Pension heartbreak for ineligible’ hotel workers
Hundreds of laid-off hotel workers have applied to take money from their pension fund — only to find that they are ineligible for a $12,000 withdrawal option under emergency relief rules.
The island’s hotel workers number more than 2,000 and most of them are enrolled in the Hotel Pension Plan.
The HPP was set up in the 1970s as a multiemployer defined-benefit plan, designed to provide a lifetime retirement income for hotel workers with at least two years’ service.
However, only defined-contribution plans are eligible for the one-off $12,000 withdrawal allowed under the National Pension Scheme (Occupational Pensions) Amendment Act 2020, which took effect this week.
Under that option, there is no requirement to prove financial hardship and payments are required to be made within 20 days of application approval.
Dennis Tucker, the administrator of the HPP, said the phone had been “ringing off the hook”.
“We’ve had hundreds of calls and we’re trying to help as much as we can,” Mr Tucker said.
“They are struggling financially and we are very sensitive to that. A number of them feel they are entitled to the $12,000 withdrawal option, but that does not apply to a defined-benefit plan.
“However, they are eligible for a hardship refund. They have to apply to the Pension Commission for that and as soon as they are approved, we turn around the payment immediately.”
Peter Sousa, the chief executive of the Pension Commission, confirmed that the HPP was not eligible for the $12,000 one-off refund.
He added: “Of course, the regular hardship withdrawals of up to 20 per cent of a member’s account balance, for rental arrears, mortgage arrears, eligible educational expenses, uncovered medical expenses and funeral expenses can be made from the Hotel Pension Fund.
“Individuals can request an application form from the commission for these types of withdrawals.”
Mr Tucker said that many HPP members had withdrawn funds on hardship grounds in recent years, under rules existing before the pandemic.
“We’ve done quite a large number in the last couple of years,” he said. “The hardship withdrawal allowances are based on contributions. They can take out 20 per cent of their and their employer’s contributions and they can do it twice with an interval of five years.”
Mr Tucker added that the total number of active members of the HPP, Bermudians and expatriates, had varied from about 1,800 to 2,000 in recent times.
The HPP covers employees who work in a job classification covered by the collective bargaining agreement between the Hotel Employers of Bermuda and the Bermuda Industrial Union.
Under the plan, monthly pension payments for retirees amount to 4 per cent of total employee and employer contributions, falling to 3.5 per cent after 2009.
“Past service credits”, gained from time worked before September 1976, add an extra $4 to the monthly pension for each year worked.
The large demand for withdrawals would inevitably affect the HPP’s ability to meet future obligations, Mr Tucker said.
He added: “We would hope that the investments of the fund will help to make up some of that shortfall and that the workers can get back to work as soon as possible and start making contributions again.”
Stephen Todd, chief executive officer of the Bermuda Hotel Association and the Hotel Employers of Bermuda, said: “The trustees of the Hotel Pension Plan recognise the position its beneficiaries are in.
“There is a balance to be met between providing for our member’s retirement, and meeting the urgent needs of the members during theses highly unprecedented and challenging times.
“As an industry, we have benefited from the support the Bermuda Government has provided to date, and we are continuing our discussions with the Ministry of Finance to see what more can be done.
“In the normal course our industry represents an important source of gross domestic product, employment and tax revenue and we look forward to making those contributions again.”
• For more information, contact the Pension Commission at 295-8672, or by e-mail at email@example.com, or contact the Hotel Pension Plan at 292-6739
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