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.
Top stories in this issue:
Australia: Super core provisions bill
Czech Republic: Pension, health and labour reform measures passed
Denmark: Budget 2012
India: IRDA guidelines for pension products
Netherlands: Pension cost disclosure standards
US: Supreme Court to hear health reform challenge
The Finance Ministry has posted the 2012 National Budget, which is notable for:
- an annex making changes (generally increases) to the fringe benefits tax on cars, housing and accommodations;
- the announcement that a new legal framework for occupational pension is in the pipeline;
- government assumption of National Pension Fund and Transitional Unemployment Benefit contributions for people with income of Rs3,000 (US$103.27) per month or less; and
- an option for employees to divert all or part of their monthly NSF (National Savings Fund) contribution into premiums for private health insurance.
Broader eligibility sought for maternity leave
The Commission for Gender Equality (CGE) and Cosatu (Congress of South African Trade Unions) have teamed up in a campaign to expand the range of female workers eligible for maternity leave benefits. Currently the informal sector, casual workers, part-timers, subcontractors and women in certain professional occupations, such as lawyers and consultants, are ineligible for benefits. The two bodies are consulting with stakeholders before drafting proposals for spinning off a maternity benefits fund distinct from the Unemployment Insurance Fund (UIF) that now pays the benefit.
NSSA benefits under scrutiny
Newsday, The Herald
The National Social Security Authority (NSSA) met with social partners last week to discuss the inadequacy of benefits under the current system (the state pension is under US$40 per month) and to demonstrate that the current contribution level doesn’t even cover that meager amount. Officials made the case for higher contributions and/or raising the salary subject to contributions with illustrations of how benefits would improve under these scenarios. The social partners agreed that the benefit is too small but reserved their judgment on the NSSA proposals.
Super core provisions bill; Various
Financial Standard, The Australian, Smart Company
The Treasury has submitted Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011 to Parliament. It incorporates many of the provisions in the recent exposure draft (IH 10/05/11), including those on the definition of MySuper product, the licensing process, contributions and fee limits. Tweaks to the original would allow more factors to be included in a lifestyle investment strategy (details are saved for the regulations) and provide more clarity on sanctioned fees. The deferred measures will cover trustee responsibilities, scheme disclosure requirements and APRA’s (Australian Prudential Regulatory Authority) role as regulator of the sector.
In other news:
- The Workplace Relations Minister announced that companies facing “significant changes” under the harmonization of occupational health and safety laws (IH 10/26/11) will be granted a 12-month “or more” grace period with respect to the 1 Jan 2012 deadline for compliance. He also exhorted the two straggler states of Victoria and Western Australia to stick to the original deadline.
- The Prime Minister has decided to support the Fair Work Australia (FWA) ruling on pay equity in the community sector (IH 05/25/11). In advance of the final ruling on the award, she has notified FWA that the increase is now budgeted.
- Chartered Secretaries Australia has drawn attention to the consequences of new amendments to the Corporations Act (IH 06/29/11). Directors and “closely related parties” including family members who vote their own shares or undirected proxies on remuneration reports could face jail sentences.
IRDA guidelines for pension products; Ruling on EPF debt in a bankruptcy
AIR Business Standard, Economic Times
The Insurance Regulatory and Development Authority (IRDA) has issued Guidelines for Pension Products, instructions to life insurers on the pension products they may offer. The anticipated mandatory annuity is announced as well as a menu of options for taking the benefit distribution fully or partially in an annuity. In place of the 4.5% guaranteed return, the insurance policy would set either a minimum return or a guaranteed maturity benefit. The guidelines also include detailed disclosure requirements. They come into effect on 1 Dec 2011.
Also, the Supreme Court has delivered a landmark decision on the status of Employee Provident Fund members in a company liquidation. It ruled that an employer’s EPF obligations to employees have priority over repaying secured creditors. However, other debts to employees are not affected by the ruling.
Final BPJS bill wasn’t final after all
The final vote on the Social Security Providers Bill (IH 11/09/11) – hastened by the angry crowd outside Parliament – proved to be something short of assent to a definitive final text. A final draft was completed several days later and passed on to the State Secretariat for approval. The President will then have 30 days to enact it. Some legislators and unions are questioning the constitutionality of its procedural shortcuts. Moreover, social partners are teaming up for a constitutional challenge to the provisions that will require formal sector workers and employers to pay high premiums in order to finance coverage for the informal sector.
