Late payments are subject to interest which is calculated at the C.I. Prime Rate (enshrined in the law).
This interest calculation begins the day after the contributions are due, in our example that would be May 16. Section 50 of this law states "An employer shall be liable to pay interest to a pension fund on all money that is due to be paid by him to that pension fund at the current prime rate in the Islands plus five per cent, calculated on a daily basis."
The National Pensions Office interpretation of this section is as follows:
- Interest, shall be calculated on contributions beginning on the 16th day of the month following the month in question.
- The Interest Rate used is the * Cayman Islands Prime Rate plus 5% (this is the calculated rate for the month in question) and shall be adjusted and calculated every month there after (compounded monthly).
- All Pension Plan Administrators are to adhere to this interpretation.
For ease of application the rate is compounded monthly as opposed to daily, however the number of days outstanding should be pro-rated if payments made are other than the 15th of the month.
An example: XYZ Company Ltd. owes $1000 worth of contributions for January 2005. This is not due until the 15th of February 2005, but that date comes and passes and a payment has not been made. The interest rate to be used as indicated by the chart below is 10.5%, which begins February 16, 2005 and compounds on the 15th of March 2005. The rate used from the 16th of March 2005 to the 15th of April 2005 is 10.63%. The $1000 of contributions was paid on April 15, 2005 and an additional $17.68 for interest.
$1000 x (5.5% + 5%) = $105 / 12 = 8.75 = February 16, 2005 to March 15, 2005 interest $1000 + $8.75 x (5.63% + 5%) = $107.23 / 12 = $8.93 = March 16, 2005 to April 15, 2005 interest Total Payment = 1000 + Mar. Int. ($8.75) + Apr. Int. ($8.93) = $1017.68
If the Superintendent has directed an employer to pay arrears within two weeks and if they fail to comply, the employer may be liable to a fine of $500 for each day that the contributions are in arrears.
- * While every effort is made to keep this schedule up to date. Employers and Administrators should check with their financial institution to ensure there have been no recent changes to the CI Prime rate since the schedule was last updated.
Last Updated: 2009-01-06