In a relief to PSU insurance companies facing huge pension liability of their employees, the regulator IRDAI has allowed them to amortise the provisions over a period of five years starting from 2015-16.
The Insurance Regulatory and Development Authority (Irdai) in a communication to all insurers said the pay revision of the officers and employees has been carried out by public sector general insurance companies in the year 2015-16.
Consequent to that the Pension Scheme 1995 has been extended to PSU officers and staff members who joined until 31 March 2010. Earlier, the pension scheme was applicable to officers and staff members who joined until 31 March 2004.
"This will lead to an increase in the 'Employee Liability' on account of extension of pension scheme. The said provisions will impact the insurers' profitability significantly as they need to provide for the same in the financial year 2015-16.
"This will also cause a strain on their solvency as well as on their performance results", Irdai said.
Irdai put the condition that the additional liability on account of pension provisions may be fully recognised and charged to Revenue Account/or Profit and Loss Account for the financial year 2015-16.
"The expenditure, may, if not fully charged to the Revenue Account and/or Profit and Loss Account during the financial year 2015-16, be amortised over a period of five years beginning with the financial year 2015-16 subject to a minimum of one-fifth of total amount involved every year", it said.
Further, the unamortised expenditure carried forward should not include any amounts relating to separated/retired employees.
It has also asked for a complete disclosure in accounts to this effect giving the total amount of liability on this account, and the amount recognised to revenue/profit and loss account.
