On February 1, the Irish government implemented the Pensions Insolvency Payment Scheme (PIPS) for a 3-year trial period. PIPS is designed to safeguard benefits of defined benefit pension plan members (those employed and retired) when both the pension plan and plan sponsor have become insolvent. PIPS is administered by the Ministry of Finance and is expected to be cost-neutral.

PIPS allows eligible pension plans to purchase annuities from the government below the cost of annuities on the open market. This permits more money to be available for eventual disbursement to plan members. Each plan's cost of purchasing PIPS annuities is calculated based on standard mortality assumptions and the interest rate for 10-year Irish government bonds, including the cost to the government for administering the program.

To participate in PIPS, pension plans must undergo a multistage application process. A pension plan must first be certified by the Pensions Board (pension regulator) based on evidence substantiating that the "double insolvency" criterion (insolvent employer and plan scheduled for termination) applies. Once certified, plan trustees may apply to the Minister of Finance to qualify for PIPS payments. After the application is approved, the plan trustees must agree to pay the lump sum quoted by the Ministry in exchange for the government taking on the responsibility for the plan's pension benefits. The government outsources pension administration to a third party.

Source: "Pensions Insolvency Payments Scheme (PIPS)-Guidance Note for Scheme Applicants," Pensions Board, January 2010; "Pensions Insolvency Payment Scheme (PIPS)," Ireland Department of Finance press release, January 18, 2010; "Irish Gov't Gets Final Say on Exclusion from PIPS," IPE.com, January 19, 2010; "How Will State's New Pension Protection Scheme Operate?" Irish Times, January 22, 2010.