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International Headlines - 22 June 2011


Written by: Patrick Sweeney

 

                                  

Continent index

Africa
Asia/Pacific
Europe
North America
South America
Worldwide
Country index
Australia
Austria
Belgium
Canada
Chile
China
Croatia
ECOWAS
Estonia
Ethiopia
EU
France
Germany
Hong Kong
Hungary
IASB
Iceland
India
Ireland
Italy
Japan
Kuwait
Lithuania
Malaysia
Mexico
Netherlands
Philippines
Poland
Romania
Saudi Arabia
Sierra Leone
Singapore
Slovakia
Switzerland
Taiwan
UAE
UK
Ukraine
US
 
 

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:

China: Consultation on mandatory expat social security participation
EU: Maternity leave directive stalled
IASB: IAS 19 amendments
India: Health insurance portability rules due for a delay
Singapore: Consultation on corporate governance code
Switzerland: New law on taxation of stock schemes
UK: Pensions Bill advances

 

Africa

 

 

ECOWAS

 

Renewed call for free movement and common currency
Business Day, Next

 

The 15 member nations of the Economic Community of West African States (ECOWAS) have pursued a unity agenda featuring a common currency and free movement of people since 1976. BORDERLESS Alliance, a public/private regional coalition aims to finally make open borders a reality and a recent ECOWAS meeting outlined the remaining steps toward establishment of a single monetary zone.

 


 

Ethiopia

 

National pension fund extended to private sector
Addis Fortune

 

Earlier this month, the Ethiopian Private Companies’ Workers Social Security Agency announced that workers in the private sector and non-governmental organizations will join the national pension fund, effective 8 Jul 2011:

 

  • Employers will initially contribute 7% of payroll and annual one percent hikes will take it to its expected plateau at 11%. Employees will start at a 5% contribution level and rise to 7% over the next two years.

     

  • The minimum contribution period is 10 years.

     

  • Workers making the minimum contribution would receive 30% of average gross salary from the final three years of service. Those working over 10 years would receive 1.25% per additional year up to a ceiling of 70% wage replacement.

 

This evidently evolved from the plan announced last year for a private sector provident fund (IH 12/08/10).

 


 

Sierra Leone

 

Work permit fees
The Times, Concord Times, Awoko News

 

As part of the program requiring that all foreign workers obtain work permits (IH 05/25/11) or leave the country, the Labour Ministry has issued a new fee schedule for work permits. The fee for an assignment of six months or less is Le500,000 (US$114.88). Long-term permits vary by sector and run in the Le2 million to 5 million range. Citizens of other ECOWAS (Economic Community of West African States) nations get a discount in the 20-50% range in a nod to the 1976 ECOWAS border-free agreement that never quite took hold, see ECOWAS item above. These payments must be submitted by next Thursday, 30 June.

 

Asia/Pacific

 

Australia

 

Consultations on low-income super tax relief and deductions for disability insurance in a super
Tax Analysts, Global Pensions, Financial Standard

 

The Treasury has published Consultation Paper: Low Income Earners Government Superannuation Contribution, which fleshes out an administration proposal to offset the 15% tax on superannuation contributions for low-income members. People earning up to A$37,000 (US$39,118) would have their levy funneled back as government contribution of up to A$500 per year. This would be distinct from the existing government co-contribution of up to A$1,000 per year. The consultation closes on 15 Jul 2011.

 

Another Treasury release, Consultation Paper: Streamlining Deductions for the Cost of Disability Insurance Through Superannuation, seeks input on the enabling regulations that would accompany measures in Tax Laws Amendment (2011 Measures No. 4) Bill 2011 (IH 06/02/11) on easier deduction claims for disability insurance offered through a super. The Senate approved the bill last week. A brief consultation concludes on 1 July.

 


 

China

 

Consultation on mandatory expat social security participation; Beijing liability insurance
IBFD, China-Briefs, Insurance Day

 

The Ministry of Human Resources and Social Security held a brief consultation this month on Provisional Measures of Social Security Program for Foreign Employees. Press coverage of the consultation consistently reports that foreign workers will be required to contribute to social security (IH 06/08/11) unless a bilateral social security agreement is in place. The press is still not clear over whether foreign workers will be contributing members of all five schemes, but they are in agreement that employer and employee contributions start on July 1.

