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: Health reform developments
Canada: Extraterritorial issues in a pension bankruptcy
China: Health reform initiatives
EU: Maternity leave directive clears committee
Singapore: 2010 Budget
US: Middle Class Task Force report includes 401(k) investment advice regs
Social security harmonization; Drug purchasing agreement
East African, New Vision
The East African Community’s (EAC) East and Central Africa Social Security Association (Ecassa, IH 04/26/07) has posted a three-year plan for harmonizing member state social security plans. This will entail minimum standards for member state programs and benefit portability for cross-border workers. Another EAC initiative would consolidate the drug purchasing power of 14 member states, both to manage cost and to tighten the procurement process in a region that has had problems with counterfeit drugs getting onto the market.
Equal pay convention
The Cabinet has agreed to forward the International Labor Organization’s C 100 Equal Remuneration Conventionto the National Assembly. The convention commits to equal pay for equal value, and it is the one ILO core labor standard that Namibia has yet to adopt.
A few more 2010-11 budget measures
SAPA, Tax Analysts, The Star
Further examination of budget (IH 02/24/10) synopses yielded a few more proposals that rate a mention:
- There would be a tax break on post-retirement conversion of annuities into lump sums and it would be subject to the R300,000 lifetime limit for deductions on lump-sum distributions.
- Employer payment of an employee’s professional fees, such as membership renewals and subscriptions, would qualify for tax relief, provided the memberships are integral to one’s occupation.
- The budget review noted that the administration is looking into a simple defined contribution scheme with income protection to cover low-income workers and other segments of the workforce that would generally not belong to an occupational pension scheme.
Social partners propose Labour Act amendments
Zimbabwe Standard, TNS
The Tripartite Negotiating Forum (TNF) has convened to discuss measures that the social partners have submitted to the Ministry of Labour. Zimbabwe Congress of Trade Union (ZCTU) proposals include a 14-day paternity leave, a 48-hour strike notice (down from 14 days), a ban on replacement workers during strikes and the removal of Labour Ministry powers to violate the autonomy of trade unions. The Employer Confederation of Zimbabwe (Emcoz) is aiming for a two-thirds reduction in both the three-month termination notice period and the 90 days sick leave on full pay.
Health reform developments; Various
The Age, LTN, Daily Telegraph
As expected, the Senate has rejected the measure on means testing the private health insurance rebate (IH 02/24/10). The bill may not be resubmitted for at least three months, and the administration is now likely to hold a double-dissolution election in August or September. Another health reform controversy looms as the Prime Minister is about to fulfill a campaign promise on revamping the public hospital system. A new funding model would reportedly have the federal government dealing directly with regional health authorities. Performance would be a factor in hospital payments. Also, the Health Minister announced Senate committee hearings on the government-sponsored Health Identifiers Bill, the first step in the creation of an e-health system for Australia. The hearings will address stakeholder concerns about privacy safeguards in the bill.
In other news:
- Super industry heavyweights have jointly released a negative response to the Super System Review (SSR) consultation on a default universal retirement fund. (IH 12/16/09) They argue that it would be too expensive and that it would give consumers a passive role in retirement planning.
- The SSR has posted A conversation about SMSFs, outlining a cautious approach to refining self-managed superannuation funds.
- The Senate has defeated SJ No. 112 Industrial Relations – National Industrial Manslaughter Laws, a Green Party motion calling for national workplace manslaughter laws.
Bills to tighten insurance industry regulations
FE, Daily Star, UNB
Insurance Act 2009 and Insurance Regulatory Authority Act 2009 are both expected to pass in the winter session of Parliament. First heralded in 2008 (IH 07/10/08), they would raise the standard for paid-up capital, improve insurance company governance and establish an independent regulator. The legislation would consolidate the life insurance sector and create a more hospitable environment for health insurance.
Health reform initiatives; Stabilizing social security benefits
China Daily, SinoCast, Thai News
Several federal agencies have jointly issued the implementing guidelines to allow a 2010 launch of a 16-city (including Shanghai and Shenzhen) pilot project for its public health system reform (IH 04/15/09). The cities will decide which reforms to pioneer and whether to include their entire public health system in the experiment. Shanghai has issued a press release on the consultation for its health reform project, which would aim for public/private coordination on medical services.