Proposal to include foreign workers in the public health system
The head of the Knesset Committee on Foreign Workers has released the finding of a study on the private health insurance market for migrant workers. Inflated premiums and bureaucratic obstacles to reimbursement were shown to be common. He has now proposed that the public health system be extended to this population. The Health, Finance and Justice Ministries are nearing conclusion of an interministerial investigation into the same issue and will soon deliver their proposals to the administration.
Consumption tax bill update
Daily Yomiuri, Jiji Press
The long-delayed consumption tax bill (IH 10/19/11) to help finance both social security and disaster recovery will soon be ready for submission to the Cabinet. It is slated to reach the Diet by the end of fiscal 2011 (March 2012). Some officials are now saying that the increase from 5% to at least 10% would come in stages and that there would be reduced rates on essential goods, at least for low-income people.
More campaign pledges; Draft guidance on employment status
Tax Analysts, Dominion Post, NZH
The main opposition Labour Party has added another front to the general election, campaigning with a children’s policy package featuring extension of paid parental leave from 14 weeks to 26 followed by a review of the prospects for “establishing a more radical approach.” The Green Party is gaining some press coverage with a plan for a public option KiwiSaver provider that would charge far lower administrative fees. This would be accomplished by economy of scale and a streamlining of offerings inspired by Australia’s MySuper model.
Meanwhile, Inland Revenue has opened a brief consultation on an Exposure Draft of guidance on determining one’s employment status for income tax and GST (goods and services tax) purposes. It consolidates a variety of tests and definitions for differentiating “contract of service” (employee) from “contract for service” (independent contractor). Comments are welcome through 25 Nov 2011.
Provident fund investment disclosure rules
The next meeting of the Securities and Exchange Commission of Pakistan (SECP) will feature a vote on measures that would set stricter disclosure requirements for the management and investment of provident fund accounts. The SECP has determined that insufficient accountability has led to lax investment policies and some instances of corruption. One provision would limit investments in affiliated companies to 10% of assets.
OFW posting ban reconsidered
Philstar, PDI, Thai News
Legislators warned the Foreign Affairs Secretary that withholding Philippine workers from posting to 41 countries and territories determined to have inadequate worker protection rules (IH 11/09/11) would cause a surge in local unemployment figures. He in turn convinced the Philippines Overseas Employment Administration (POEA) to reconsider. The POEA and the Department of Foreign Affairs (DFA) have now consulted on the matter with an eye to both reviewing the list (compiled by DFA) and expediting bilateral worker protection agreements with the noncompliant states. The POEA will soon post Governing Board Resolution (GBR) No. 8, rescinding the ban issued in GBR7 and giving a 90-day reprieve on new certification for these countries, which would have taken effect 17 November under GBR7.
Typhoon leave proposal shrinks
China Post, Taipei Times
The administration’s proposal for paid family leave on typhoon days was initially seven days, five at full pay (IH 09/22/11). It was reportedly upgraded to seven days’ leave at full pay when the Cabinet approved it. Stakeholders are now in an uproar because the Council of Labor Affairs (CLA) has published the Care for Children in Times of Natural Disasters Act, which would grant parents only three hours of paid leave per year, and that only if both are salaried workers and their employers do not have day care facilities.
Jersey 2012 Budget passed
Tax Analysts, BBC
The States Assembly has passed the 2012 Budget (IH 10/05/11). All of the provisions highlighted earlier in IH have survived intact.
Pension, health and labour reform measures passed; Health reform phase II; Tax reform stalls
GIDA, CTK, CIA
Several major reform bills presented by the ruling coalition as “necessary like a bitter medicine” were gathered into a single package and passed in Parliament after six marathon days of debate. They include pension, health and labour reform measures (IH 09/22/11) that have gone through a variety of legal maneuvers in recent months:
- The health reform bill faced a court challenge after it was signed by the President (IH 10/05/11) and was bounced back to Parliament for further consideration. It is a public/private hybrid model with generally higher copayments and allows for more patient involvement in decision-making.