 

There is also a July 1 launch for the Beijing municipal government’s requirement that companies in high-risk sectors take out "production" insurance. This will cover both monetary compensation for workers who are killed or injured on the job and protection against economic losses from workplace accidents.

 


 

Hong Kong

 

MPF contribution adjustments proposed
SCMP, IBFD

 

In light of the introduction of a minimum wage (IH 03/30/11) and the long wait since their last rise, the government has submitted proposals to the Legislative Council for significant hikes in the minimum and maximum income thresholds for mandatory provident fund (MPF) contributions. Under a pair of draft amendments to the Mandatory Provident Fund Schemes Ordinance, the minimum monthly income level for MPF contributions would jump from $5,000 to $6,500 (US$834) in November 2011 while the maximum pensionable income would rise from $20,000 to $25,000 from 1 Jun 2012. Equivalent adjustments are proposed for the daily and annual thresholds.

 


 

India

 

Health insurance portability rules due for a delay; Secondment fee ruled taxable; NMIZ labour law exemption
Financial Express, AIR, Financial Chronicle

 

The health insurance sector is of a single voice in both criticizing the guidelines for the health insurance portability rules (IH 06/15/11) and warning that the 1 July implementation deadline is not viable. The head of the Insurance Regulatory & Development Authority (IRDA) said that IRDA officials will meet with the insurers on 24 June to hear their concerns. He added that final confirmation of the July start will be issued only if he is “confident that they are ready to go for it.” This leads observers to believe that the meeting will inventory the problems with the system and chart a course to a delayed implementation.

 

Meanwhile, the Authority for Advanced Rulings (AAR) determined in AAR 865/2010 that fees paid by a foreign company to an Indian subsidiary to compensate it for paying the salaries and benefits of workers it has seconded there are taxable “fees for services.” The seconded employees had already had income tax deducted from their salaries, but that did not preclude assessing a tax on the subsidiary from what could be viewed as payment for management services. The ruling cites the India/US tax treaty but is considered to have broader application.

 

Also, the Prime Minister has approved in principle a draft manufacturing policy document but has asked the interministerial Committee of Secretaries (CoS) to “fine-tune” it. The paper proposes establishment of National Manufacturing and Investment Zones (NMIZ), a larger scale version of Special Economic Zones (SEZs). The revision request comes in response to union and environmental group pressure over proposals to waive various labour, environmental and tax laws.

 


 

Japan

 

Pension reform proposal nears completion
Kyodo News, Jiji Press, AFP

 

Government officials and ruling coalition representatives met through the weekend trying to firm up a draft agreement on social security reform (IH 06/15/11). A junior partner in the coalition remains opposed to funding reforms with a consumption tax hike. According to one newswire, coalition members have settled on a compromise approach that would defer any consumption tax increase until the economy is firmly on the rebound, but the Economy Minister still aims to start the climb in mid-2013. The 20 June deadline for an agreement has now been pushed back to the end of the month.

 


 

Kuwait

 

Visa cap considered
Emirates 24/7, Gulf News, Arab Times

 

An interministerial group is entertaining but not yet committed to a visa limit proposal that would eventually lower the foreign resident population from 69% to 45%. This would limit visas to:

 

  • Six years for unskilled workers

     

  • Eight years for semi-skilled

     

  • Ten years for semi-skilled who are there with their families

     

  • Twelve years for skilled

     

  • Open-ended for those with “rare expertise”

 

This discussion comes as a four-month amnesty period nears a 30 June conclusion.

 


 

Malaysia

 

Target date for minimum wage
Bernama

 

The Prime Minister announced that the Human Resources Ministry is nearing completion of the National Wage Consultation Council Bill 2011, which would establish a nationwide minimum wage policy (IH 02/16/11). He noted that coverage of foreign workers has not yet been determined. He aims to expedite the bill through the current session of Parliament and get the wage consultation council set up in time for a launch at the end of the year.

