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: Consultation on higher super contributions
EU: Infrastructure investment project
IASB: Board on track for March release of IAS 19 amendments
India: 2011-12 Budget
Netherlands: Expense allowance scheme
US: SEC endorses exec comp rules
Early access to retirement accounts
The Nation, Business Daily
The Treasury recently rescinded a 2005 law that had barred occupational pension scheme members from taking withdrawals before retirement. Initially under this reversal, workers who had contributed to a scheme for at least three years and were transferring funds to a new occupational pension scheme became entitled to their own contributions plus interest earnings and half of the employer’s contribution. Now, the three-year minimum is waived and workers transferring their funds to individual pension plans are also entitled to the withdrawals.
Bill on pension fund foreign investment limits
New Era, The Namibian
The Finance Minister has introduced legislation in Parliament that would amend the 1956 Pensions Fund Act to authorize the ministry to set limits on foreign investments for pension funds. A companion measure would give the registrar of the Namibia Financial Institutions Supervisory Authority (Namfisa) authority on foreign investment limits for insurers and reinsurers.
Consultation on higher super contributions; Various
Tax Analysts, ACC, Super Review
The Assistant Treasurer has launched the consultation paper Concessional Superannuation Contribution Caps for Individuals Aged 50 and Over, which proposes doubling the concessional contributions cap to $50,000 from July 1, 2012. The concessional cap is the higher contribution level allowed to people over age 50 with total superannuation balances below $500,000. A key concern in the consultation is how to design a streamlined, cost-effective process. The brief comment period closes on March 25.
In other news:
- The Treasury has delivered the promised (IH 11/24/10) Exposure Draft – Extension of FBT Exemption for Fly-In Fly-Out Arrangements. The fly-in fly-out fringe benefits tax exemption for people working in remote areas of Australia would be extended to Australian residents working in remote areas overseas. A consultation on the ED will close on March 28.
- There have been some modest advances in the administration's health reform agenda (IH 02/16/11). Parliament passed National Health and Hospitals Network Bill 2010 (IH 09/29/10) without significant amendments and the Health Minister has delivered National Health Reform Amendment (National Health Performance Authority) Bill 2011 to legislators. The National Health Performance Authority would monitor and report on the performance of local hospital networks and individual hospitals.
- The Federal Court of Australia recently fielded a high-profile privacy case concerning a worker’s home use of a business computer. The court found that the plaintiff’s pornography viewing, while conducted at home on his own time, violated company policy because he used a company laptop that screened for expressly prohibited uses with a desktop login system. The decision confirmed, however, that employee privacy rights may not be violated by monitoring systems tracking any use that has not been specifically banned.
Simplified work permits, foreign investment
The Board of Investment has drawn up more hospitable work permit rules to help stimulate foreign investment. Every foreigner seeking to do business in Bangladesh must obtain a work permit, but the tenure period is doubled to two years. Opening offices will be much easier for foreign companies, but any job position must be advertised in the local papers before the company may hire a foreigner.
Women’s retirement age under review
Xinhua, China Daily
The National People’s Congress Standing Committee has revealed that the Ministry of Human Resources and Social Security has been tasked with examining the role of women in the workforce, particularly the abnormally early retirement age of 50 for women in the private sector. The query is expected to recommend a flexible retirement age arrangement that would set the norm higher but preserve an early retirement option.
Reversal on pension boost
Under pressure from a populace that sought more liquidity rather than a bonus tucked away in a retirement fund (IH 03/02/11), the Financial Secretary announced a revision to the 2011-12 Budget provision on windfall pension contributions. The HK$6,000 (US$770) that had been earmarked for Mandatory Provident Fund accounts and qualified occupational retirement schemes will be given to each permanent resident over age 18 with no strings attached. Details will follow on incentives to move the sums to retirement plans.
In other news:
- Mandatory Provident Fund Schemes (Amendment) Bill 2011 (IH 02/24/11) has had its first reading in the Legislative Council.
- The final guidelines on the Minimum Wage Ordinance (IH 12/02/10) should appear here by mid-month. The Labour Department has scheduled a March 21 briefing on the ordinance and it will come into force on May 1.
- The Mandatory Provident Fund Schemes Authority (MPFA) has announced the release of three new leaflets to educate MPF participants about investment decisions, annual benefit statements and administrative fees.
