This weekly compilation of stories from wire services, newspapers and other sources is intended to keep Mercer employees and registered visitors to mercer.com informed of benefits, compensation and HR developments around the world. Facts have not been independently verified, and opinions expressed are those of the editor. Readers are invited to clarify, correct or expand on these items.

Kenya

Pension trustee training requirements
Business Daily

The Retirement Benefits Authority has introduced the Pension Trustee Development Programme, a training curriculum that will be mandatory for certification as a pension trustee. Asset management, scheme governance, pension law and plan funding are among the training modules in the five-day certificate programme.

Morocco

Unemployment insurance proposal re-surfaces
Magharebia, GIDA

With parliamentary elections set for 25 November, the government has released an update on its long-awaited unemployment insurance scheme (IH 01/13/10). Workers who had contributed to the social security fund for at least 780 days would be entitled to up to 70% of salary – capped at 100% of the guaranteed minimum wage – for up to six months. Funding sources are still a bit nebulous. The government has set aside the start-up money and would have an ongoing role in financing the scheme. Employers would contribute 0.38%, possibly a diversion from existing social contributions, and there would be an as yet unspecified employee contribution.

Australia

Paid paternity leave consultation
Herald Sun, Sunday Mail

In a follow-up to the paid parental leave scheme (IH 01/06/11) introduced at the start of this year, the Department of Families, Housing, Community Services and Indigenous Affairs (FAHCSIA) has opened a consultation, Paid Parental Leave: Dad and Partner Pay. Fathers and same-sex partners would be entitled to two weeks' paid parental leave at the national minimum wage for children born on or after 1 Jan 2013. The leave would have to be taken within a year of a child’s birth or adoption and there is a $150,000 salary cap for eligibility. The consultation runs through 17 October.

China

Guidance, deadline for foreigner participation in social security; Occupational safety directive
SCMP, China Insurance, China Daily

The Ministry of Human Resources and Social Security has issued (Chinese only) a summary of the provisional implementation rules for foreigner participation in social security (IH 08/17/11). From 15 Oct 2011, foreign workers and their employers must contribute 11% and 37% respectively on income up to three times the average local salary. The rules detail how workers are treated under the existing bilateral social security agreements. The US, Japan and Russia are among the several nations now pressing for accelerated negotiation of bilateral agreements. Workers from Hong Kong, Macao and Taiwan did obtain relief from this mandate as the ministry does not regard them as foreigners. The full text of the rules has had limited circulation and stakeholders are still anxious about getting greater clarity.

Also, the State Administration of Work Safety published a directive (Chinese only) on maintaining employee health records for a variety of occupations. Workers would get physical examinations at the start and end of employment contracts and throughout the course of their employment to monitor the health effects of their jobs. While this is described as limited to workers in high-risk occupations, one account projects that 80% of employers will be sharing health status records for at least some of their employees with work safety authorities by 2015.

India

Health insurance portability guidelines; Committee report on PFRDA bill
Financial Express, Economic Times, Mint

The Insurance Regulatory and Development Authority (IRDA) has now issued its delayed guidelines on health insurance portability (IH 06/29/11). A policyholder will have to notify the insurer at least 45 days before the renewal date and insurers will then have 15 days for the transition. The old insurer will transmit the client data to the new insurer within the first seven days as a new insurer that does not object to the transfer within 15 days cannot turn it down. The client receives credit for any pre-existing condition waiting period with the earlier insurer, but must submit to the new insurer’s policy and coverage limitations. The date of entry into force remains 1 Oct 2011.

Parliament’s Standing Committee on Finance has released a highly anticipated report on the Pension Fund Regulatory and Development Authority Bill, 2011 (IH 03/30/11). The committee addressed two thorny issues that it said should not be set aside in the interest of quick passage. Rather than defer the argument on foreign direct investment (FDI) in pension funds, it recommends a compromise ceiling of 26%. In order to limit subscriber risk in the new National Pension System (NPS), it calls for a minimum guaranteed return equivalent to the rate offered by provident funds. Additional proposals would:

• allow loans from the fund after 10-15 years of contributions,
• grant broader and more frequent choice of scheme model and fund manager, and
• appoint public sector personnel to at least a third of the fund manager positions.