Also, an ongoing wage statistics reform is likely to reduce the average salary for urban workers. As social security benefits are based on the average salary, the Ministry of Human Resources and Social Security (MOHRSS) is studying options for adjusting the benefit formula to minimize the impact on participants. The ministry has given assurances that these do not include raising employer contributions.
Working hours clash
Fiji Times, FBC, RNZ
A snafu over plans to eliminate daylight savings time this spring has the school day starting at 9 am while the standard work day starts at 8 am. The Council of Social Services is among those appealing for an urgent coordination of these schedules, preferably by starting the work day at 9 am.
SCMP, Tax Analysts
The Financial Secretary presented the 2010-11 Budget last week. A segment on health care reform (IH 02/24/10) mentions that tax deductions for private health insurance premiums are under consideration. The secretary has noted elsewhere that any deduction would be for health insurance plans that meet certain standards, including no coverage restrictions for pre-existing conditions. A discussion on job market relief measures covers training programs and financial incentives, including the possible continuation of a Transport Support Scheme that subsidizes travel expenses for low-income job seekers who live in remote areas.
2010-2011 Budget offers NPS incentive
DNA, Business Line, Financial Express
The 2010-2011 Union Budget introduces a plan (Budget Speech) to make the New Pension Scheme (NPS) more appealing to the unorganized sector with an Rs. 1,000 (US $21.70) government contribution to each new account opened over the next three years. Contributions in one’s first year must be between Rs. 1,000 – Rs. 12,000. One evidently need not be in the unorganized sector to receive this government match. Another budget proposal calls for a service tax on health insurer payments to hospitals. Unless an anticipated offset materializes, this cost would be passed on to customers.
Committee report on institutional investors
Reuters, Jerusalem Post, Ha'aretz
The Hodak Committee has submitted its report on the investment practices of institutional investors to the Finance Ministry. It found them paying too little heed to the risk involved in sophisticated new investment products, and it flagged the corporate bond market, particularly the secondary bond market, as underregulated. The Finance Ministry is preparing regulations based on the report’s recommendations.
MNC stock option underreporting; Consumption tax hike back on the agenda; Draft ordinance on exec comp disclosure
DRE, Nikkei Report, Dow Jones
The National Tax Administration has signaled a crackdown on underreporting of stock option income in Japanese branches of MNCs. More than 100 employees of one company were tagged over stock options that were kept in overseas accounts and not disclosed on tax returns. Also, the Deputy Prime Minister, who doubles as Finance Minister, said that he wants the government’s new tax panel to develop a proposal on raising the consumption tax and earmarking the revenue for the social security system (IH 06/10/09).
The Financial Service Agency (FSA) has posted its Proposal of Disclosure Items concerning Corporate Governance, a draft rule for top executive remuneration disclosure (IH 02/18/10). A securities report would disclose total executive compensation and would have to provide individual details for anyone with annual salary over ¥100m (US $1.1m). A consultation will close on March 15 and the rule is slated to take effect on March 31.
Social health insurance plan
Katmandu Post. Himalayan Times
A pilot project for Social Health Insurance (SHI) performed well enough that the Health Minister has now appointed a steering committee to draw up a plan for introducing it nationwide. Free basic health services are already enshrined in the Constitution, but the scope is limited so a universal health insurance scheme with a modest premium is still needed.
GST offsets; Youth minimum wage bill
NZ Herald, NZPA, Scoop
The Prime Minister has reassured seniors that a proposed Goods & Services Tax (GST) rise from 12.5% to 15% would be accompanied by provisions protecting the purchasing power of pensioners. The income tax trade-off and an immediate 2% super hike would more than make up for the tax. Moreover, the shift would raise the average wage, which is pegged to the minimum superannuation payment.
Meanwhile, the latest ballot drawing of private member bills yielded Minimum Wage (Mitigation of Youth Unemployment) Amendment Bill, a measure to restore reduced minimum wage rates for youths. An unemployment spike for ages 15-19 is cited in this proposal to exempt the young from the $12.75 per hour minimum wage.
