Leading accountant and shipping industry adviser Moore Stephens says employers need to act promptly to manage their exposure following notification of liabilities for deficits under the Merchant Navy Officers’ Pension Fund (MNOPF).
Employers have recently received notification of their share of the liability arising from the deficit under the scheme, which has been set by actuaries at £575m for the period ended 31 March, 2009. In addition, there is an outline recovery plan for an additional shortfall of £402m. Moore Stephens Shipping Industry Group partner Michael Simms says, “For shipowners and other employers, this could have serious implications for financial accounting and reporting, working capital and funding issues, potential loan covenant breaches and discussions with existing lenders, as well as potential going-concern issues.
“Some employers with December 2009 year-ends, who have reported their results already, have not been providing for their additional obligation based on an estimate which the actuaries had prepared in November 2009, maintaining that there were uncertainties in the estimated obligation and that they therefore could not obtain a reasonable estimate of their obligation. But that argument can no longer be used following publication of the most recent report from the actuaries, which provides evidence of issues which existed at the end of the reporting period, for example at 31 December 2009.
“As a result, employers will be required to provide for their share of the MNOPF deficit based on their proportion of the historic share indicated by the trustees in prior years or on more recently revised share information from the trustees. Employers participating in the MNOPF need to act promptly to manage their exposure”