2011-12 Budget; Companies Bill update
PTI, Business Standard, Hindustan Times
The Finance Minister delivered the 2011-12 Budget last week accompanied by the Finance Bill and Economic Survey 2010-11. A few of its provisions could prove consequential:
- The New Pension System (NPS, IH 11/17/10) has so far underwhelmed its target audience. It would gain a tax incentive under prospective Direct Taxes Code guidelines that would take effect in April 2012. Employer contributions would be exempt from the Rs100,000 (US$2,223) annual limit on pension scheme contributions.
- The 1% service tax on insurance policies would rise to 1.5%.
- The Pension Fund Regulatory and Development Authority (PFRDA) Bill (IH 02/09/11) will be prioritized.
- Investment services provided by life insurance companies would become taxable.
- A new schedule of exemptions from direct taxes would skew higher for senior citizens, particularly those over 80.
The new budget is among the spots where the administration has confirmed that there will be a push for passage of Companies Bill, 2009 (IH 09/29/10) in the budget session of parliament. While the provision on capping CEO salaries has been removed, the business sector still opposes the bill over its shareholder say on pay measure and a proposal for a 2% corporate social responsibility levy on company profits.
Five-day week proposal
The Vice Prime Minister has been promoting a plan for conversion to a five-day work week. Amendments to the Work and Rest Hours Law would make an official five-day work week with Sundays off and half an hour added to each weekday. The normal Friday shift would end at 2 pm most of the year, 1 pm in the winter.
Official retirement age mulled
Korea Times, Korea Herald
The Economic and Social Development Commission’s Committee on Employment Measures for Baby Boomers Age is drafting legislation that would set an official retirement age of 60. There is no official age now, but the average retirement age is 57. The Ministry of Employment and Labor broadly agrees that this move will be necessary. A proposal is now before the tripartite commission where the Korean Employers Federation has indicated that it will oppose it.
Reform package for Palestinians advances
The Labour Minister has signed a decree that would implement last August’s Labour Law amendments on establishing an array of employment rights for Palestinian refugees (IH 08/26/10). The Shura Council must grant final approval, but that should prove a formality.
Foreign worker ban relaxed
Bernama, GIDA, The Star
The Human Resources Minister has allowed the first exception to an unpopular two-year- old ban on hiring unskilled foreign workers in numerous key sectors (IH 01/29/09). The ministry has identified significant labor shortages in 13 sectors and has approved the recruitment of 45,000 foreign workers to meet the “initial requirement.”
Tax regime clarification for workers posted abroad
Revenue Regulation 1-2011 makes the distinction that while income earned overseas by overseas Filipino workers (OFW) and overseas contract workers (OCW) is tax-exempt, their income derived from the Philippines – including passive income – is taxable.
Family leave proposals rejected; Captive insurance tax incentive scheme extended
Today, Straits Times, Tax Analysts
The Deputy Prime Minister’s recent speech Addressing Singapore’s Population Challenge was among the administration statements rebuffing recent proposals (IH 02/16/11) for expansion of parental leave and introduction of a caregiver’s leave. The government’s position is that it should allow more time for existing requirements and for voluntary private sector efforts to show results before it considers more mandates.
One interesting provision that didn’t turn up in initial coverage of the 2011 Budget (IH 02/24/11) last month was an extension of the Captive Insurance Tax Incentive Scheme, which had been set to expire on February 16. The scheme fosters Singapore’s growth as a captive domicile with tax exemptions on several types of offshore income. The exemptions are renewed through March 31, 2018. The Monetary Authority of Singapore (MAS) will soon publish a document explaining some changes to the scheme that are being introduced under the extension.
Fully paid parental leave on a back burner
The head of the Council of Labor Affairs (CLA) has nixed a proposal for elevating parental leave from six months for each parent at 60% of pay and six months unpaid to a full year at full pay. She said that this is a long-term goal but not feasible under the current economy.
Universal health scheme funding shortfall
Globalsurance, Dow Jones
The Senate Standing Committee on Public Health has publicized a subpanel study showing that the public health system is near “collapse” due to a chronic funding shortfall (IH 04/11/07). Low reimbursements have left many hospitals in debt and have depleted the supply of professional staff available to handle a heavy volume of patients. The committee has made an urgent appeal for giving the health sector a larger share of the national budget and for reallocating the funds to ensure that medical professionals are adequately rewarded.
Six-day work week bill passed
NEWS.am, ARKA, ARMINFO
Parliament has approved in its final reading the Labor Code amendment that gives companies the option of a six-day work week, still capped at 40 hours (IH 02/16/11). Once the bill is signed into law, the State Labor Inspection will pay special attention to compliance with the 40-hour limit, including the payment of overtime premiums. The Armenian National Congress (ANC), the main opposition party, is mobilizing behind a set of 15 demands that include rescinding this new law. Other demands include a US$100 monthly unemployment benefit and minimum statutory severance pay of three months’ salary.