Korea

Cabinet approves parental leave measures; Greater protection for temporary workers
KBS, Chosun Ilbo, Yonhap

The Cabinet has approved a set of Employment Ministry measures (IH 05/18/11) that would:

• replace the three-day unpaid paternity leave entitlement with three days' paid and two unpaid;
• allow greater flexibility – subject to employer/employee agreement – in accessing the 90-day unpaid family care leave;
• require reasonable accommodation of schedule change/reduced hour requests for parents of children under age six; and
• permit and promote employer provision of child care leave to fixed-term and temporary agency workers.

The ministry aims to get the bill through the National Assembly this year for implementation early next year.

Also, the government is preparing initiatives to improve the lot of irregular workers and other low-wage employees:

• The state would subsidize pension contributions and unemployment insurance premiums for low-income workers in small enterprises.
• The Employment Ministry will issue guidelines on fair pay and welfare benefit policies for irregular workers.
• The head of the ruling party has made a campaign promise to raise the salaries of temporary workers to 80% of what their permanent counterparts are paid.
• Industrial insurance coverage would expand to some high-risk unskilled occupations, such as bicycle messenger, that had fallen between the cracks.

New Zealand

KiwiSaver contribution hike bill; Sleepover pay deal
Voxy, IBFD, NZ Herald

Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill will face its first reading in Parliament later this month. It would raise both employer and employee mandatory KiwiSaver contributions from 2% to 3%, effective 1 Apr 2013. The government contribution would be halved to 50% of each dollar a worker saves and employer contributions would no longer be tax-exempt.

Meanwhile, the government has reached a deal on paying minimum wage to disability support workers for their sleepover shifts (IH 03/23/11). The pay will be partially retroactive back to 2005 and will not reach 100% of minimum wage until 1 Jul 2013. The administration will soon submit legislation extending this pay arrangement to all workers with sleepover shifts to Parliament.

Taiwan

Paid family leave proposals
Taipei Times, China Post, Focus Taiwan

The President recently ordered the Council of Labour Affairs (CLA) to draft an amendment to the Gender Equality in Employment Act (GEEA) that would grant workers paid family leave on typhoon days. The current law protects workers from employer retaliation if they take unpaid leave to be with family on a typhoon day. Later that week, the head of the CLA notified the Legislative Yuan of a broader agenda for paid family leave. She would amend the act to give private sector workers the same leave entitlement as government employees. Their seven-day unpaid leave entitlement would be upgraded to include five days at full pay.

Bulgaria

Proposal to expand pension fund investment menu
Sofia Echo, Plan Sponsor

The Financial Supervision Commission (FSC) has approved draft amendments to the pension fund investment rules that would allow them to:

• buy or sell government securities,
• invest in bank deposits in the BRIC nations and South Africa, and
• purchase shares in collective investment schemes.

The FSC will consult with the pension sector before presenting the proposal to the government.

Czech Republic

Pension, health and labour reform measures clear Lower House
Reuters, CIA, IPE

The Lower House of Parliament has now passed the second pillar pension reform package that would bring the Czech Republic into compliance with the Institutions for Occupational Retirement Provision (IORP) Directive (IH 07/20/11). From 2013, people would have the option of diverting 3% of their 28% state pension contribution into the second pillar scheme, provided they contribute an additional 2% to the savings plan. After retirement, the pensioner would have the choice of a lifetime annuity without inheritance or a 20-year annuity with inheritance. The Senate is not likely to approve this bill, but the Lower House evidently has enough votes to override its veto. The next stage would be a challenge in Constitutional Court.

There is a Constitutional Court challenge ahead for controversial health reform legislation that passed the Lower House after the Senate rejected it (IH 07/27/11). A two-tier system differentiates between universal basic care and "above-standard services," creating concerns that some essential care would be dropped from the standard package. Other provisions would sharply raise co-payments and reduce drug reimbursement. Another item to clear the Lower House is a package of Labour Code amendments (IH 07/20/11) that would double the new employee trial period to six months and raise the limit on a work performance contract from 150 to 300 hours.

Denmark

Initiatives to raise the retirement age; New government elected
Esmerk, Copenhagen Post, IBFD

A highlight of the 2012 Budget is fulfillment of the promise for tax-free refund of contributions to the early retirement schemes that will be shut down under last spring’s agreement on ending the state subsidized early retirement scheme (IH 05/25/11). The details of its elimination are expected soon. The Tax Ministry recently closed a consultation (Danish only) on draft pension taxation measures including provisions that would allow greater retirement deferral flexibility by letting life annuity pension holders defer or suspend their benefits to remain in or return to the job market. The Danish Insurance Association hailed the proposal but urged that the flexibility be extended to all retirement annuity products.