 


 

Philippines

 

Universal health care bills advance; Sex discrimination bill; Support for insurance premium tax breaks
Business World, PDI

 

House Bill 367 and its counterpart Senate Bill 2849 are the administration-backed legislation that would amend the National Health Insurance Act of 1995 to finally deliver on its promise of universal health insurance (IH 05/25/11). The respective health committees have cleared them both in the closing days of this past legislative session.

 

Another bill to benefit from the final push was House Bill 4643, a collection of measures offering some protection from workplace sex discrimination. It has passed the House and its counterpart Senate Bill 429 is due for a second reading soon after Congress reconvenes next month. The legislation would penalize companies that discriminate against women in hiring, firing, employee benefits and promotion. Any employee found complicit in the employer’s discriminatory practice may also be held accountable.

 

Also, the Insurance Commission (IC) has thrown its support behind the insurance industry on a proposal to end all taxes on non-life insurance policies in order to make insurance more affordable for consumers. The tax on life insurance premiums is already slated for removal in 2015.

 


 

Saudi Arabia

 

New Saudization program detailed
Arab News, MENAFN, Emirates 247

 

The Nitaqat program that limits foreign visa renewal for enterprises that have not met Saudi worker quotas (IH 06/08/11) has a great many moving parts including four levels of compliance and dozens of different sectoral quotas. Fortunately, the Labour Ministry has set up a resource page (Arabic only) for employers featuring an application for determining one’s compliance level. In additional information offered on the site:

 

  • There is guidance on determining compliance status for diversified companies.

     

  • The two non-compliant categories – yellow for standard and red for evidently not even trying – will have grace periods of nine and six months respectively for upgrading status.

     

  • The program starts on 1 September, giving red companies until March to improve their standing.

     

  • The two types of complying companies – green for standard and premium for extra effort – may freely poach foreign workers from non-complying companies however much time they have left on their visas.

 

In a Saudization development not connected to Nitaqat, the Riyadh Chamber of Commerce has ordered that all shops selling women’s clothing be staffed exclusively by Saudi women.

 


 

Singapore

 

Consultation on corporate governance code
CNA, Business Times, GFS News

 

The Monetary Authority of Singapore past posted a consultation on the Corporate Governance Council’s draft revisions to the Code of Corporate Governance: Among the notable changes:

 

  • Precise executive remuneration figures would be disclosed for the CEO and each individual director “on a named basis.”

     

  • Executive pay policies should reflect the long-term interests of the company and should not encourage excess risk.

     

  • Management must maintain a robust risk management system.

     

  • Shareholder rights and responsibilities are spelled out.

 

The consultation will close on 31 Jul 2011.

 


 

Taiwan

 

Stiffer penalties for labor law infractions
Focus Taiwan

 

The Legislative Yuan has now passed an amendment to the Labor Standards Act that will increase fines for violations of the Labor Standards Act five-fold (IH 04/27/11). There could be supplemental fines if a situation is not corrected quickly enough and all penalties will come with a name and shame exercise.

 


 

UAE

 

Deadline for new Emiratisation formula deferred
The National, Gulf News, Emirates 24/7

 

The new Emiratisation scheme (IH 12/15/10) was to have been enforced from 30 June, but the Labour Ministry has extended the deadline to 1 Jan 2012. Along with the 15% Emiratisation quota, there is a “Cultural Diversity” element that aims to encourage a variety of nationalities among the foreign workforce in an enterprise. These elements plus the skill levels required for the workforce will all contribute to reduced work permit fees. The fees will range from Dh300-2,000 (US $80-533). Incidentally, the Labour Ministry has also warned the private sector that work permits will not be issued or renewed at enterprises that do not meet set standards for decent worker housing.

 

Europe

 

Austria

 

Warning on early retirement
Der Standard

 

Last week the International Monetary Fund (IMF) delivered its Preliminary Conclusions report on the Austrian economy. Health system cost management is flagged as a serious issue, but the authors view Austria’s “widespread” early retirement as a key problem. The report concedes that some positive steps have been taken, but it points out lingering systemic faults that are keeping the retirement age down.