Amnesty program for SSS contributions
The Social Security System released implementing regulations for a six-month condonation program “for employer social security contributions.” Through July 31, 2010, all fines will be waived on payment of social security obligations incurred on or before February 1, 2010.
Asia One, Today, Business Times
Highlights of the 2010 Budget include:
- A series of steep hikes for the foreign worker levy between July 2010 and July 2012
- Benefit and coverage expansion for the Workfare Training Scheme (WTS) and Workfare Income Supplement (WIS)
- One-time top-ups for Medisave and Medifund
- A name (and coverage) change for the “wife relief” scheme, which would now – as the spouse relief scheme – offer tax breaks for any workers whose spouses are not in the workforce
- A discussion of the need for a long-term care insurance coverage, including a concession that nothing in the “3m” framework (Medisave, Medishield and Medifund) can fully handle this task.
Nationality verification program
Last summer’s amnesty program for unregistered workers morphed into a nationality verification project that requires submitting personal information to one’s country of origin. An official has denied press reports that its February 28 deadline was pushed back to March 31 because a large backlog of workers still await processing. The project continues to run past the deadline and the government has given assurances that deportations will not be starting any time soon. Lingering problems include a processing fee that is often two to three months’ salary and poor prospects of interstate cooperation on workers who are political refugees. Human rights groups fear a massive deportation of undocumented Burmese workers who would face persecution in Myanmar.
New employee reporting requirement
Under Law No. 10209, effective February 5, 2010, employers must advise tax authorities of new hires no less than 24 hours (down from 48) before their first day of work. Noncompliance carries a penalty of up to ALL 100,000 (US $982.00).
Pension portability measure
Parliament has now adopted in its second reading a set of amendments to the Social Security Code. A citizen would be able to transfer funds from a Bulgarian pension to a Community pension scheme when employed in another member state. When leaving that job, the citizen would have several options for repatriating the funds, including the state pension, a supplementary pension or an insurance product that would generate a retirement income stream.
During an extraordinary meeting last week, the Cabinet approved a measure that would exempt employee benefits from the new Value Added Tax (VAT). It has asked Parliament to vote on the measure today because the transport union has scheduled a strike over this tax for tomorrow. An extraordinary meeting of the Chamber of Deputies failed to move a proposal for a one-shot 2,400 crown (US $126.32) bonus to pensioners to offset the burden of the new VAT.
Maternity leave directive clears committee; Green paper on pensions; AIFM amendments debated
Money Marketing, Euractiv, IPE
Parliament has published a press release and FAQs to mark the approval of a draft maternity leave directive in the Women’s Rights and Gender Equality Committee. It includes measures on 20 weeks maternity leave at full pay, two weeks paid paternity leave and various leave entitlements for adoption, premature babies and multiple births. There are good prospects for success in a plenary vote later this month.
Meanwhile, the European Commission plans to issue a green paper on an EU framework for pensions by mid-year. It will give an overview of sustainability and adequacy for all member state public and private pension systems. A review of the IORP directive and a pair of committee reports on state benefit programs are also set for this year, so there could be a pensions white paper reflecting the observations in all four documents.
In addition, the revised AIFM (alternative investment fund managers) directive (IH 02/24/10) was reviewed in Parliament’s Economic and Monetary Affairs Committee along with 1,669 proposed amendments. Stakeholders have publicly warned Parliament, the European Commission and the European Council of Ministers that however urgent the legislation is, it is too complex for a rush job.
Health reform commission
The government has appointed eight ministers to a commission for reforming the health care system. The Health Minister has gotten the process off to a divisive start with a proposal to switch from a levy shared by employers and employees to a participant-funded model with government subsidies for the poor.
Baltic Times, BNS, Baltic Reports
The Prime Minister has outlined a batch of proposals to maintain the solvency of the SODRA social security system. The retirement age – now 60 for women and 62.5 for men – would gradually rise to 65 over the course of 5-10 years. It would “probably” continue rising to 67 over the following 10 years. There are also savings estimates for undisclosed cuts to maternity benefits and special pensions.