Also, a center-left coalition won last week’s national elections and expects to have a three-party majority government in place before the 4 October opening of Parliament. The vote is seen as a refutation of the current administration’s anti-immigration policies. The new Premier has advocated a one-hour rise in the work week, raising the traditional 37-hour standard to a statutory 38-hour week. The new government supports the previous administration’s efforts to discourage early retirement and promote working past retirement age.

EU

Schengen refinement plan; Various
EU Observer, Euractiv; IPE

Parliament backs a European Commission strategy to balance freedom of movement (IH 08/17/11) with the border security concerns of member states in a more EU-centric approach to Schengen management. The EU would both monitor Schengen compliance and have a mechanism for swiftly approving temporary border control arrangements (in 30-day increments) in extraordinary circumstances. Parliament has formally adopted part of this plan and will field the balance soon. An FAQ accompanied the releases.

In other news:

• The states that are uncomfortably yoked to each other by formal adoption of the euro currency are nearing agreement on a package of economic governance proposals. This would strengthen the Stability and Growth Pact, ceding some member state sovereignty in areas of tax and social policy when their budget crises threaten the stability of the Eurozone. The plan calls for penalties when states fail to comply with austerity measures and there is a heavily disputed last resort of expelling intransigent states from the Eurozone. Many in the European financial sector believe that Greece’s inability to pass significant reforms will drive it out of the Eurozone by the end of this year. Greece’s Finance Minister has given assurances that "we will do anything" to prevent that from happening.
• The European Court of Justice (ECJ) ruled in case C-447/09 that an airline’s age limit for pilots (60) did not merit an exemption from the rules against age discrimination in employment. Requirements that pilots age 60 and up fly with a crew and with a co-pilot under age 60 provide an adequate safeguard.
• Members of the European Parliament are pressuring the European Council to quickly adopt a formal position on increasing maternity leave rights (IH 06/29/11). The member state family ministers have an informal meeting scheduled for 20 October and a plenary session of Parliament is expected to approve a formal query for them by that date.

France

PERCO evaluation
IPE

The Court of Audit has delivered a stinging evaluation of the collective retirement savings plan (PERCO) that companies often use to complement their Plan d’Epargne Enterprise (PEE) retirement savings scheme. Excess risk exposure and an ineffective tax regime are among its flaws. Its most damaging feature is the ample opportunity it presents for pre-retirement withdrawals.
 

Italy

Austerity package revision
ANSA, EU Observer, Tax Analysts

Last month, leaders of the ruling coalition agreed to a set of changes (Italian only) to the administration’s new austerity package (IH 08/17/11). Both houses of Parliament have since passed the controversial legislation by narrow margins. Most notably, the one year per year retirement age hike for women will start in 2014. A proposal to remove college years and periods of military service from the calculation of contribution history did not make it into the final draft.

Netherlands

Pension reform update; Various
IBFD, Dutch News.nl, IPE

When union federation FNV rejected the tripartite pension reform proposal (IH 08/31/11), the minority ruling coalition added some concessions to secure opposition support for the bill in Parliament. The most prominent changes would ease the transition period for workers most affected by the retirement age increase and modify the benefit reduction for low-income workers who still want to retire at 65 (for some hazardous and strenuous occupations, there would be no benefit reduction). The administration still believed that it needed FNV’s stamp of approval on it. The federation narrowly approved the plan on Tuesday, but it now faces a rift over low executive council representation of the dissenting unions.

In other news:

• The Secretary of Finance is preparing refinements to the 30% rule for taxation of highly skilled foreign workers. A minimum salary threshold would be available as an alternative to the scarce specialist skills condition, workers living within 150 km of the Dutch border would no longer qualify, and earlier work periods in the Netherlands within the past 25 years would be subtracted from the 10-year period at the special 30% regime. Incidentally, the Supreme Court recently handed down a ruling that put some teeth in the scarce specialist provision. A German pipefitter with specialized pipe-fitting skills was deemed ineligible.
• The rule on collecting a partial pension while staying in the workforce between ages 60-65 has been sweetened, effective 7 September. Receipt of a partial pension is no longer contingent on a proportionate reduction in employment income.
• The 2012 Tax Plan will introduce the vitality savings regime (vitaliteitssparen), which had been set to supersede the levensloop scheme as a vehicle for saving toward early retirement (up to €20,000 tax free). By one account, negotiations with unions have resulted in a reprieve for the levensloop scheme, which will now be complemented by the vitality scheme.