 


 

Belgium

 

Pension bonus extension bill reprieve
La Libre, Agence Belga

 

The pension bonus, a benefit enhancement for people who remain in the workforce after age 62 or 44 years of employment, was adopted temporarily in 2007 and will lapse at the end of 2012 if not renewed. If and when it ever does lapse, people who qualify for the benefit will retire en masse to take advantage of it. The administration does not appear ready to make it permanent, but the Pensions Minister supports a measure that would keep the bonus through 2013. That bill has just cleared the House’s Committee on Social Affairs.

 


 

Croatia

 

Accession negotiations conclude
EU Observer

 

Croatia has now cleared the final four chapters in its accession negotiation (IH 02/09/11) and the European Commission has asked the Council of Ministers to formally recognize completion of the process this week. Lingering concerns about political reforms do not appear powerful enough to derail a process that is expected to see Croatia become the 28th member of the European Union on 1 Jul 2013.

 


 

Estonia

 

Reasoned opinion over IORP compliance
IPE

 

A European Commission reasoned opinion has given Estonia two months for a satisfactory response to charges that it has inadequately transposed the Institutions for Occupational Retirement Provisions (IORP) Directive, aka the Occupational Pensions Directive. A number of discrepancies in Estonian pension law pose an obstacle to IORP model cross-border pensions operating there.

 


 

EU

 

Maternity leave directive stalled; Campaign against unpaid internship
European Express, Euractiv, Euractiv

 

Last Friday, the Employment and Social Affairs Council (EPSCO) reviewed a controversial parliamentary proposal (IH 11/04/10) to extend minimum paid maternity leave from 14 weeks to 20 and raise the compensation to full salary. As expected, the states were unable to adopt a Common Position on this proposal when 14 of them took issue with it. It isn't clear at this point whether backers will revise the plan or abandon it.

 

Also, the social partner consultative body, the European Economic and Social Committee (EESC), has flagged unpaid internship as a major job market abuse of the down economy. EESC is expected to exercise its power to assemble a petition for a citizens’ initiative on stricter regulation of internships. A legitimate citizens’ initiative is regarded as legislation and would be submitted to Parliament for approval.

 


 

France

 

Stock option tax regime ruling
Tax Analysts

 

The tax administration published a ruling last month extending a favorable tax regime on a US company’s stock option scheme for its French subsidiary, even though the options were granted for 76 months, twice the threshold for French stock options. It cites a 2009 tax instruction that authorizes grants of over 38 months from a foreign company, provided the company is subject to securities laws that meet an adequate standard for shareholder protection and transparency.

 


 

Germany

 

Debate over health insurance rates; Cross-border ARD ruling
Handelsblatt, Reuters, AP

 

The National Association of Statutory Health Insurance Funds (IH 05/25/11) has been trying to give a balanced account (German only) of how there could be strong cases for both reducing contributions to the health insurance funds and raising them. The Health Fund has over €1 billion in surplus that many want used to pay for lower contributions, but it cannot be tapped. The Health Fund themselves are a mixed bag. One high-profile bankruptcy had a greater impact than expected and sent a chill through the sector. Twenty of the 150 insurers, including some of the largest, have critically low funding and are expected to announce higher premiums and/or benefit reductions in November.

 

Also, a Federal Labour Court decision is credited with an important precedent on application of the Acquired Rights Directive in a cross-border transfer. As part of an internal restructuring, a German company had transferred certain facilities just over the border into Switzerland, offering to keep the personnel involved on at a lower wage. Workers who did not accept the transfer were terminated. The court ruled that shedding workers in the course of a transfer was invalid and that the cross-border element was irrelevant.

 


 

Hungary

 

Pension reform review
IPE

 

A set of International Monetary Fund (IMF) documents on Hungary’s economy includes a review of its radical pension reform. Nationalization of the second pillar (IH 05/18/11) was a dramatic move and a short-term boost to the economy, but almost all of those funds are going back to people who transferred out of the scheme, so pension reform remains an urgent priority.

