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International Headlines - 27 July 2011


Written by: Patrick Sweeney

 

   

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Ivory Coast
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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:

EU: Single permit proposal advances
Hong Kong: MPF fee review, withdrawal options
Philippines: Excess contributions tax
South Africa: Code for responsible investing
Spain: Senate approves pension reform bill
UK: Draft regulations on auto-enrolment

 

Africa

 

Ivory Coast

 

Free health care unworkable
Ivory Coast Democracy, UNI

 

Following this spring's political crisis, the government introduced free health services as a temporary measure to help restore equilibrium. When the health fee waiver expired on 4 June, the government decided to extend it indefinitely. As the free health care was a spontaneous gesture, there is not adequate funding, staffing or resources in place to handle the demand. A Health Ministry panel held meetings this month to discuss health care financing options. National health insurance is said to be a top contender.

 


Nigeria

 

Minimum wage committee
Daily Trust, Daily Champion, The Moment

 

The federal government averted a nationwide strike by the main union federations by agreeing to the formation of a technical committee for mapping out implementation of the new minimum wage (IH 05/11/11). Union representatives are now meeting with federal and state officials to hammer out a plan by their 31 July deadline.

 


South Africa

 

Code for Responsible Investing; PFA rules on using pension funds to pay debt
ITI, Pretoria News, Business Live

 

The Committee on Responsible Investing by Institutional Investors in South Africa has published CRISA: Code for Responsible Investing in South Africa 2011, making South Africa the second nation (first was UK) to formally push institutional investors to support long-term sustainability by including environmental, social and governance (ESG) factors in their investment decisions. The code boils down to a handful of investment principles centering on ESG but also addresses transparency, conflict of interest and corporate governance. The code follows the "comply or explain" model.

Also, the Pension Fund Adjudicator (PFA) has dismissed the appeal of a group of workers who sought to tap their retirement funds to settle their housing debts. While a pension fund can grant a home loan to a participant and deduct the amount from the person's pension if he or she is unable to pay, the Pensions Fund Act prohibits accessing benefits until the member leaves the fund.

 

Asia/Pacific

 

Australia

 

Stronger Super preliminary report due; Various
AFR, Investor Daily, Super Review

 

The Stronger Super advisory group is scheduled to submit its preliminary report to the Assistant Treasurer this week. Some unresolved issues may either delay the document's release or leave some gaps in it. These include:

 

  • automatic consolidation of retirement savings accounts
  • fixed vs. variable pricing for the MySuper default fund
  • whether MySuper should be automatically attached to industrial awards

 

In other news:

 

  • There has not been formal confirmation of this development, but the press has been reporting that the administration's health reform plan (IH 06/08/11) is unraveling. The federal role as single funder for health insurance and a guaranteed maximum wait for surgery are said to be among the casualties.
  • The Australian Securities and Investments Commission recently released a review critical of the disclosure of executive remuneration in financial reports. It calls on companies to provide greater detail and clarity, particularly in the area of goal-setting for incentive compensation.
  • A draft Australian Tax Office (ATO) ruling has asserted that when a person dies, the beneficiaries must pay capital gains and income tax on the deceased's pension assets. Comments are welcome through 26 Aug 2011.

 


Fiji

 

Decrees to restrict union activity
RNZ, Fiji Village, PACNews

 

The administration is reportedly drafting a pair of decrees to limit trade union rights in a large number of "vital" and "critical" industries, ranging from air transport to sugar production. These and some assaults on union members now have the Australian Council of Trade Unions (ACTU) and the New Zealand Council of Trade Unions (NZCTU) threatening sanctions against Fiji.

 


Hong Kong

 

MPF fee review, withdrawal options; Sector-based minimum wage guidance
MBJSM, SCMP

 

The Mandatory Provident Fund Schemes Authority (MPFA) has issued a press release covering a pair of notable developments. It will commission an independent study on the administrative fees charged by MPF scheme trustees. The panel will examine both how the costs are generated and how they can be cut. The closing paragraphs of the press release give a taste of the issues facing the MPF early withdrawal working group (IH 07/20/11). A compassionate withdrawal for matters such as critical illness or unemployment is under consideration. The study's scope includes consideration of broadening the withdrawal menu for people who have reached retirement age. Phased withdrawal may become possible. The working group will issue a proposal on expanded options for MPF withdrawal to the MPFA management board in September and a public consultation will launch later this year.

 

Also, the Labour Department's resource page for the statutory minimum wage (IH 03/30/11) has now added industry-specific guidelines for several sectors. The department targeted sectors such as retail, tourism and catering where compliance could be particularly challenging.

