The Amendment to the National Pensions Law which establishes the pension holiday period came into force on the 26th April 2010. The amendment allows an employer and each employee to voluntarily participate in a suspension of pension contributions.
The pension holiday period is 1 year for Caymanians and 2 years for non-Caymanians. In order to establish the proof of nationality needed to determine each employee’s eligibility period, all applications must be accompanied with the proof of nationality for each employee applying to participate in the pensions holiday period.
In order to participate in the pension holiday period, an employer and each employee need to collectively apply to their pension plan administrator. As part of the application process, the employer with each voluntarily participating employee must submit a completed application form, proof of nationality and the signed written agreement, of which standardized forms are available from the pension plan administrator. Please note neither the employee nor the employer can be forced to participate in the pensions holiday period. In addition, signing the written agreement means that neither the employer nor the employee have to pay pension contributions for the pensions holiday period going forward unless both parties subsequently agree, in writing, to void the signed written agreement which would result in the required payment of mandatory contributions once again.
After the pension plan administrator has received all of the required documentation, the administrator has seven (7) calendar days to provide their decision to the employer, the employee and the Superintendent of Pensions. The administrator has the authority to approve or decline the application and must inform the employee, the employer and the Superintendent of Pensions of their decision regardless of the outcome.
In order for approval to be granted, the employer’s pension contributions must be current and if they are not, a payment arrangement needs to be established with the pension plan administrator, who can subsequently revoke the certificate if the payment arrangement is not honoured.
If the application is approved, then the employer and that employee will become “Approved Persons” and no contributions will be required until the expiry of the pension holiday period for that employee unless the certificate is subsequently revoked. Even though no pension contributions are due for the approved persons during the pension holiday period except those relating to the payment arrangement, each employer’s and employees’ membership in the pension plan must be maintained.
As mentioned above, the application submitted to the pension plan administrator can also be declined under specific circumstances including if the employer has not submitted the required documentation or if the employer is delinquent in their pension contributions and no payment arrangement has been agreed with the pension plan administrator.
The amendment to the National Pensions Law also establishes the right for the applicant affected by the administrator’s decision to refer the decision to the Superintendent of Pensions. The National Pensions Office has developed an application form for this purpose which is available at its reception.
For clarity: Employers and employees that decide not to participate in the pension holiday are not required to fill out any paperwork and must continue to make contributions in accordance with the National Pensions Law.
Last Updated: 2010-10-06