- The pension reform bill (IH 10/19/11) would give workers the option of transferring part of their state pension contribution into a second-pillar pension fund. It includes the transposition of EU rules on cross-border pensions (IH 07/20/11) and offers two annuity formulas.
- The labour reform measures would double the new employee trial period to six months, set a three-year limit on fixed-term contracts and raise the time limit on a work performance contract from 150 to 300 hours.
While Parliament's vote was depicted as somewhat of an endgame for final passage of government-sponsored austerity measures, it is far from certain that there will be no further challenges. Incidentally, the Finance Minister has warned that the newly passed pension reforms, which are slated to launch in 2013, may have to be postponed to 2014, but said that he will do “everything possible” to keep implementation on schedule.
Soon after passage of the health reform measures, the Health Minister outlined (Czech only) the bills that would comprise phase II of health care reform. An act on long-term care would better coordinate patient support between health facilities, nursing homes and home health care. A health insurance law would tighten the regulatory framework for the sector, requiring more transparency, disclosure and accountability. There is also a project for “rationalization of the network of medical facilities” that would better coordinate resources with the demand for care. Another item on the horizon is the coverage regulation for 2012, which will introduce a Diagnosis-Related Group (DRG) system for medical care fees (IH 08/10/11). The DRG schedule is now expected to be in place for approximately 75% of medical care by the end of 2012.
In addition, the Finance Ministry’s tax reform proposal (IH 08/31/11) that recently won the Cabinet’s approval has taken one step backward. This is in part because coalition parties have not been able to resolve their differences on a measure that would remove the tax exemption on employer-provided meal vouchers. The coalition leaders have announced that all measures except a new gambling tax will have their target implementation date pushed back by a year to early 2014.
Copenhagen Post, DRE, IPE
The Finance Ministry has published (Danish only) its 2012 Budget, featuring some significant proposals affecting employee benefits:
- Tax exemptions for direct distribution of shares to employees would be eliminated. It is not clear whether existing schemes would be grandfathered. The formula for stock options that taxes the gain at exercise would not be affected.
- The annual limit on contributions to annuity pension schemes would be reduced from DKK100,000 (US$ 18,454) to DKK55,000, but a plan to introduce an annual DKK100,000 ceiling on the popular life-long pension schemes did not materialize.
- Employer-paid health plans would lose their tax exemption. Employer subsidy of certain specified treatments, generally drug rehabilitation and smoking cessation programs, would remain tax-free.
- The multimedia tax would be rescinded and replaced with a regime tailored to give more targeted tax breaks on employer-provided computers, internet service and phones used for telecommuting.
- The CPR public health insurance card would no longer entitle a person to coverage outside of Denmark. The European Health Insurance Card (EHIC), also known as the blue card, would serve the same role for Danish citizens, but Danish residents who are not EU citizens do not qualify for one.
FTT exemption for pension mulled; Various
Insurance Newslink, Euractiv, IPE
The head of Parliament’s committee for financial regulation has stated that the Financial Transaction Tax proposal (IH 10/05/11) has significant backing and that the committee is looking into modifications to make it more viable, “and that middle ground could be to exempt pension funds.” Prominent analysts warn that without that exemption, pensioners would bear the brunt of the new tax.
In other news:
- The European Market Infrastructure Regulation (EMIR) directive (IH 06/02/11) is now in place with a three-year “special regime” exempting pension funds from the counterparty clearinghouse requirement for derivatives trading. Experts are now warning stakeholders that they should have contingency plans in case the temporary exemption is not renewed after three years.
- The European Commissioner responsible for financial services has observed that existing controls on remuneration in the banking sector have not sufficed to curb disproportionate pay and bonus increases. The “next framework” for remuneration limits in that sector is now in preparation.
- The European Insurance and Occupational Pension Authority (EIOPA) has released a pair of consultations on draft guidelines under the Solvency II Directive. One covers an undertaking's own risk and solvency assessment (ORSA), the other reporting and disclosure. Both welcome comments through 20 Jan 2012.
LQM, Tax Notes, IBFD
PLFSS, Social Security Finance Bill 2012 (IH 10/05/11), moved quickly through the Cabinet and the National Assembly, then reached the Senate Social Affairs Committee, which pronounced it “indigent, irresponsible and unrealistic.” The Senate has since completely rejected the underlying calculations and forecasts of the bill and has introduced several new revenue measures as well as one tax break:
- The recent doubling of the levy on complementary health insurance to 7% (IH 09/28/11) would be reversed.