 


 

Iceland

 

Accession status
Ice news, Globe and Mail, IPE

 

Despite an unresolved dispute over debt claims arising from its financial crisis, Iceland is about to enter the first stage of European Union accession talks. Citizens have generally polled against EU membership and there will be some serious policy obstacles along the way, but Iceland does have a running start on many of the 30 broad convergence areas for member state laws.

 


 

Ireland

 

Social Welfare and Pensions Bill advances
Irish Times, Irish Examiner, BFDN

 

Social Welfare and Pensions Bill 2011 (IH 06/08/11) has passed in the Dail without significant changes and with the fiercely disputed pension age hike surviving intact. The bill must still be approved in the Seanad.

 


 

Italy

 

Retirement age hike for women mooted
AFP, Dow Jones

 

Last year’s measure setting a longevity peg for retirement age hikes (IH 08/04/10) was widely regarded as a trail-blazing move, but the next round of austerity measures will reportedly require more. Unnamed sources in the Economy Ministry said that a plan to harmonize male and female retirement age, now 65 and 60 respectively, is almost certain to be advanced as part of a strategy for balancing the budget by 2014.

 


 

Lithuania

 

Clarification on residence for tax purposes
Tax Analysts

 

The Ministry of Finance has set out regulations defining who is a resident for tax purposes. A foreign worker is subject to personal income tax if:

 

  • Resident in Lithuania for at least 183 days in a calendar year

     

  • Posted there at least 280 days within two calendar years

     

  • Having other clear signs of taking root in Lithuania such as family home, bank accounts and ownership of immovable property.

 


 

Netherlands

 

Pension reform accord update
IPE

 

The Social Affairs Minister has heard from the pension industry that the recently agreed upon blueprint for pension reform (IH 06/15/11) would have a disproportionate impact on younger generations. The Bureau for Economic Policy Analysis will conduct a study on this matter and deliver it early next year so Parliament will have a chance to pass a set of Pension Act amendments in 2012.

 


 

Poland

 

ECJ referral, reasoned opinion over pension laws
Tax Analysts, EIS, IPE

 

The European Commission has referred Poland to the European Court of Justice (ECJ) for going far beyond the September 2005 deadline for full transposition of the Occupational Pensions Directive. As the case is going to court, the commission refrained from giving examples of missing provisions. Poland was also dealt a second reasoned opinion in a long-standing dispute with the commission over its discriminatory tax treatment of foreign pension funds (IH 06/03/09). If there is not a satisfactory response within two months, the commission will refer Poland to the ECJ over this one too.

 


 

Romania

 

Maternity leave law upheld
Mediafax

 

The parental leave bill based on last December’s emergency decree was “tacitly” accepted in the Senate last February, so when the Chamber of Deputies approved it at the end of May (IH 06/02/11) there was just one hurdle left. The Constitutional Court has now dismissed an opposition charge that the legislation is unconstitutional. The law is retroactive to 1 Jan 2011.

 


 

Slovakia

 

Measure on holiday closures
SITA

 

Last week, the Parliamentary Social Affairs Committee passed a draft amendment to the Labor Code that would require the retail sector to shutter all establishments on public holidays. The dominant party in the ruling coalition has teamed with the main opposition party in support of this. The Labor Minister opposes it as does the junior member of the ruling coalition, which warned that it would consider the Coalition Agreement voided if the measure is passed.

 


 

Switzerland

 

New law on taxation of stock schemes; Implementing ordinances for pension reform; Corporate governance package
IBFD, Le Reseau, IPE

 

The Department of Finance announced (French only) that after a long legislative process culminating with the referendum deadline lapsing in April, it had reached agreement with the cantons on a 1 Jan 2013 implementation date for the Federal Act on the Taxation of Employee Participations. This act will harmonize the tax regimes for stock compensation schemes, which currently vary at the cantonal and municipal levels:

 

  • Reduced cost employee shares will be taxed at their market value when acquired. Restricted stock will be taxed at 6% less than market value per year of restriction to a maximum of 10 years.