 


India

 

Broader definition possible for salary subject to PF contribution; Health coverage rules expansion, consolidation
Hindustan Times, Times of India, Mint

 

The Provident Fund Commissioner will confer with the Ministry of Labour over whether a recent Madhya Pradesh high court ruling should be applied nationwide. The court determined that a range of perquisites such as employer-provided rent and transportation allowances should be included in the definition of salary for determining provident fund contributions. At present, both employees and employers contribute 12% of basic salary to the fund.

 

Meanwhile, the Insurance Regulatory and Development Authority (IRDA) has asked the state governments to expand the scope of health insurance coverage to include hospital outpatient care and childbirth. This will increase standardization for when the health insurance portability rules (IH 06/29/11) come into effect. There is a new set of health insurance rules due by the end of September, also part of the effort to smooth the introduction of portability. The effort will include consolidation of existing rules and standardization of claims processing.

 


Indonesia

 

Another delay for social security bill
Jakarta Post, Asia Pulse, Tempo

 

Deliberations on the social security agency (BPJS) bill (IH 06/15/11) necessary for implementation of the 2004 Social Security Law did not conclude on the 22 July target date. The administration has assured stakeholders that a few more disputes will be resolved in the next legislative session in plenty of time for passage this year.

 


Israel

 

Five-day workweek proposed
Jerusalem Post, Ha'aretz, Arutz Sheva

 

The President has appointed a committee to study the Deputy Prime Minister's proposal to establish a five-day workweek. The plan calls for Saturday and Sunday off, an extra hour of work daily Monday through Thursday and a half day on Friday. There is now a public debate underway over whether to adopt the European standard of Sundays off or the Middle Eastern tradition of a Friday-Saturday weekend. Reports that the President backs a three-day weekend are evidently the result of a viral typo.

 


Malaysia

 

PRS working paper due
Malaysia Today, Bernama

 

The Finance Ministry and the Securities Commission are about to release a working paper that will flesh out the Prime Minister's proposal (IH 04/21/11) for a voluntary Private Retirement Scheme (PRS). The document will feature some draft amendments to the Capital Markets and Services Act. The administration aims to implement the scheme by the end of the year.

 


Nepal

 

New work permit rules; Social security funding scandal

Katmandu Post, Himalayan Times, Republica

 

The Ministry of Labour and Transport Management (MoLTM) is reportedly planning a new immigration policy that would require ministry approval for hiring foreign staff. One prerequisite for a work permit would be that the job be advertised in at least five national dailies. Also, the delay in launching the social security system, now 23 months after introduction of the levy (IH 06/15/11), has generated yet more controversy now that most of the contributions are not making their way into the fund. The Finance Ministry (MoF) has deposited less than a quarter of the collected monies, reasoning that there was no point in depositing the full amount in a fund that isn't yet operational. MoLTM countered that the MoF's diversion of funding is a big reason that implementation has been delayed and noted that the system will not get off the ground before next year.

 


Philippines

 

Excess contributions tax; Social security contribution hike

Business World, Manila Bulletin, Manila Standard

 

The Bureau of Internal Revenue has set out to plug some tax loopholes with Revenue Memorandum Circular (RMC) No. 27-2011. The Internal Revenue Code granted tax relief on contributions to the Social Security System (SSS), Philippine Health Insurance Corporation and other government-managed schemes without limiting the relief to the statutory contribution level, so people have caught on to the benefit of making excess contributions. Under this circular, voluntary contributions are no longer deductible.

 

Also, when the Social Security System (SSS) board learned that the President had misgivings about its planned contribution hike (IH 05/04/11), it held off on formal submission and spent some time refining the plan. It has now revived the plan for a 0.6% increase evenly split between employer and employee. The current 10.4% contribution is half that of many other Asian retirement funds, so the initial increase to 11% would be followed by several more hikes averaging 1% every two years. This would both stabilize funding and increase benefits. The voluntary provident fund (IH 07/20/11) is still sought to complement the enhanced pension fund.

 


Saudi Arabia

 

Nitaqat tweaks

EIU, Arabian Business, BIME

 

The first wave of studies has flagged some problems with the "Nitaqat" Saudization plan (IH 06/22/11). The Labor Minister conceded that 20% of private-sector companies would receive the "red" rating for extreme noncompliance and that certain sectors ranging from chemical industries to gas stations would be disproportionately affected. In response, he has pushed back the start of the process to 9 Oct 2011, and he has conceded that some sectors will be exempt. The first batch includes pharmacies and jewelers. More may be added after "prolonged study."

