Masterson & Ors v Coras Iompair Eireann (Approved)

Factual and Procedural Background

This judgment concerns the interpretation of the Córas Iompair Éireann Superannuation Scheme ("the Scheme"), established in 1951 and amended over time, including significantly in 2000. The Scheme provides superannuation benefits for clerical, supervisory, and executive staff of the respondent, Company A. The applicants are members of the committee responsible for administering the Scheme and seek the court's directions on the proper interpretation of rule 20 of the Scheme’s rules, specifically regarding Company A's obligation to fund the Scheme to maintain its solvency.

The dispute centers on the extent of Company A's obligation to contribute to the Scheme fund, particularly whether this obligation requires contributions sufficient to satisfy the statutory funding standard (SFS) under the Pensions Act 1990, and whether this obligation is compatible with reductions in member benefits.

The proceedings were initiated by special summons in September 2021, accompanied by detailed affidavits and extensive written submissions from both the applicants and Company A. Expert actuarial evidence was presented by actuaries for both sides. The trustees of the Scheme and the Minister for Transport were notice parties; the trustees filed written submissions and remained neutral, while the Minister supported Company A's position without elaboration.

The Scheme had been adequately funded until 2008 but experienced underfunding thereafter, leading to funding proposals and industrial relations processes, including a Labour Court recommendation accepted by a union ballot in May 2021. Company A submitted an amending Scheme to the Minister for Transport incorporating the Labour Court’s recommendations, which included an increase in the minimum normal retirement age from 60 to 63, resulting in a reduction of member benefits. The applicants contest the adequacy and legality of these changes and Company A's funding obligations.

Legal Issues Presented

1. Does the obligation imposed on Company A by rule 20 of the 1951 Scheme, to "support and maintain the solvency of the Fund," require, at a minimum, that contributions satisfy the Statutory Funding Standard under the Pensions Act 1990?
2. Is the obligation imposed on Company A by rule 20 to "support and maintain the solvency of the Fund" compatible with reductions in members’ benefits as proposed in the amending Scheme?
3. Does rule 20 require Company A to make annual contributions sufficient to ensure the Scheme satisfies both the funding standard and the funding standard reserve as prescribed by the Pensions Act 1990?
4. Are Company A and the Minister for Transport prevented from exercising their statutory powers to submit and confirm an amending Scheme that contemplates reductions in member benefits if rule 20 requires compliance with the statutory funding standard?

Arguments of the Parties

Applicants' Arguments

• Company A's contribution obligation under rule 20(1) to "support and maintain the solvency of the Fund" requires payment of sums sufficient to satisfy the Statutory Funding Standard (SFS).
• Benefit reductions for members are incompatible with Company A’s obligation; the employer must take all necessary steps, including increased contributions or contingent assets, to ensure solvency without reducing benefits.
• The limit of 3.6 times members' contributions in rule 20(3) is not a cap on Company A’s contributions but triggers a review of contributions by both Company A and members.
• The Scheme is a balance of cost scheme where the employer must meet the shortfall beyond members' contributions to maintain solvency.
• Company A’s refusal to provide the draft amending Scheme and failure to publish notice as required under the Transport Act 1950 constitute breaches.

Respondent's (Company A's) Arguments

• Rule 20(1) grants Company A an "undoubted discretion" in determining its contribution amount, which is inconsistent with an absolute obligation to satisfy the SFS.
• The statutory funding standard, introduced after the original Scheme and amended rule 20, does not impose a direct obligation on Company A under the Scheme rules.
• The contribution limit of 3.6 times members' contributions in rule 20(3) effectively caps Company A’s obligation, triggering a review if exceeded.
• The employer and employee contribution rules are interconnected and must be construed together; members may be required to increase contributions or accept benefit reductions.
• The industrial relations process culminating in a Labour Court recommendation and union ballot was appropriate, and the submission of the amending Scheme to the Minister complies with statutory requirements.
• The applicants have no right to receive the draft amending Scheme before the Minister directs publication.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by emphasizing that the Scheme is governed by statutory provisions, including the Scheme rules contained in a statutory instrument and the Pensions Act 1990. The court applied established principles of statutory interpretation, focusing on the ordinary and natural meaning of the words, their context within the Scheme and relevant statutes, and the legislative intent.

Rule 20(1) requires Company A to contribute annually such sum as it, after consulting the Scheme actuary, determines to be "necessary to support and maintain the solvency of the fund." The court held that this obligation is not unfettered discretion; Company A must determine a sum that ensures solvency, which necessarily includes compliance with the statutory funding standard (SFS) under the Pensions Act 1990.

The court rejected Company A’s argument that the SFS could be ignored or that the employer’s obligation is limited to an ongoing funding basis. It held that the SFS represents real, statutorily-imposed liabilities that must be accounted for in determining the necessary contribution to maintain solvency.

Rule 20(3) provides that if Company A’s contribution exceeds 3.6 times the members’ contributions, a review of contributions by both parties must occur. The court interpreted this as not capping Company A’s contribution but requiring negotiation, potentially leading to increased member contributions or benefit reductions to maintain solvency.

The court acknowledged that the Scheme contemplates the possibility of member contributions increasing or benefits being reduced as part of maintaining solvency, consistent with the statutory framework allowing the Pensions Authority to direct measures including benefit reductions or winding up if necessary.

Regarding the submission of an amending Scheme to the Minister for Transport under the Transport Act 1950, the court found that the relationship between this power and the Pensions Act 1990 is unclear and was not fully argued. The court therefore declined to rule on whether the statutory funding standard prevents amendments that reduce benefits.

The expert actuarial evidence was of limited assistance because the court’s task was statutory interpretation, not actuarial judgment. The court gave weight to the statutory framework, the Scheme’s wording, and the legislative context.

Holding and Implications

Holding: The court held that the obligation on Company A under rule 20(1) of the 1951 Scheme to "support and maintain the solvency of the fund" requires, at a minimum, that contributions satisfy the Statutory Funding Standard under the Pensions Act 1990. However, if Company A’s contribution exceeds 3.6 times the members’ contributions, a review of contributions by both parties must take place, which may involve increased member contributions or benefit reductions. The obligation is therefore not absolute and contemplates shared responsibility between Company A and members to maintain solvency.

The court did not decide on whether the statutory funding standard prevents Company A or the Minister for Transport from submitting or confirming an amending Scheme that contemplates reductions in member benefits, noting this issue was not fully argued and remains for future determination.

Implications: This decision clarifies that Company A’s funding obligation under the Scheme includes meeting the statutory funding standard, ensuring the Scheme’s solvency in accordance with statutory requirements. It also confirms that the Scheme envisages a mechanism for review and adjustment of contributions and benefits when funding obligations become disproportionate. No new precedent on the interaction between the Transport Act and the Pensions Act regarding amendments to the Scheme was set. The parties were invited to agree on orders following the judgment, with a hearing scheduled for any unresolved issues, including costs.