Poland

Holiday carry-over extension bill
PNB, PMR

Last month, the Sejm passed a package of deregulation measures including one that gives workers a longer carryover period for unused annual leave. Effective 1 Jan 2012, the three-month grace period for unused leave will be carried over an additional six months to 30 September of the following year.

Portugal

More austerity measures
DRE, IBFD, Tax News

A revised memorandum of understanding (MOU) with Portugal’s creditors has a few notable, if vague, provisions. There are references to:

• refining company car taxation rules,
• limiting certain tax deductions such as health expenses for high earners, and
• revising the tax regime of "income in kind."

More proposals will reportedly follow and the Finance Ministry aims to produce legislation soon with a goal of entry into force next year.

Slovakia

One less guarantee fund for second pillar schemes
TASR, SITA, CIA

Parliament has passed a government-sponsored measure that will alter the funds offered in the second pillar from 1 Apr 2012. The growth and balance fund will be rebranded the mixed fund and will lose its state guarantee. The conservative fund will become the bond fund and maintain its guarantee. A new index fund will be introduced to complement the stock fund.

Sweden

Tax break reduction for green cars
DRE

Skatteverket, the Swedish tax authority, has previewed the forthcoming 2012 Budget with a reminder of last May’s posting (Swedish only) on projected reductions to fringe benefit tax (FBT) breaks on employer-provided green cars. The regime will be trimmed over the next few years with tax breaks fully phased out for some of the less efficient models, including alcohol-powered cars and electric hybrids that have limited recharging options.

Switzerland

Banker bonus cap measure rejected
Reuters

A bank capital standards bill, including a set of governance measures for the sector, passed in the Senate with a provision capping management bonuses at 50% of salary intact. The bill recently cleared the Economic Committee of the Lower House, but minus that provision.

Ukraine

President signs pension reform law
Interfax, UNN, Ukrainian News

After a few more maneuvers from die-hard opponents (IH 08/31/11), Parliament passed the complete pension reform legislation and the President signed it. The law will take effect on 1 Oct 2011. Incidentally, the Vice Premier has refuted press reports that a provision capping benefits at 10 times the minimum wage had been abandoned.

UK

Executive pay transparency consultation; Various
Professional Pensions, Global Pensions, The Independent

The Department for Business Innovation and Skills issued a pair of consultations on greater transparency in company pay and reporting. Executive Remuneration Discussion Paper offers a set of proposals on better ensuring that executive pay is linked to performance. Possible solutions include binding shareholder votes on executive compensation. The other consultation, The future of narrative reporting: a further consultation, broadly addresses the issue of more transparent disclosures to investors, but also includes specific proposals on improving reports on executive remuneration and there is a recommendation that companies be obliged to report on the percentage of women sitting on their boards and executive committees. The consultations for both conclude on 25 November.

The following bullet points merit a closer look than the usual "various" collection:

• The Pensions Minister noted in a recent interview that the "express train" of life expectancy will compel the government to raise the state pension age at a faster clip. Retirement age hike projections, earlier set to reach 66 in 2020, 67 in 2036 and 68 by 2046, now see 67 and 68 arriving much faster - 67 as soon as 2025.
• The minister also mentioned at a recent conference that the disproportionate member risk in defined contribution plans is an "extreme" end of the pendulum and there is a need to develop better risk-sharing models. He said that short service refunds are another drag on retirement income growth that will also get onto his department’s agenda.
• With the Agency Worker Regulations (IH 08/03/11) set to take effect in 10 days, the warnings about their implications are getting more specific. The agency workers will be covered by automatic enrollment, which could prove quite a boondoggle given the duration of many assignments. There are also some concerns about the logistics of including workers on short assignment in performance-related bonus schemes. The rules must take effect on 1 October, so any tweaks would have to come later and be retroactive.
• Kay Review of UK Equity Markets and Long-Term Decision Making comes in response to concerns about the causes of short-termism in institutional investor investment strategies. The discussion paper is accepting comments through 18 November.