Boardroom quota for women
The Commercial Law Committee of the Chamber of Representatives has endorsed a trio of measures that advance the role of women in the management of companies. Most notably, large publicly-traded companies would have five years to bring the female compositions of their boards up to 33% while smaller companies would have eight years to reach the target. The Belgian Enterprise Federation (VBO), which has already set its members on a voluntary course to 30% female boards within the next seven years, will oppose this bill.
Health reform update
The Health Minister has advised the House Health Committee that the introduction of a national health insurance scheme (IH 12/02/09), initially scheduled for 2011, has been postponed indefinitely. The current economic slump is not an appropriate time to introduce it, particularly now that the funding estimates have been revised and there would have to be “significantly higher” contributions from workers, employers and the government.
Copenhagen Post, EU Observer
The Prime Minister aims for a belated adoption of the euro before Denmark assumes presidency of the European Union in January 2012. This is in part because he wants a role in revising the competitiveness pact. The population is now polling 50% against switching to the euro. A referendum is tentatively planned for this June.
Infrastructure investment project; Various
Dow Jones, Times of Malta, IPE
The European Commission has opened a consultation on the Europe 2020 Project Bond Initiative, an infrastructure bond offering that will target pension funds and insurance companies. Observers vary in their assessment of whether the initiative will be held back by the lack of a pan-European regulatory framework for infrastructure investment. The commission has published an FAQ for the consultation. It will run through May 2.
In other news:
- The EU Justice Commissioner held a summit with social partners and business leaders to launch an attempt at voluntary compliance with goals for raising the ratio of women on the boards of publicly-traded companies. Women on the Board Pledge for Europe commits its signatories to 30% female composition on corporate boards by 2015, 40% by 2020.
- A leaked revision of the competitiveness pact (IH 02/24/11) no longer calls for an end to automatic wage indexation (IH 02/09/11), but it does propose monitoring the link between wages and productivity and requiring states to “address’ the situation as needed. It also proposes decentralizing sector-based collective bargaining and some degree of harmonization on a higher retirement age for state pensions. Eurozone officials are scheduled to review it this week.
- The Committee on Economic and Monetary Affairs has started reviewing draft legislation on tighter control of derivatives. The rapporteur for this project has rejected a proposal to give pension funds a blanket exemption, but he will consider a less onerous treatment for them.
- The European Commission has completed a status report on the 20004 social partner agreement on work-related stress. It gauges both the agreement’s impact and the degree of implementation in member states. While 19 states have either legislation or binding collective agreements reflecting this accord, the report reminds eight states that they have come up short.
Health reform update
YLE, Helsingin Sanomat
The first stage of health reform will introduce the right for patients to choose any health facility or provider within their own municipalities (IH 06/16/10), effective May 1, 2011. A health care guarantee will set a variety of deadlines for specialist appointments, diagnostic procedures and medical treatments. There will be a general election on April 17 and all major parties have indicated that they want to further improve quality in the public health system to preserve its dominance in a time when people are increasingly drawn to private health insurance.
The President has unveiled new measures to improve the job market for some populations hardest hit by the economic crisis:
- An employer will get a €2,000 bonus for hiring a worker over age 45.
- Enterprises with over 250 workers will face an apprentice tax: 0.1% of payroll if fewer than 3% of staff are under age 26, 0.2% if fewer than 1% are. Those with at least 4% under age 26 would receive a €400 bonus per contract per year. The annual social charges will be halved for younger workers at companies with fewer than 250 employees.
- There will be intensive training, counseling and job placement efforts for those who have been out of work for more than a year.
Hartz IV deal; ECJ referral over taxation of foreign pensions
Tax Analysts, The Local, Deutsche Welle
The government and the opposition reached a compromise agreement on the Hartz IV welfare benefits and it was quickly passed (German only) in both houses of Parliament. Along with the benefit adjustments for the long-term unemployed and their families, there is an agreement on a minimum hourly wage for agency workers. In an effort to forestall wage dumping, a minimum salary of €7.59 per hour will be introduced for temps on May 1, 2011.
