If the replacement employer is already a participating employer before the flexible allocation scheme comes into force, it may already have its own debts to the plan to its own employees. It is important that trustees take this into account when verifying that the funding test is completed. For example, the overall contract is likely to be reduced, unless the entire business and the assets of the outgoing employer are transferred to the replacement employers and no other issues affect the guarantee, such as the guarantee for the granting of credits or structural subordination to other creditors. When an employer leaves a plan with multiple employers, provided that none of these mechanisms apply (additional time, restructuring test, de minimis restructuring test or flexible allocation regime), a debt may be triggered in accordance with Section 75. When a debt is triggered in accordance with Section 75, directors are normally required to ask the plan actuary to calculate the share of liability payable by the outgoing employer. We would not expect, for example, that agents would consider the funding review of another flexible allocation regime, in which the initial funding test contemplates the departure of a small losing employer and the employer under the new flexible allocation agreement is a more profitable employer. When an employer leaves a system with this mechanism on Or after April 6, 2008 and the flexible allocation conditions (see below) are met: before entering into a flexible allocation agreement, directors must be reasonably satisfied that both aspects of the funding test are completed: a regulatory allocation regime can be put in place before , at the time or after the triggering of the Section 75 debt. However, the parties should keep in mind that the decision to proceed with a retroactive allocation (which occurs after the event that triggered the section 75 fault) is an event to watch for (see our code of conduct for notable events). Another mechanism was introduced in the january 27, 2012 amendments to the Employer Debt Regulation, known as the Flexible Distribution Scheme, which may prevent section 75 debt from expiring or altering that debt. Flexible allocation schemes do not replace other mechanisms available for employer debt, for example.
B the rules for the allocation of schemes or the restructuring facilities of companies. However, flexible allocation schemes cannot be used when the plan has gone bankrupt or dissolved. We expect trustees to have the employer`s departure as a one-time event, part of a major transaction or a broader change in strategy. Some information about employer resignations and restructurings can be tricky, so directors and employers may consider using confidentiality agreements. There are different parties that are at the root of a system`s debts, the most frequent employers. There may be other parties who have agreed to support the plan through other agreements known as “guarantors.” Flexible allocation agreements have become a tool often used for employers, but, as Andy Lewis says, there can be problems for the unwary.