- The on-again-off-again income tax and social security charges on overtime pay are back on.
- A number of tax increases on executive pensions, bonuses, stock options and other stock schemes were introduced.
- A schedule of annual Medicare deductibles for people in higher tax brackets would be introduced for 2012-15.
- The 2% social levy – already flagged for a rise – would increase by about 3% while the social levy on capital from income would go up 0.5%.
The Senate gave its final approval to the revised bill yesterday and a joint committee is likely to make additional changes. Final passage is expected on 19 November.
Labour code advances to plenary debate
Real Deal, MTI
The administration’s draft labour code (IH 10/26/11) cleared Parliament’s Employment and Labour Committee in a strictly partisan vote. It advanced to plenary debate last week.
Austerity measures update
Dow Jones, ANSA, AKI
The compromise that got an austerity package passed last month (IH 10/12/11) fell apart in political squabbling. The Prime Minister then promised to step down as soon as the legislation passed. A “maxi-amendment” (Italian only) to the 2012 Budget, including most of what the European Central Bank had been promised, then quickly passed in the Senate. In this version, the normal retirement age would climb to 67 one year later than previously planned, in 2026. Labor reform measures have been deferred until after the administration consults with social partners. These proposals would reduce barriers to firing workers during an economic slump, provided there is a severance payment, and alter the rules on collective bargaining.
Pension cost disclosure standards
Finance sector regulator AFM has now endorsed fee disclosure guidelines developed by the Pension Federation. Uniform reporting standards with comply-or-explain status will now be phased in. The goal is full transparency on all aspects of pension administration costs. The timeline for the transition has not yet been set and will, in some cases, be hampered by the terms of existing contracts.
2012 budget bill advances
Reuters, Economic Times, Expatica
The 2012 budget bill (IH 11/09/11) passed easily in its first reading last Friday, with the ruling party and its allies supporting it as a bloc and the main opposition party abstaining. In one measure that had not turned up in earlier accounts of this bill, pensioners with income over €1,000 per month would no longer be eligible for the 13th and 14th month bonus payments. Parliament’s final vote on this package is scheduled for 30 November.
Maternity leave expansion proposal panned; Hospital transformation suspension
SITA, Slovak Spectator, BBC
Both the Confederation of Trade Unions (KOZ) and the National Union of Employers (RUZ) have made formal submissions to the Labor Minister questioning the wisdom of extending maternity leave and upping the income replacement formula (IH 08/31/11) while the social security agency, which finances such leave, is already in deficit and liable to see its funding cut soon (IH 10/19/11).
Also, with thousands of doctors threatening to cancel their contracts at the end of this month in protest over the transformation of state-run hospitals into joint stock companies, the President has proposed suspending the hospital “transformations” until at least after the parliamentary elections next March. Parliament is holding an extraordinary session on this proposal.
Labour reform is a campaign issue
El Pais, Reuters, Bloomberg
The conservative People’s Party holds a commanding lead over the ruling Socialist Party in the final weeks before the 20 November election. Its proposals (Spanish only) include much talk of labour market liberalization, but few details so far. This coincides with a well-received push from the Association for the Rationalization of Spanish Schedules to switch the standard day from two shifts with a long siesta in the afternoon to a single shift with a meal break as short as half an hour.
Parental leave proposals; Ordinance on cross-border medical reimbursement; Minimum wage referendum
Geneva Lunch, Swiss Info, SDA
The Federal Commission for Women’s Issues (CFQF) and the Federal Coordinating Committee for Family (COFF) have both proposed (French only) statutory paid parental leave including paternity leave rights (IH 06/29/11). The COFF plan recommends up to 24 weeks of parental leave with each parent entitled to at least four weeks while the CFQF plan calls for a minimum of 24 weeks with parents afforded the right to share the period equally.
Also, the Federal Council has approved (French only) an ordinance bringing Switzerland into compliance with the medical care provisions of the EU rules on coordination of social security systems and free movement of people. Anyone insured in Switzerland but residing in an EU or EFTA (European Free Trade Association) state will receive care whether in their state or Switzerland and receive a reimbursement based on actual costs. This will replace a formula that has penalized non-resident members of the Swiss health insurance system. The change will take effect in January 2013.