Also, the European Commission recently referred Germany to the European Court of Justice (ECJ) over the discriminatory tax treatment of dividends paid to foreign pension funds. The case has now turned up in the docket as C-600/10
Expense allowance scheme
Werkkostenregeling (WKR, Dutch only), an employment expense allowance scheme replacing an array of rules on employer reimbursement of employee business expenses (IH 09/23/09) is available on a voluntary basis from the start of this year and will become mandatory in 2014. A tax exemption equivalent to 1.4% of total payroll would cover costs ranging from work clothes allowances to certain benefits in kind. A tax package submitted to Parliament last month includes several measures on implementing the scheme, most notably the inclusion of employee discounts among the covered expenses.
Cabinet approves pension system reform proposal
PAP, PNB, Global Pensions
Yesterday, the Cabinet rubber stamped (Polish only) the administration’s proposal for OFE second pillar scheme reform (IH 02/24/11). The proposal is scheduled for a first parliamentary reading on March 16, final passage during a special session March 24-25 and implementation as early as May 1. By some accounts, the contribution cut alone is fast-tracked for May while measures on banning OFE commissions and splitting the scheme’s accounts into subfunds would come later Incidentally, the government's own lawyers have drafted a legal opinion warning that implementing the pension law so soon after it is promulgated may be unconstitutional.
Confidence vote over Labour Code
Mediafax, Rompres, GIDA
Yesterday, the opposition parties filed a no-confidence motion in Parliament over the draft Labour Code (IH 03/02/11). The vote is expected to be held on March 16. The draft continues to be a moving target:
- A provision on unpaid leave during business slumps has been modified to state that working hours for full-time workers could not be cut to less than a four-day week.
- Reports that existing collective contracts would no longer be valid after January 1, 2012, have been corrected to state that a law trailing close behind the Labour Code would set a new legislative framework for collective contracts, but it would not affect existing contracts and it would not ban collective labour agreements on a national level.
- The rehabilitation period for workers who commit disciplinary infractions would be doubled to 12 months in the latest draft.
- There would be a 25% premium for night shift work.
The Prime Minister aims to have the law come into effect by the end of 2011.
Double taxation relief
The Federation Council has approved a Tax Code amendment canceling the effects of an earlier measure that had inadvertently caused double taxation for some people. When the tax regime for voluntary pensions (IH 08/11/10) switched from tax-tax-exempt (TTE) to exempt-tax-tax (ETT) on January 1, 2008, many who had contributed earlier faced an ETE bind. Under the new measure, all contributions made before that date will be mirrored by a tax break upon withdrawal.
Labor Minister on holiday law simplification, super salary expansion
TASR, Visegard Group
The Labor Minister will be drumming up social partner support for an amendment to the Labor Code that would reduce the administrative burden of the annual holiday entitlement formula. The allotment is now four weeks, or five weeks for those workers who can document a 15-year employment history. The bill would make five-weeks leave a statutory right for any worker age 33 and up.
The minister also recently issued a press release explaining the design of the super-gross wage concept that has already been used to expand the contribution base for health insurance levies (IH 01/06/11). The minister mentioned that the super-gross wage basis is set to spread to other social welfare levies. There is also a proposal in circulation to replace the 9% salary deduction to the second pillar scheme with 6% of the super gross wage. One legislator has noted that an accurate conversion to super-gross would be 6.68%.
FSA crackdown on mortality assumptions
The Financial Supervisory Authority (FI) was alarmed by recent findings that the mortality assumptions that pension companies employ in calculating annuities vary widely, particularly in companies that distribute dividends. It will conduct an investigation of the market to determine how the actuaries arrive at these assumptions.
DRA repeal regulations; Various
Pension Age, The Telegraph, Professional Pensions
The revised draft Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011 have appeared just weeks ahead of the repeal of the default retirement age (DRA, IH 02/24/11). The transitional provisions on the treatment of workers who reach age 65 by September 30 require a retirement notice by April 6, 2011, to meet the six-month minimum notice period. Employers are asked to consider – but not obliged to honor – a request to extend the notice period to 18 months. The provisions on exempting employers from age discrimination charges when workers above state pension age are ineligible for group risk insured benefits have been faulted because they make no allowances for life insurance coverage under an occupational pension.
In other news:
- The Actuarial Profession has published a pair of new Actuarial Profession Standards; APS P1 Duties and Responsibilities of Pension Actuaries and APS P2 Compliance Review: Pensions. They have the same effective date as the Pension Technical Actuarial Standard (TAS) – April 1, 2011.
- A Treasury release on high annual allowance charges states that the charges must be paid at the time they are incurred, but that amounts over £2,000 may be paid directly from the pension scheme. The document is accompanied by draft legislation that will be included in the Finance Bill, which is set for March 31 release.
