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:
Canada: PRPP legislation, backlash
China: Rules on dispute resolution
EU: Single Permit Directive adopted
Hungary: Final stage of dismantling second pillar; Labour Code clears Parliament
India: Panel proposes regulatory framework for UHC; PFRDA bill advances
Netherlands: Higher standards for pension advisers
US: Temporary FATCA rules, filing guidance
SPF levy rise
IBFD, Tax Analysts
The Seychelles Pension Fund was launched last January with employers and employees contributing 1% each to finance the scheme. The figure had initially been set at 1.5% each and now the 2012 Budget proposes raising it to that level. The employer levy would be the higher of 1.5% of gross salary or SCR50 (US$3.80).
Reports on supporting an aging workforce; Various
The Australian, Tax Analysts, The Age
Release of a government-commissioned report on any given topic doesn’t necessarily mean that legislation will ensue, but simultaneous releases from the Treasury and the Minister for Employment Participation suggest that the workforce role of seniors is a major concern. The interim report of the Consultative Forum on Mature Age Participation, Ageing and the Barriers to Labour Force Participation in Australia, surveys issues affecting the job market for seniors. These include age discrimination in employment, flexible workplace arrangements and skills training. The Advisory Panel on the Economic Potential of Senior Australians’ report, Realising the economic potential of senior Australians: turning grey into gold, covers much the same territory and offers a number of recommendations. These include reviewing federal anti-discrimination laws and auditing federal, state and territorial laws for any possible barriers to hiring seniors.
In other news:
- The Australian Tax Office (ATO) has issued the Draft Taxation Ruling TR 2011/D6, a consultation on guidance supporting the new regulations on the deductibility of total and permanent disability insurance premiums paid by a superannuation fund (IH 10/12/11). Comments are welcome through 3 Feb 2012.
- Another ATO consultation SuperStream contributions message implementation guide – for industry comment covers the data standards for super contribution transactions under the SuperStream reforms. The consultation closes on 31 Jan 2012 and supporting legislation is expected in the first half of the year.
- The Australian Council of Super Investors (ACSI) has cast a harsh spotlight on the growing practice of paying hidden dividends on unvested shares in incentive-based share schemes. ACSI has started engaging companies in which it has a stake on both this policy in general and the frequent lack of disclosure in particular.
Rules on dispute resolution; TCM crackdown
Xinhua, China Daily, CLB
New regulations that take effect on 1 Jan 2012 will introduce a mechanism for handling dispute resolution to ensure that most conflicts are resolved peacefully. Regulations on Consultation and Mediation for Labour Disputes in Enterprises will make labour dispute mediation committees mandatory in large enterprises and encourage them in smaller companies. An equal number of employee and employer representatives will serve renewable one-year terms and companies with multiple worksites will have some degree of committee representation at all significant locations. The committees would also apprise workers of relevant labour law changes and address employee concerns in mergers and relocations.
Meanwhile, traditional Chinese medicine (TCM) has remained an important part of the Chinese health system while escaping the scrutiny faced by the pharmaceutical sector. Recent scandals with fraudulent, contaminated and “doctored” herbal remedies have compelled the State Council to draw up a drug safety plan that will introduce standardized production and a mechanism for tracing these medicines back to their place of origin.
Panel proposes regulatory framework for UHC; PFRDA bill advances; EPF guarantee status; Contract worker bill update
Business Standard, The Statesman, Economic Times
The High Level Expert Group Report on Universal Health Coverage for India, a large package of proposals for fleshing out the blueprint for Universal Health Coverage, was submitted to the Planning Commission last week. An entity called the National Health Regulatory and Development Authority (NHRDA) would be responsible for regulating and monitoring both the public and private health sectors. Its responsibilities would include overseeing provider and facility accreditation, drafting a patient’s bill of rights, developing treatment guidelines, maintaining quality assurance and improving dispute resolution. A separate panel of experts would develop the national health coverage package for UHC. Stakeholder consultations will be held in the coming months and the commission will issue a final report in March 2012.
Also, the PFRDA (Pension Fund Regulatory and Development Authority) Bill, 2011 (IH 12/01/11) seemed to be stalling in Parliament, but the government has now reached a “broad agreement” on support with key opposition party BJP. The accord features a government concession on capping foreign direct investment (FDI) at 26% and a compromise on a safe investment return assurance (for investing 100% in government securities) that would fall a bit short of a guaranteed return. By some accounts, the long-awaited legislation could pass in the next few days.