 


Singapore

 

Public/private health model; Consultation on CPF contributions; Tax deduction for SPV administration of EEBR scheme
IBFD, CNA, Zimbio

 

The Deputy Prime Minister delivered a speech last week on how the private health sector might be tapped to strengthen the public health system. Medical professionals have been migrating to the private sector much faster than clients have, so the public health service needs a bridge to that manpower and expertise. Introducing greater efficiency to the health system while maintaining high standards of medical ethics is the goal in this arrangement. The hybrid model has been posted as a topic in the Reach discussion forum.

 

The Deputy Prime Minister has also committed to a stakeholder consultation on the reduced CPF (Central Provident Fund) contribution rates for older workers (IH 07/20/11) that the National Trades Union Congress (NTUC) flagged earlier this month. He says he is sensitive to NTUC concerns about generating adequate retirement income, but will not lose sight of the original intent of the reduced contributions, which was to help older people stay in the workforce.

 

In addition, the 2011 Budget (IH 02/24/11) featured a proposal to grant tax deductions on a company's purchase of shares for an Employee Equity-Based Remuneration (EEBR) scheme administered by a Special Purpose Vehicle (SPV). Following review of last spring's consultation on the proposal, the Inland Revenue Authority of Singapore (IRAS) produced the circular Income Tax: Tax Deduction for Shares used to Fulfill Obligations under an Employee Equity-Based Remuneration Scheme, which explains how the tax deduction will work and sets the conditions that a qualifying SPV must meet. This new regime will take effect in 2012.

 


Thailand

 

National Savings Fund update; Mobility limit for migrant workers

Thai News

 

The Ministry of Finance has set a target date for launch of its National Savings Fund (IH 10/28/09). Independent contractors, part-timers and other workers not covered by social security or other pension funds will be invited to join the voluntary NSF scheme from 8 May 2012. The monthly contribution would range from 50-1,100baht (US$2.41) and there would be a government match based on the member?s age. A minimum guaranteed return would be pegged to the 12-month deposit rate in the banking industry.

 

Also, the Secretary of Labour has set out to dispel a popular misconception among migrant workers. He asserted that a work permit is only valid for the employer that was originally registered, so switching jobs invalidates the permit. The few exceptions to that rule include employer death, employer bankruptcy and physical abuse.

 


Vietnam

 

Outsourcing measure

VIETNB

 

A revised draft labor code (IH 08/04/10) is expected to reach the National Assembly later this year. One noteworthy provision would protect employee rights in labor outsourcing arrangements by defining outsourcing as a subleasing arrangement in which the leased worker is still legally an employee of the original employer.

 

Europe

 

Austria

 

Golden handshake may lose tax break
Tax Analysts, LTN

 

The Finance Minister recently told (German only) reporters that she aims to eliminate tax breaks for golden handshakes. Proclaiming Austria the "European champion (of) early retirement," she said that the tax exemption for companies awarding golden handshakes amounted to an incentive for maintaining an early retirement culture. She also intends to remove the tax breaks now in place for individuals receiving early pensions.

 


Channel Islands

 

Jersey social security contribution rise
IBFD, Tax Analysts

 

Draft States of Jersey Annual Business Plan 2012 reports that the States Assembly has agreed to raise the employer social security contribution for high-earners (IH 06/15/11) by 2% from 1 Jan 2012. The increase will apply to income between £44,232 and £150,000.

 


Czech Republic

 

Health measure defeated, more in the pipeline
CIA

 

A key health reform measure was defeated in the Senate last week. The bill on public health insurance was unpopular for advancing a public/private hybrid model with two tiers of care (standard and above standard) and shifting more costs onto patients. Opponents charged that it was fundamentally unconstitutional. Another component of health reform, due to reach Parliament by the end of the year, would introduce greater accountability in the private health insurance sector and standardize some aspects of coverage.

 

The Cabinet has already approved a bill that would end various exemptions from the obligation to pay sickness and social insurance premiums. The legislation would extend coverage to executives and board members. It would also prevent companies from serially rehiring temporary workers in order to avoid responsibility for insurance contributions.

 


Denmark

 

EU disputes Schengen retreat
EU Observer, Euractiv

 

An EU delegation to Danish border posts reached a preliminary conclusion that reinstated border controls on Denmark's borders with Germany and Sweden (IH 05/18/11) are not justifiable. If Denmark is unable to document that porous borders contribute to some kind of harm or criminal activity, the Commissioner for Home Affairs "will not hesitate to use all tools" to enforce the EU rules on free movement of people.