     

  • Unrestricted stock options of listed companies will be taxed at market value upon acquisition while restricted stock options or those of unlisted companies would be taxed upon exercise.

     

  • Stock options received abroad but exercised in Switzerland will be taxed on a pro rata basis.

     

  • Stock options received in Switzerland but exercised abroad will be subject to a federal source tax of 11.5% and cantons would have the option of levying their own source tax.

 

Also, earlier this month the Federal Council issued decrees (French only) implementing the pension reforms that were passed by Parliament last year (IH 03/24/10). The deadline for pension fund compliance with the rules has been pushed back a year to the end of 2012. The internal control structure for pension funds will vary by scheme size and complexity, unlike the one-size-fits-all model originally proposed.

 

Meanwhile, the upper house of parliament has passed a corporate governance bill that would grant the government oversight on the executive pay policies of large banks that have received federal bailouts. This would include the option of a ban on bonuses and other types of variable compensation. The lower house will not see the bill until this fall.

 


 

Ukraine

 

Parliament defies Constitutional Court on expat pensions
Ukrainian News

Parliament has rejected by a wide margin legislation that would have restored the rights of citizens to receive pension benefits while residing abroad. In 2009, the Constitutional Court struck down provisions of the Law on Mandatory Retirement Insurance (IH 12/02/09) that limited pensions to a small lump sum when citizens emigrated to a country that hadn’t concluded a social security agreement with the Ukraine. It’s not clear what comes next now that this attempt to revise the law in line with the court ruling has failed.

 


 

UK

 

Pensions Bill advances; Rewriting rules to switch indexation nixed; Consultation on FAS expansion; Health reform revision
IFA, Money Marketing, Professional Pensions

 

On Monday the House of Commons approved the divisive Pensions Bill (IH 05/04/11). The Pensions Minister appeased critics of the accelerated retirement age increase for women a bit with a promise that he would hold talks with them on “transitional arrangements” – possibly including financial compensation – to cushion the impact on those most affected. The bill will be reviewed in committee before its third and final reading. If the law is passed as written, its opponents plan to take the government to court.

 

Government Response to Consultation: The impact of using CPI as the measure of price increases on private sector occupational pension schemes definitively states that the government will not condone switching from the retail price index peg to the generally lower consumer price index (IH 03/23/11) when it entails rewriting an occupational pension scheme’s rules. Last week also saw publication of Department for Work and Pensions Working Paper No 102, which estimates the take-up of the new formula and the impact of the change.

 

Also, the Department for Work and Pensions has opened a consultation on draft regulations that would plug a loophole in the protection of benefits for members of failed pensions. The Financial Assistance Scheme (FAS) would be extended to cover people whose pensions had not come under the protection of the Pension Protection Fund (PPF), in particular victims of a high-profile scheme collapse who were excluded from PPF by a technicality. The consultation will run through 1 September.

 

In addition, the Prime Minister announced that Government response to the NHS Future Forum report features some significant modifications to his health system reform agenda (IH 01/26/11):

 

  • The local decision-making about health budgeting and services would be entrusted to a wider range of medical professionals than originally envisioned.

     

  • The elements of competition and hints at privatization that had alarmed stakeholders are respectively downplayed and disavowed.

     

  • Informing and consulting patients would be a key element.

 

North America

Canada

 

Budget bill introduced; Ruling on parental leave for twins
LTN, WFP, Ottawa Citizen

 

Supporting Vulnerable Seniors and Strengthening Canada’s Economy Act incorporates many of the measures in the new budget. A few rate a mention:

 

  • Members of Registered Disability Savings Plans with “shortened life expectancy” would have certain restrictions on annual withdrawals waived.

     

  • Seniors with inadequate retirement income would be eligible for a Guaranteed Income Supplement of up to $600.

     

  • People who are denied their requests for Disability Tax Credits would be entitled to appeal.