Meanwhile, the Employee Provident Fund Organisation (EPFO) Central Board of Trustees (CBT) has a guaranteed minimum monthly benefit for all members (IH 12/14/11) on the agenda for its 23 December meeting, but officials characterize the proposal as dead in the water because no one has found a viable way to fund it.
In addition, the Labour Minister has reached an impasse with the committee of secretaries over a Labour Code consolidation that would feature equal rights for contract workers (IH 10/26/11). There has already been a “comprehensive” study on the ramifications of upgrading contract worker status but the committee wants another. The Cabinet Secretariat has been asked to intercede in this matter. The minister meanwhile is discussing the issue with legislators.
Social security contribution hike
Parliament has passed a set of Income Tax Ordinance amendments attributed to the Trachtenberg Committee recommendations (IH 10/19/11). One measure will raise the 5.9% employer social security contribution rate to:
- 6.5% in 2014
- 7% in 2015
- 7.5% in 2016
National Health Insurance Bill
Minivan News, Haveeru
The universal health insurance scheme that started accepting voluntary members last year (IH 02/10/10) and has just now found a match for its private/public partnership (IH 12/07/11) still does not have a full legislative framework in place. The administration recently submitted its National Health Insurance Bill to Parliament where over 90 amendments have so far been proposed. The bill would tentatively finance the system with a 3.5% worker contribution, but some believe that a tax on tobacco products would suffice. One amendment would make participation mandatory for the expatriate workforce.
Occupational health action plan
Stuff, Voxy, FUSMED
Weeks after last month’s consultation (IH 11/09/11) closed, the Department of Labour issued Occupational Health Action Plan to 2013, outlining a score of initiatives to address occupational safety in general and five advancing hazards (carcinogens, noise, skin irritants, respiratory damage and psycho-social impacts) in particular. Building the knowledge base on occupational hazards, developing an occupational disease surveillance framework and providing greater support for the field of occupational medicine are among the measures being undertaken.
The Supreme Council of Health (SCH) has provided some updates on the development of a social health insurance scheme (IH 06/29/11):
- A new state-owned company would engage with the private health sector in the private/public partnership.
- Licensing standards are being developed in coordination with the Gulf Cooperative Council (GCC), which plans to launch GCC-wide licenses for health care professionals.
- All nationals, residents and visitors would be covered by this scheme.
- The common practice of subsidizing medical treatment abroad will be sharply curtailed as local facilities are upgraded and modernized. “Nationalization” of medical treatment would involve creation of a panel to both review all overseas referrals and hear the grievances of patients denied referrals.
- A network of “wellness clinics” would combine preventive medicine with gyms, swimming pools and nutrition classes.
- Implementing legislation is due early next year and the launch is tentatively set for mid-2012.
Early retirement disincentives
On a separate track from the new government’s plan to gradually raise the retirement age from 60 to 62 (IH 12/01/11), the 2012 Budget (IH 12/07/11) includes a new tax regime on the redemption of pension benefits. Those who work until age 65 would pay 10%. The levy would be 20% for those who retire at 60, 18% at 61 and 16.5% from 62 to 64.
Parliament overrides presidential veto of pension reform
As expected (IH 12/14/11), the President’s veto of the retirement age hike legislation did not stand and there are no further procedural hurdles. Moreover, he leaves office in January and his successor supports the measure. The first installment of the retirement age hike (63 to 65 for men and 60 to 63 for women, in four-month increments) will arrive next month.
Single Permit Directive adopted; Various
GIDA, European Voice, Euractiv
Parliament has granted final approval to the Single Permit Directive (IH 12/14/11), giving member states until 13 Dec 2013 to transpose it into their national legislation. Along with the cross-border recognition of work permits, there will now be a single procedure for obtaining work and residency permits. Next month, Parliament will start the first phase of negotiations on draft directives setting the rights of intra-company transfers and seasonal workers, neither of which category is covered by the Single Permit Directive.
In other news:
- Parliament has adopted a resolution giving urgent priority to rules reflecting occupational health and safety ramifications of quickly evolving technologies. It also asks the commission to follow up on member-state implementation of the 2004 EU Framework Agreement on work-related stress (IH 10/27/04).
- Another parliamentary resolution exhorts member states to open their job markets to Bulgarian and Romanian citizens by the end of 2011.
- The European Insurance and Occupational Pensions Authority’s (EIOPA) Report on pre-enrolment information to pension plan members finds wide disparities and many shortcomings in member state rules on pre-enrolment disclosure requirements.
- Last month, the European Commission introduced the EU Immigration Portal website, an information clearinghouse for foreign nationals interested in EU and member states' rules and procedures for immigration.
