Cessation Events

Under pensions law, a church or other organisation that is a participating employer under the DB Plan will trigger a 'cessation event' when:

 it ceases to have any active members in the pension scheme when some other employers continue to have active members and 

 the pension scheme is in deficit at that time.

The DB Plan is currently in deficit (and has been for some years), like many other DB schemes.

When a cessation event arises, the employer becomes liable for an 'employer debt'. This means that it has a legal obligation to pay its share of the deficit, based on the total service of members in the DB Plan with that employer.

The amount of an employer debt depends on the participating employer’s history of having members in the DB Plan, but it will normally be a substantial sum.

Hence, cessation events and their associated employer debts are to be avoided unless an employer is clear that it has the resources to meet the debt and wishes to pay it off.

Many participating employers have only one member, their minister, in the Scheme, so a cessation event can easily arise when a minister moves on from a church, retires or dies.

Fortunately, the law allows a cessation event to be avoided where a church is going into a pastoral vacancy and expects to call another minister who is a member of the scheme (for the avoidance of doubt, please note that any new minister needs only to be a current active member of the BPS. He or she does not need to have been a previous member of the closed Defined Benefit plan), but it is necessary for the church to contact the scheme administrators about this before their minister leaves, and to apply for a Period of Grace no later than two months after his/her leaving date.  See Periods of Grace and Interim Ministers .

If you have triggered a cessation event and owe an employer debt, then the Pensions Office will contact you about what needs to happen next.  Where a church or other participating employer is closing, it is essential to contact the scheme administrators to check whether a debt is due, before any assets are disbursed.

Please be aware that changing the legal structure of a church or other participating employer, for example to a Charitable Incorporated Organisation or through an amalgamation, could potentially trigger a cessation event and give rise to an employer debt.  If you are considering such a step, it is imperative that you or your legal adviser contact the scheme administrators at an early stage, as a specific process has to be followed if a cessation event is to be avoided (see Changes to an Organisation's Legal Status).