Employer Debt: Basics
Under section 75 and section 75A of the PA95, where the value at the trigger time of a DB scheme’s assets is less than a scheme’s liabilities (both calculated on a prescribed basis), the amount equal to the difference is treated as a debt due from the employer to the scheme trustees (the employer debt).
Broadly, the trigger time is:
- immediately before an insolvency event;
- when the scheme goes into wind up; or
- in a multi-employer scheme, when a participating employer exits the scheme leaving behind at least one other employer (who is not a DC employer).
The employer debt calculation is a two stage process:
- first, the trustees and actuary have to calculate the assets and liabilities to determine whether there is a deficit in the scheme;
- second, if the scheme is a multi-employer scheme, the debt must be apportioned between the participating employers.
Once calculated the debt is due from the employer(s) to the trustees, unless arrangements are made for managing the debt.
Commonly used abbreviations in pensions
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