Final stage of dismantling second pillar; Labour Code clears Parliament
MTI , BBJ, IPE
The stakes in the legal battles over diversion of second-pillar pension contributions to the state pension (IH 09/01/11) had been unclear until last week because the arrangement was ostensibly temporary. New austerity measures announced last week and passed by Parliament on Monday confirm that the re-routing of member contributions will be permanent. A revised constitution that goes into effect on 1 January removes the Constitutional Court’s powers to block this move. Pension fund association Stabilitas may seek justice in international court.
Also, Parliament has passed the Labour Code (IH 12/07/11) after a number of late-stage “genuine compromises.” Among the highlights of the final version:
- Minimum wage may vary by sector or region.
- The 200-hour ceiling on overtime will rise to 250 hours, or 300 if approved in collective bargaining.
- The minimum annual leave period remains 20 days, but employees will have greater flexibility in how to structure vacation periods.
- Workers will maintain relative job security during the five years before retirement age, but employers will be able to fire them with cause.
All of these measures come into effect on 1 Jul 2012. The Socialist Party plans to stage a referendum against the new law.
Consultation on DC plan regulation
The Pensions Board has launched Consultation on the simplification of defined contribution pension provision. It sets out criteria for determining which regulations are overkill and identifies some areas that merit consideration. The latter include the variety of personal pension vehicles, the requirement to annuitize even small pension pots and a range of disclosure requirements that could prove excessive. Interested parties should leap on this one by 29 Feb 2012.
Austerity package advances
ANSA, Dow Jones, Vancouver Sun
The Prime Minister’s fiscal reform decree (IH 12/07/11) survived a confidence vote in the lower house of Parliament with relatively few changes. The monthly income threshold for a temporary freeze on pension benefit indexation rose from €936 to €1,400. The Senate is expected to endorse the decree by the end of this week.
Temporary reduction of second pillar transfer
ELTA, Baltic Daily
The parties of the ruling Homeland Union coalition have signed an agreement on trimming next year’s scheduled transfer of contributions from the SODRA social insurance fund to the second-pillar retirement savings scheme. To help restore temporarily cut SODRA benefits (IH 12/14/11), the 2% diversion to the second pillar will be 1.5% for 2012. The agreement commits coalition members to spring 2012 passage of pension reform legislation (IH 07/14/11) that would set a 2% transfer rate for 2013 and gradually raise the amount siphoned from SODRA to 3.5%.
Higher standards for pension advisers; Various
DutchNews.nl, Reuters, The Independent
Following the dismal results of a review of the training levels of professional pension advisers, the Finance Ministry has raised the bar for their skill requirements (Dutch only). Amendments to the regulations on Financial Enterprises cover a more comprehensive knowledge base and a wider set of competencies. The higher standards will apply for financial service companies from 1 Jan 2012. Service providers may transition to 1 Jan 2014.
In other news:
- The Finance Ministry has drafted legislation on a bank levy that is due to take effect in mid-2012. The 0.011% levy on long-term debt and the 0.022% tax on short-term debt would have a 5% surcharge in banks that pay directors bonuses higher than their annual salaries.
- The Economic Affairs Minister delivered a mixed review of compliance with the corporate governance code (Dutch only). He opposes legislating any of this, but he has exhorted companies and executives to negotiate golden handshakes no higher than one year’s salary.
- Noting that temporary workers take a higher rate of sick leave, the Minister of Social Affairs has proposed (Dutch only) basing the benefit on employment history. From 1 Jan 2013, sick leave would be paid at 70% of salary and the worker’s employment history would determine how long before it dropped to 70% of minimum wage. Also, the employment agency would pay the first two weeks of sickness leave.
Dow Jones, IBFD, Warsaw Voice
The Cabinet has approved the 2012 Budget (Polish only) and it is now before Parliament. Two measures stand out. The employer old-age pension contribution would rise from 9.76% to 11.76%. Also, a person’s contributions to an individual private pension account would be tax deductible.
Pension investment rules
The Council Supervisory Commission of the Private Pension System (CSSPP) has published Standard on Investing and Valuation of Assets of Private Pension Funds (Romanian only), a modernization and consolidation of the rules for both voluntary and second-pillar pension funds. Infrastructure and private equity investments will now be allowed, both capped at 10% of assets. It also stipulates that market price will be used for the valuation of fixed income instruments.