Canada

Consultation on profit-sharing scheme taxation
SNS, Tax News

The Finance Department has posted Consultations on the Tax Rules for Employee Profit Sharing Plans to solicit input on refinements to the tax regime for EPSPs. This is a follow-up to concerns expressed in the 2011 Budget (IH 03/30/11) over possible tax loopholes. Topics include contribution limits, eligibility, income-splitting and whether EPSPs should be subject to income tax. The consultation runs through 25 Oct 2011.

US

Economic stimulus and job growth proposals; Various
NYT, IBFD, Reuters

The President has presented an economic recovery plan featuring a job creation bill. Living Within Our Means and Investing in the Future incorporates The American Jobs Act, draft legislation that was released a few days earlier. Among the proposals:

• As an incentive for job growth, the bill would eliminate the social security tax on the 2012 payroll above the 2011 level. This would be capped at $50 million.
• The OASDI (Old Age, Survivors and Disability Insurance) portion of the social security tax (normally 6.2%) for the calendar year 2012 would fall to 3.1% for employees while employers would pay 3.1% on the first $5 million of wages.
• Companies that hire long-term unemployed workers would be entitled to a tax credit of up to $4,000.
• US Pension Benefit Guaranty Corp (PBGC) premiums, both flat-rate and variable rate, would rise to better reflect the level of risk.
• A tax loophole giving corporate jets a shorter depreciation period would close from 1 Jan 2013.

Several other items would have dominated a quieter period:

• The issue of fiduciary duty in the offering of 401(k) investment options got some clarification from a landmark ruling in the 7th Circuit Court of Appeals. Offering retail mutual funds with high fees to members of a self-directed 401(k) scheme did not constitute a breach of fiduciary duty provided there was a sufficient mix of investment options and transparency on fees.
• A 4th Circuit Court of Appeals judgment rejected constitutional challenges to the Affordable Care Act (IH 02/02/11), but it was not decisive enough to preclude an eventual Supreme Court hearing.
• After the ranking Democrat on the House Financial Services Committee appealed to the Department of Labor to revisit its proposed rule on broadening the definition of fiduciary (IH 08/03/11), the department withdrew the draft rule for revisions. The new proposed rule should arrive early next year.
• The House Judiciary Committee is reviewing legislation that would require all employers to use the E-Verify system to screen for illegal immigrants. HR 2885 Legal Workforce Act would supersede existing state laws on E-Verify and would phase in the requirement – starting with larger employers – over two years. The bill has bipartisan support, but strong opposition on the left and right leave its prospects uncertain.
• The Internal Revenue Service (IRS) has released guidance on compliance with the rules on employer-provided cell phones and employer reimbursement for business use of personal phones. A notice and a memo offer significant relief from the administrative burden of recordkeeping.

Brazil

Health system funding debate
Nasdaq, Dow Jones, Tax Analysts

There is robust support in Congress for a social health care levy (CSS) on all financial transactions in order to reinforce funding for the public health system and make its coverage more universal. The administration prefers to evaluate alternative funding sources including oil revenues and gambling or luxury taxes. Plenary debate in the lower house is set for 28 September.

Chile

Pension investment disclosure, restriction; Occupational safety proposal
Financial Times, Hedgeweek, BNamericas

A report from one of the nation’s largest banks has sensitized the pension sector to including the need for greater investment transparency in the AFP private pension investment review (IH 08/31/11). While members have access to daily updates on investment return, there is too little disclosure on asset allocation. Another sign of risk aversion in AFP investment is pension regulator CCR’s recent inclusion of Irish-domiciled investment funds (popular locally) on the list of high-risk restricted investments.

Meanwhile, the lower house of Congress has passed a motion requesting that the government produce health and safety regulations for high-altitude work. Another lower house motion asks the labor and health ministries to study the physical toll of working in high-altitude sites. Much of the mining sector would be affected by the new rules.

Peru

AFP reform measures
BNamericas, Andina

The Finance Ministry is preparing a bill on reform of the AFP private pension system for release early next year. Aims include:

• a larger investment menu,
• lower administrative fees,
• greater competition among AFPs, and
• extending coverage to more workers.

A ministry press release echoes (Spanish only) a proposal from pension regulator SBS that AFPs be lured into investment in infrastructure projects.

Comments or queries may be directed to Patrick Sweeney at +1 212 345 2462. Click here to find your local Mercer office.