 


EU

 

See also: Denmark

 

Single permit proposal advances; Agenda for integration; Commission adopts CRD revision
New Europe, Agence Europe

 

Parliament's Civil Liberties Committee has adopted the revised proposal for affording third country nationals (TCN) a single work and residence permit applicable throughout the EU (IH 03/30/11) . The proposal would also establish a common set of employment-related rights for TCNs in the EU. Member states would have limited flexibility on customizing the rules. The document is the result of a compromise agreement between Parliament and the European Council on legislation that had already cleared Parliament. It must now face another plenary vote.

 

The single permit vote occurred in the context of the European Commission's (EC) promotion of its agenda for integration of migrants and its adoption of the European Agenda for Integration of Third-Country Nationals. The latter is a resolution that stops short of seeking to harmonize member state laws, but aims to develop a "flexible European toolbox" to support integration programs.

 

The EC has also adopted a revision of the Capital Requirements Directives (CRD IV) that echoes the Parliament's recent resolution on women in boardrooms (IH 07/20/11) but stops short of setting quantitative targets. Financial sector firms would be required to "take diversity into account" when selecting board members.

 


Germany

 

Health insurance coverage ruling; Siesta campaign
The Guardian, SMH, AFP

 

The Federal Constitutional Court has ruled that when one parent belongs to the statutory health insurance scheme and the other has private health insurance, their children are not eligible for coverage under the compulsory health scheme. This scheme – unlike private health insurance – covers children at no charge.

Also, the DGB trade union confederation is promoting a return to a midday nap tradition that was popular in Germany before the industrial revolution. It cites recent findings on the health benefits of this practice and notes several large companies that have adopted the practice attest to increased worker productivity.

 


Italy

 

Austerity program contingency plan
Tax Analysts, LTN

 

The government's austerity plan credits a portion of the future savings to coming social security and welfare reforms that have yet to get through Parliament. If they get stalled and are not approved by September 2013, the austerity legislation (Italian only) that Parliament did pass earlier this month (IH 07/20/11) includes a measure that would extract the needed revenue from all 483 deductions, allowances, etc. now offered in the tax system. It is estimated that tax breaks would fall by 5% for 2013 and 20% for 2014.

 


Latvia

 

Pension indexation bill
LETA, Baltic Times, Baltic Daily


Legislators in the Saeima agreed – over the Finance Minister's objections – to forward a state pension indexation bill to committee. The bill would peg the benefit to the consumer price index and backers hope to have it enacted by 1 September so the first adjustment can be on 1 October. Last weekend's dissolution of Parliament may disrupt this tight timetable.

 


Portugal

 

Cabinet approves severance pay proposal
PLA

 

During an extraordinary meeting (Portuguese only) the Council of Ministers approved a reduction in the severance pay formula based on the terms of the bailout agreement (IH 05/11/11). Under new labor contracts only, the compensation would be 20 days per year of service with a ceiling of 360 days. A companion document (Portuguese only) compares the formula to statutory severance pay in several other countries.

 


Russia

 

Labor reform mulled; Tax breaks on mobile phone services, drinking water
Tax Analysts, Garant.ru, RT

 

Opposition parties and major trade union and employer federations have set out to draft a "radical" revision of the Labor Code. The President has since met with union leaders to discuss his more measured approach to confronting the law's failings. He will convene a high-level tripartite group to pursue his vision of reform. The areas he identified as particularly needing attention include labor conflicts, union rights and distance workers.

 

The Finance Ministry's Guidance Letter 03-03-06/1/378 states that an employer may deduct the cost of providing its employees' mobile phone services, provided there is adequate documentation of the benefits provided. The ministry had to backtrack last month after a letter it posted in May led the press to conclude that employer-provided drinking water is a benefit in kind and that employees will be held responsible for deducting its value from pay. A subsequent ministry press release (Russian only) clarified that any economic benefit that cannot be quantified cannot be treated as a benefit in kind under the code.

 


Slovenia

 

Health reform options
STA, Slovenia Times

 

The Health Ministry has opened a public debate on a set of health care reform options. All involve merging the state-run health system with the "top-up" private health insurance sector. One variation would raise the contribution rate from 13% of gross salary to 15.4% for full coverage with minimal wait for treatment. Others would keep the contribution level down but either allow longer queues or leave out some of the non-essential treatments in the top-up package.