Amendment to the law on employee protection in an insolvency
A measure that came into force on February 19 boosts the protection of employee entitlements in an employer insolvency. For the purposes of this law, an employer will now be classified as insolvent when workers have not been paid for two months. Employees will also be able to receive advances on the payment of their claims from the Fund of Guaranteed Employee Benefits.
Retirement age hike on the cards
Forthcoming emergency measures to combat the budget deficit will reportedly include raising the retirement age from 65 to 67.
Junk food tax misses deadline
LTN, AFP, Balkan Traveler
The Health Ministry’s draft legislation to boost public health system funding with a hefty tax on fatty, salty and heavily processed foods (IH 01/13/10) has had a mixed reception and remains a work in progress, so the March 1 implementation target date has been pushed back to “this spring.” Even backers are concerned that a sudden dramatic levy without nutritional education would create a black market for the stuff.
Health insurance profits law update
The Health Insurance Act amendment that went into effect in late 2007 (IH 12/05/07) remains in limbo over private health insurer challenges to its requirement that all of their profits are plowed back into service improvements. The Prime Minister asserted at a recent press conference that most legal challenges had been resolved and that he was optimistic about the coming round of international arbitration with insurers.
Minimum wage rises; “Exit strategy”
Parliament has unanimously passed the legislation that will sharply raise the minimum wage from 2010-2012 (IH 02/10/10). A labor market flexibility package known as the “exit strategy” is a concession to employers to offset the wage victory for workers. The administration will soon consult with social partners on measures that would cut severance pay (Unemployment benefits are pegged to the minimum wage, so they’re set for a rise.) and relax the rules on notice periods. Additional “flexicurity” trade-offs are expected in the package.
See also: Canada
Draft clauses on special annual allowance; Draft actuarial standard on pensions; Trustee register review
Professional Pensions, PNA, Tax Analysts
HM Revenue and Customs has opened a consultation on draft regulations for the special annual allowance limiting tax breaks on pension contributions for people with annual income above £130,000 (IH 12/16/09). Feedback is welcome through March 12, 2010.
Also, the Board for Actuarial Standards (BAS) has released its draft Actuarial Standard on Pensions. It includes the BAS responses to an earlier consultation on pension Technical Actuarial Standards (TAS). Along with clarity in reporting and “reasonableness of assumptions,” it would expect actuaries to be able to convey the “limitations” of the actuarial information to trustees. The consultation will close on May 21, 2010.
In addition, the Pensions Regulator (TPR) has previewed its response to the still-open consultation on its register of independent trustees. In light of some well-publicized trustee mishaps, TPR anticipates “revisions and refinements” to its criteria for inclusion in the register. The consultation will close on March 12.
Extraterritorial issues in a pension bankruptcy
Benefits Canada, Globe and Mail, IPE
A multinational based in Canada has made headlines in the past several months over the issue of Canadian workers trying to salvage their retirement benefits while the company is in bankruptcy (They reached a settlement on sharply reduced benefits last month.). The Pensions Regulator (TPR) argued last week in Ontario Superior Court on behalf of the company’s 400,000 UK employees who are due $4.3 billion in pensions. The court has now determined that TPR does not have a more compelling claim than the other creditors. A TPR claim against the company's US operations was similarly rebuffed in Delaware Bankruptcy Court. TPR will not issue its formal claim against this company until this June and it is expected to appeal these decisions.
Pension contribution holiday
The Ministry of Education, Training & Employment will soon reveal the details of a proposal to allow voluntary pension contribution holidays for private sector employers. Employers that are not delinquent on their 5% pension fund contributions would need to secure an agreement with workers before suspending contributions. There would be a maximum 12-month suspension for Caymanian employees and a 24-month limit for foreign workers. Employees would continue their 5% contributions. If the final draft of the proposal is ready in time, the legislature is likely to approve it this week. Thanks to Martin Rondeau for flagging this one.