Also, when an employment insurance board of referees ruled that the parents of twins deserve double the normal allotment of parental leave the federal government appealed. An employment insurance umpire has now backed the government’s position that the leave period is not meant to reflect the level of difficulty in infant care. The parents will take the case to the Federal Court of Appeal.

 


 

Mexico

 

External asset managers for pension; New system for voluntary contributions; Special session for labor reform measures
Financial Times, El Economista, Institutional Investor

 

Pension regulator Consar has now set the guidelines for external asset managers to invest some of the 20% of Afores private pension fund assets that are allowed to go into foreign stocks and bonds. They may also be engaged for domestic investment, but they are seen as particularly adding value for foreign investments.

 

Meanwhile, Consar has set out to raise the rate of voluntary Afores contributions by making the process far easier. Unless one commits to payroll deductions, it now involves visiting a branch of the Afore or an approved financial institution. A system that should debut in November will allow contributions via the internet and ATMs. Also, Congress is in recess until September, but the President has asked the Standing Committee that represents it during breaks to reconvene legislators for a special summer session on “urgent” bills. A top priority is to consolidate and pass ruling party (IH 07/08/10) and opposition (IH 03/30/11) labor reform packages.

 


 

US

 

Social security reform proposals; PBGC plan termination regs; Class action suit rejected
Pensions & Investments, Workforce Management

 

As expected, the opposition’s Medicare privatization plan (IH 05/18/11) failed in the Senate, so it was curious when a Social Security privatization bill, HR 2109 Savings Account for Every American Act of 2011 attracted several sponsors in the House. Since then, opposition members in the Senate have come out with S 1213 Defend and Save Social Security Act and S 804 Social Security Solvency and Sustainability Act, both with more modest approaches that would give some traction to serious debate. These bills feature retirement age hikes and benefit reductions. The ruling party would prefer to raise the income level subject to social security contributions. Incidentally, insiders in the hugely influential seniors lobbying group, American Association of Retired Persons (AARP), say that despite a new campaign against Social Security and Medicare cuts, its leadership recognizes that reforms are inevitable and will try to have a role in steering pragmatic debate.

 

The Pension Benefit Guaranty Corporation has issued final rules that count the day a plan sponsor files for bankruptcy as the date of plan termination for purposes of setting the PBGC guaranty. Benefits earned after that date will not be guaranteed. The regulations will take effect on 14 Jul 2011.

 

Also, the US Supreme Court rejected in a split decision a class action lawsuit brought against a giant retailer by over 1.5 million women. The suit over pay discrimination had snowballed because plaintiffs believed the rationale consistently given for pay disparity – that men are the breadwinners while female employees are housewives out for a little spending money – was company policy nationwide. The court determined that this had not been adequately proven. Many of the women will now pursue the case through lower courts and a claim with the Equal Employment Opportunity Commission (EEOC).

 

South America

 

Chile

 

AFP investment rules come under scrutiny
Dow Jones, La Nacion, BNamericas

 

When a large retail chain came into financial distress, it was revealed that the AFP private pension funds own 27% of its stock and took a fair-sized hit when its value plummeted. Pension regulator SP, one target of a congressional investigation into the affair, is expected to review the regulations on the terms under which AFPs invest in domestic companies.

 

Worldwide

 

IASB

 

IAS 19 amendments
DRE, Financial Times, IPE

 

The International Accounting Standards Board has completed a major set of amendments to standard IAS 19 Employee Benefits (IH 06/08/11):

 

  • The corridor method for deferring recognition of gains and losses will no longer be an option.

     

  • New disclosure requirements for defined benefit plans will make for greater transparency on risk exposure.

     

  • There will be more straightforward reporting of a plan’s assets and liabilities.

 

The changes take effect for accounting periods starting on or after 1 Jan 2013, but earlier adoption is welcome. Mercer has released a commentary on the implications of these amendments.

 


 

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

 


 

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Mercer International Headlines is published by the US international consulting practice library of Mercer. Comments or queries may be directed to Patrick Sweeney at +1 212 345 2462. Click here to find your local Mercer office.

 


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