 


Spain

 

Senate approve pension reform bill; Regional bond investments for social security funds
El Pais, IPE, IPE

 

The administration's pension reform bill (IH 07/14/11) has cleared the Senate and the Senate's amendments were quickly approved in the Lower House:

 

  • From 2013, the legal retirement age will start a gradual climb from 65 to 67.
  • A 37-year contribution history will be required for the full benefit.
  • Early retirement will start at age 63 and there are provisions for the disabled retiring as early as 56.

 

While these measures were being debated to help stabilize the state pension, the administration let slip that it is considering a Social Security Reserve Fund to invest €76 billion in the bonds of several of the nation's financially strapped regions. The Ministry of Labour has drafted a document defending the legality of this move, but not all stakeholders are convinced of its wisdom.

 


UK

 

Draft regulations on auto-enrolment; Finance Act receives Royal Assent; Various
Pensions Age, Tax Analysts, Professional Pensions

 

The Department for Work and Pensions (DWP) has opened a consultation on a set of draft regulations covering auto-enrolment under the workplace pension reforms that will be introduced next year. The regulations follow a stakeholder consultation and are meant to allay employer concerns about understanding their role and handling the administrative burden. It includes details of the auto-enrolment phase-in and guidance on certifying money purchase plans and certain other hybrid schemes under auto-enrolment. The consultation will end on 11 Oct 2011.

 

Also, Finance Act 2011 (IH 04/06/11) has received Royal Assent. The sharp cuts in the maximum annual and lifetime pension allowances (IH 03/30/11) will now come into effect on 6 Apr 2012. Other notable measures in this law will curb disguised remuneration and revise the rules for employer subsidy of childcare expenses.


In other news:

 

  • The Workplace Retirement Income Commission (WRIC) was tasked earlier this year with an independent review of occupational retirement savings schemes. WRIC's interim report was due last week but was cancelled because it's ready to publish the final report this week.
  • The Business Department's response to a consultation on training breaks reveals that the right to reasonable accommodation of requests to take training breaks (IH 08/18/10) will not be extended to workplaces with fewer than 50 employees. Extending the right to enterprises with fewer than 250 employees will be considered in 2015 after officials have had a chance to study the scheme's impact.
  • A recent tax tribunal ruling was greeted by stakeholders as a potential landmark in the struggle to determine the scope of the IR35 independent contractor legislation. In this case, the professional worker's independent status was well-documented as was his ad hoc pay arrangement, yet the case dragged on for years.

 

North America

 

Canada

 

Recent Communiqué

Mercer has produced a Communiqué reviewing the new Ontario regulations on pension splitting in divorce (IH 07/14/11). It examines a range of valuation issues. Another recent Communiqué discusses how The Agreement Respecting Multi-jurisdictional Pension Plans (IH 06/02/11) determines which jurisdiction is the major authority and describes its impact on pension funding, investment, asset allocation, governance and administration rules.

 


Honduras

 

Social security contribution rise
IBFD, La Tribuna

 

Last month, the Social Security Institute gazetted a resolution raising the employee social security contribution from 3.5% to 4% and the employer contribution from 7% to 8%. It also lifted the monthly salary ceiling subject to the levy from HNL4,800 to HNL7,000 (US$370). This is retroactive to 1 June.

 


US

 

Debt ceiling negotiations; FATCA resources
Dow Jones, AP, Financial Times

 

As the 2 August deadline for raising the debt ceiling (IH 07/14/11) draws closer, the proposals are mutating rapidly. Although the proposals are short on detail, certain benefit-related themes are recurring. It appears likely that whatever breakthrough package is cobbled together, it will include measures reducing the tax break for employer-sponsored medical plans and some radical cost containment in the Medicare program.

 

Also, the Foreign Account Tax Compliance Act (FATCA) threatens to eclipse FBAR (Report of Foreign Bank and Financial Accounts) in its significant but murky implications for multinational retirement plans (IH 03/31/10). The Treasury and the Internal Revenue Service (IRS) have recently released guidance on the phased implementation of FATCA reporting and withholding requirements, which is set to start in 2013. The IRS has created a FATCA resource page, which is bound to add content – including guidance that stakeholders hope will narrow its application to cross-border pensions – in the coming months. Colleagues and subscribers have access to a recent GRIST that explores FATCA's possible impact on non-US retirement plans.

 

South America

 

Chile

 

Employer SIS contributions
BNamericas, UPI

 

Part of the 2009 pension reform was ending AFP responsibility for SIS (survival and disability insurance) coverage. Companies with over 100 workers had to start paying a 1.49% premium for SIS that year. The Superintendent of Pensions has announced (Spanish only) that from the start of this month the mandate is extended to companies with fewer than 100 employees.


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

 



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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