- HM Treasury Office of Tax Simplification (OTS) has released its final recommendations on simplifying a “spaghetti bowl” of tax reliefs. Those flagged for abolition include late-night taxis, partial subsidy of lunch vouchers, trade union subscriptions and meal provision on “cycle to work” days. The government is expected to include some of these changes in the 2011-12 Budget, which is scheduled to arrive on March 23.
- Pensions Bill 2010-11 is now under examination in Parliament’s Grand Committee. One amendment under consideration would require the government to give pension funds much stricter guidance on the disclosure of environmental, social and governance (ESG) factors of their investment policies in their Statements of Investment Principles (SIPs)
- The National Association of Pension Funds (NAPF) joined a pension fund in a challenge to HM Revenue & Customs before the VAT Tribunal over whether occupational defined benefit schemes are exempt from value-added tax on investment management services. The plaintiffs based their case on a European Court of Justice (ECJ) ruling that investment funds are exempt from VAT on these services. The tribunal has referred the case to the ECJ.
Health Care Act denies care to nonnationals
Jamaica Observer, Nation News, Trinidad Express
Barbados has started to roll out reforms under the new Health Care Act, which is slated to end the free provision of medical care to non-citizens. Barbados is a member of the Caribbean Community (Caricom) and a participant in the community’s Single Market and Economy (CSME) project, which includes a cross-border shared medical benefits scheme on its agenda. Other Caricom members have asked Barbados for an explanation and have sought to accelerate a cross-border agreement, possibly involving a regional health insurance scheme.
CAPSA draft guidelines; OSFI intervention guide
Benefits Canada, Mondaq
The Canadian Association of Pension Supervisory Authorities (CAPSA) has opened consultations on its draft Pension Plan Prudent Investment Practices Guideline and Pension Plan Funding Policy Guideline. The former is accompanied by a self-assessment questionnaire. Both are part of an effort to improve plan governance standards as is the concurrent release of the final draft Guideline on Fund Holder Arrangements. Comments are welcome through June 1. Also, the Office of the Superintendent of Financial Institutions (OSFI) has released its Guide to Intervention for Federally Regulated Private Pension Plans, which sets out the types of interventions that OSFI performs and the conditions that would trigger them.
Guidance on plan transfers
In late February, the US Internal Revenue Service issued Written Determination 201108046, which approves the transfers of funds from qualified US defined benefit and defined contribution plans to nearly identical qualified Puerto Rican schemes. There is a disclaimer that the advice is only for the taxpayer who requested it, but employers looking to transfer staff from a US plan to a qualified Puerto Rican plan by the December 31, 2011, deadline (IH 12/22/10) may benefit from the detailed account of a plan that was approved.
SEC endorses exec comp rules; Supreme Court discrimination ruling
NYT, LA Times, AP
The Securities and Exchange Commission was the third of seven federal regulators to pass rules reflecting provisions in the Dodd-Frank Act (IH 07/21/10) on disclosing -- and limiting -- incentive compensation in the financial sector. Annual reports on top management bonuses would be filed with the SEC, compensation plans that encourage “inappropriate risk-taking” would be banned and there would be additional review and deferral requirements for bonuses in the largest financial institutions. There will be a public consultation on the rules after they have been approved by the other regulators.
Also, the Supreme Court reached a unanimous decision in a case that is likely to significantly expand the scope of future job discrimination claims. If a supervisor fires a worker for what would appear to be valid reasons, but the evidence against the worker is tainted by the “discriminatory animus” of another supervisor, discrimination has occurred.
Maternity leave extension bill
NTN24, Santiago Times, Xinhua
Later this month, the President will submit a long-awaited maternity leave expansion bill (IH 06/23/10) to Congress. The bill would double the paid maternity leave period to six months. A maximum maternity leave subsidy would be set at 30UF per month (US$1,387) and women who earn more than that would be entitled to work part-time after the initial 12 weeks. The subsidy would also be extended to some low-income women who do not qualify for the current benefit.
Board on track for March release of IAS 19 amendments
The February issue of IASB Update reported that the International Accounting Standards Board plans to resolve the remaining issues in the IAS 19 amendments Exposure Draft (IH 05/05/10) and release the final draft of the amendment by the end of this month. Recent tentative decisions illustrate how risk sharing features are accounted for in a defined benefit plan and how certain risk sharing features of some ostensibly DB plans could get them reclassified as defined contribution plans. The board also agreed that remeasurements should be presented in other comprehensive income. The effective date of the amended standard will be no earlier than January 1, 2013.
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