In addition, the Swiss Federation of Trade Unions (SGB) advised the government that it had collected enough signatures to force a referendum on setting a monthly minimum wage of SFR4,000, which would work out to SFF21.98 (€17.86) per hour for a standard 42-hour work week, the highest minimum wage on earth. Employer federations have issued dire warnings against this move.
Consultation on levy cuts; Various
Money Marketing, Daily Telegraph, Financial Times
The Department for Work and Pensions has opened a consultation on Occupational and Personal Pension Schemes (Levies – Amendment) Regulations 2012. The draft regulations propose cutting the general levy by no less than 12% and the Pension Protection Fund (PPF) administrative levy by at least 25%. This is presented as a gesture to help keep defined benefit schemes viable. The consultation runs through 30 Jan 2012.
In other news:
- The Migrant Advisory Committee (MAC) has launched a call for evidence on refinements to the formula for tier 2 of the points-based system. Besides stricter standards on skill levels and command of the English language, a tighter definition of minimum salary would exclude allowances from a salary threshold that MAC recommends setting at £35,000. The consultation will close on 21 Dec 2011.
- The Prime Minister is not satisfied with the lack of restraint on executive compensation in publicly traded companies and the Deputy Prime Minister added that “the policy of reward for failure must change.” Although they have served notice that the issue is in their sights, the Prime Minister has noted that there is nothing to gain from doing battle with the private sector. The Business Secretary is considering a few legislative options including binding shareholder votes on executive pay and mandatory inclusion of employees on remuneration committees.
- The Employment Minister has announced plans to sue the European Commission in the European Court of Justice (ECJ) over its reported plans to allow people from non-EU countries in Eastern Europe and North Africa to claim benefits in EU member states. He added that he was increasingly open to calls from the more isolationist voices in Parliament to hold a referendum on continuing EU membership.
Job support package; Default CPP deductions for older workers; PRPP consultation
Globe and Mail, TNS, Dow Jones
The Finance Minister has unveiled a job support package that is essentially a retreat from a couple of earlier messages. A planned increase of up to 10 cents per $100 in the 2012 Employment Insurance premium will now be capped at 5 cents. A recently lengthened work-sharing program that subsidizes giving workers reduced hours rather than laying them off will now be extended by an additional 16 weeks, bringing the maximum duration of a work-sharing agreement to 54 weeks. The maximum will only hold for existing agreements as the government has only agreed to funding them through October 2012.
Also, Canada Revenue Agency (CRA) has posted guidance on changes to the rules for Canada Pension Plan (CPP) deductions that come in to effect on 1 Jan 2012. CPP contributions will be deducted from the salaries of workers age 60 to 70 – even those already receiving benefits – unless they submit a form to the CRA notifying it of their intention to cease contributions. Incidentally, another recent CRA release announced the 2012 adjustments to pensionable earnings.
Meanwhile, the Finance Minister recently showcased the Pooled Registered Pension Plans (PRPP) model (IH 10/26/11) in a keynote address at the World Pension Summit. The press release appends an e-mail address for an informal public consultation soliciting feedback on how to implement the PRPP system. There was no mention of a cut-off date.
Supreme Court to hear health reform challenge
NYT, WSJ, Employee Benefits
The US Supreme Court has agreed to hear a constitutional challenge to the Patient Protection and Affordable Care Act and has posted a set of submissions related to the case. The administration’s position that a minimum coverage mandate is legal was bolstered by the latest appeals court ruling, an unexpected victory before a conservative panel. The court expects to hear oral arguments by next March and issue a decision in June.
Labor law modernization
The Planning Minister noted in a recent speech that early stages of a labor law modernization study are now under way. Some of the laws are “very old” and she aims to strike a balance between securing worker rights and being more competitive in a global marketplace.
Tax regimes for voluntary retirement plans lose disincentives
BNamericas, Diario Financiero
Congress has overwhelmingly approved (Spanish only) a Finance Ministry capital reforms package featuring measures that protect against double taxation of contributions to APV voluntary retirement accounts and Cuenta 2 voluntary long-term savings accounts (IH 01/20/11). It also now allows for having Cuenta 2 accounts with two separate AFP pension fund administrators.
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