Consultation on small pension plots, notice on short service refunds; Various
Money Marketing, Personnel Today, IPE
The Department for Work and Pensions (DWP) is holding a public consultation on Meeting future pension challenges: improving transfers and dealing with small pension pots. It proposes making it easier to transfer the contents of small pension pots when someone changes jobs after a short stay. It recommends using a “single aggregator scheme,” preferably the National Employment Savings Trust (NEST), for default transfers. Also, the document announces – not subject to consultation – that the government aims to abolish short service refunds to employers of both employer and employee contributions to occupational defined contribution plans when a worker leaves a job early. This would entail legislation, which the DWP aims to bring into effect on 2014. Comments are welcome through 23 Mar 2012.
In other news:
- The DWP has published The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2011, final regulations on how employer debt to a multiemployer pension plan is triggered by a reorganization (IH 07/14/11) and how that debt is settled. The rules will take effect on 27 Jan 2012.
- The Pension Minister’s preview of a code of conduct (IH 12/14/11) for the full range of pension buy-out/risk transfer arrangements didn’t mention a stage two. A speaker at a pension industry conference related her discussions with the minister who said that if the code – now scheduled for May release – does not suffice, legislation will be necessary.
- The Justice Ministry is consulting on a controversial proposal to charge fees for filing claims with employment tribunals. Two sets of fee schedules, ranging up to £1,250 when there is an actual hearing, would discourage frivolous use of the tribunal system but would also place workers at a disadvantage. The consultation will run through March.
PRPP legislation, backlash; Various
Benefits Canada, Law and Tax News, Canadian Press
The Finance Department has opened a consultation on the draft legislation, Pooled Registered Pension Plans Act (IH 10/26/11). These measures provide the regulatory framework for plans covered by federal law, but the tax rules would apply to both federally and provincially regulated PRPPs. Some key details:
- Employer contributions to a PRPP would vest immediately and would be tax exempt for the employee.
- Worker contributions would be tax deductible and would have the same annual limit as Registered Retirement Savings Plans (RRSP).
- Rather than strict investment caps, there are general rules on level of diversification and limiting the level of investment in a particular business.
Many pension experts have now weighed in with their misgivings about the PRPP model. For low-risk enhancement of retirement income, the expanded CPP (Canadian Pension Plan) (IH 07/14/11) still has many influential backers. Bracketing that argument, there is also a push for revising the PRPP approach. One high-profile critique is Saving Pooled Registered Pension Plans: It’s Up To the Provinces.
Additional news plus a correction:
- Canada Revenue Agency’s (CRA) Interpretive Bulletin IT-529 Flexible Employee Benefit Programs states that from 1 Jan 2013, converting any bonus compensation into credits in a health care spending account (HCSA) would render it taxable income. Mercer colleagues and Select subscribers may access a Communiqué that views this ruling as further evidence of a CRA initiative to “squeeze more tax revenue from … non-pension employee benefits.”
- Another CRA posting offers guidance to older workers affected by imminent changes to the CPP tax regime. From 1 Jan 2012, workers between ages 60 and 65 who are receiving CPP benefits will still have to contribute to the program. Those both working and receiving benefits from age 65 to 70 may opt out of further CPP contributions if they complete the necessary paperwork.
- The initial distribution of the item on the Ontario caregiver leave bill (IH 12/14/11) included a reference to a “ruling coalition.” Actually, the ruling party currently has a minority government and is working on assembling a coalition for passage of this bill.
Deadline extension for US retirement plan transfers
US Internal Revenue Service Notice 2012-6 provides another extension of the deadline for transferring Puerto Rican residents from a qualified US retirement plan to a qualified Puerto Rican plan (IH 12/22/10). Most plans will get a one-year extension to 31 Dec 2012, but qualified US retirement plans that participate in group trusts will – for now – have an indefinite extension.
Temporary FATCA rules, filing guidance
Forbes, Tax Analysts, Economic Times
Two days ago, the Internal Revenue Service (IRS) answered many questions about the Foreign Account Tax Compliance Act (FATCA) (12/14/11), but there is still some confusion among stakeholders. Monday’s release of both the temporary regulations Reporting of Specified Foreign Financial Assets and Form 8938, Statement of Specified Foreign Financial Assets occasioned some relief for those taxpayers who fell below unexpectedly high thresholds, but the pension and deferred compensation guidance is essentially limited to addressing valuation problems.
Same-sex survivor benefits
Hoy, AFP, Aciprensa
The Social Security Institute (IESS) cited the new constitution’s guarantee of equal rights to same-sex couples in its precedent-setting award of a monthly survivor pension to a lesbian whose companion had died. Incidentally, the constitution does recognize civil unions, but getting notaries to register unions in this still-conservative society has proven difficult.