CNS, Reuters, AZ Starnet
Another unusual case of extraterritorial jurisdiction. After 65 miners were killed in a Mexican company’s Mexican mine with a well-documented history of safety problems, the widows were awarded a small sum by a Mexican court. On the premises that a fair settlement could not be obtained in Mexico and that the company is listed on the New York Stock Exchange under a Phoenix, Arizona address, the widows have now filed a case in US District court in Phoenix.
See also: Canada
Middle Class Task Force report includes 401(k) investment advice regs; Various
AP, Reuters, NYT
The first Annual Report of the Vice President’s Middle Class Task Force showcased some major developments:
- It announced the Department of Labor (DOL) release of draft regulations on 401(k) investment advice (IH 11/18/09) to replace the rescinded regulations from the previous administration. Investment advisers could not have anything resembling a conflict of interest and their advice would have to be backed up by a computer model that had been certified as objective. The consultation runs through May 5.
- The 401(k) draft regs were released in a package with a final regulation on required disclosure to participants in multiemployer retirement plans. Disclosure of scheme funding and investment practice will become mandatory on April 1, 2010.
- A set of executive orders protects employee rights in federal government contracting and encourages project labor agreements (PLA) in federal construction contracts. The White House has not yet committed to a “high road” contracting plan that would count the compensation and benefits packages among the criteria in evaluating bidders for government contracts.
- There would be tougher enforcement and more concise regulations to combat employee misclassification.
- There is confirmation of a commitment to automatic enrollment in 401(k) or individual retirement account plans and mention of Guaranteed Retirement Accounts (GRA), a possible approach for expanding the menu of safe investment options.
- Flexible workplace initiatives include support for a bill on minimum standards for paid sick leave (up to 56 hours) that could also be used for caring for a sick family member.
In other news:
- The President held his much-vaunted bipartisan meeting on health reform as a first step toward transparency in his endgame on the passage of health reform legislation (IH 02/24/10). Today he is scheduled to announce his legislative strategy.
- Should there end up being a piecemeal approach to health reform legislation, the near unanimous passage of H.R. 4626 Health Insurance Industry Fair Competition Actbodes well for it. This bill would end the health insurance industry’s antitrust exemption.
- The Securities and Exchange Commission (SEC) has issued a large set of Compliance & Disclosure Interpretations (C&DIs) for the new rules on proxy disclosure for executive compensation and corporate governance (IH 12/23/09). The rules apply for all proxies filed on or after February 28, 2010.
- The SEC has also released a Commission Statement signaling its support for IFRS convergence. A staff work plan will revise the SEC roadmap for convergence (IH 09/04/08). The SEC now believes that if the US does adopt international accounting standards, it will happen “no earlier than 2015.”
Legislative package features a revised labor code
AP, Reuters, FM Bolivia
The Labor Ministry has posted a set of significant bills (Spanish only) including a revised labor code that is now undergoing stakeholder consultation. The draft revision proposes many new entitlements:
- A “punctuality bonus” would reward private and public sector workers who go a full month without being late for work. Lateness is endemic to Bolivian culture and the administration believes that it would take something this radical to change worker habits.
- Another bonus would recognize good attendance records.
- New parents would be protected from dismissal during a child’s first year.
- Workers would receive a “refreshment bonus” for purchasing snacks during breaks.
- There would be subsidies for commutes of over 2 km (1.25 miles).
- Workers would become eligible for vacation after six months on the job (down from one year).
- Companies that employ more than 10 workers with children would provide day care services.
- New employees would not have a probation period.
- Paid leave entitlements would include three days for marriage, three days for the death of a close relative and half a day for one’s birthday.
The President has enough support in Parliament to assure passage of this bill. Accounts vary over whether the bill will reach Parliament in March or May. Notable measures in the accompanying bills include occupational safety provisions for young workers, pregnant women and nursing mothers as well as an extension of social security coverage to a number of occupations in which the workers are typically self-employed.
Shorter workweek bill due for a vote
Dow Jones, Business Week
A bill that would cut the 44-hour workweek down to 40 hours is scheduled for a vote in the Chamber of Deputies this month. The business sector has urged congressional leaders to delay the vote. The ruling Workers Party has included this proposal in its campaign platform for this month’s national elections. Its candidate for President is currently polling in second place.
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