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: Draft rules on extension of social insurance to foreigners
France: Levy proposed for companies that pay high salaries
IASB: “Near final” draft of IAS 19 revision circulated
Ireland: Social Welfare and Pensions Bill 2011
Japan: Social security reform outlined
UK: Consultation on tax break purge
Minimum wage proposal
The Cabinet has endorsed a measure that would nearly double the minimum hourly wage for unskilled workers from US$0.25 to US$0.47. The Minimum Wage Bill is now before the House.
National health insurance bill passed; Guidelines on pension fund accounting
Daily Independent, This Day, Daily Champion
The Senate has passed the National Health Bill, a consolidation of different versions of the National Health Insurance Scheme Act (IH 12/02/09). First presented to the National Assembly in 2004, it finally cleared the Senate a day after a women’s group stormed the National Assembly Complex. It sets a regulatory framework for the development, oversight and management of a national health insurance system. It also addresses standards of medical care and the responsibilities of caregivers. Stakeholders have served notice that “the next battle is effective implementation.” Also, the National Pension Commission (Pencom) has published Guidelines on Fund Accounting to ensure consistency in the financial statements of pension funds.
Ruling on employee loan; CAMAC reports on executive pay; Various
Australian Tax Office (ATO) Interpretive Decision ID 2011/33 explores a case in which a loan to an employee does not incur the fringe benefits tax (FBT) that is generally applied to this perk. In this instance, the loan was to an employee/shareholder and escaped the FBT because it qualified as a dividend.
Meanwhile, the Parliamentary Secretary to the Treasurer has embraced the broad themes of the CAMAC (Corporations and Markets Advisory Committee) Executive Remuneration Report. It calls for an overall streamlining and simplification of executive pay disclosure requirements and recommends a generally nonprescriptive approach to the topic. There are, however, more types of compensation brought under the disclosure rules, including crystallized past pay and post-severance arrangements.
In other news:
Stopgap privacy guidance
The National People’s Congress (NPC) and the State Council are six years into preparation of a Personal Information Protection Law that would consolidate existing privacy measures and plug any gaps they find. As an interim step, the Ministry of Information and Industry Technology (MIIT) has published the draft guidance, Information Security Technology – Guide for Personal Information Protection. It is most notable for a “transfer restriction” provision that would ban multinationals from maintaining personal information on their Chinese workers anywhere outside of China. If the guide is promulgated, compliance will be mandatory.
Social security reform measures
La Depeche, CDE
The unicameral Assembly has passed a set of major social security reform measures:
- The early retirement age threshold is raised from 50 to 52 and it will gradually climb to 55.
- The minimum contribution period will rise from 15 years to 20.
- Cost-sharing will be introduced for chronic illnesses and funds from the industrial accident scheme will be claimed by the public health system where applicable.
Health reform advances
IFN, Kuwait Times, Arab Times
In the coming months, the Kuwait Investment Authority will launch the Kuwait Health Assurance Company (KHAC), a public/private partnership that will upgrade the public health system and privatize expatriate health insurance. The privatization, entailing a higher annual premium for expats (IH 04/21/11), would probably not take effect before 2015.
EPF statement review campaign
Bernama, Business Times
The Employees Provident Fund has started an ad campaign advising members to routinely check their account statements to ensure that employer contributions are in order. The fund has decided that this is the best way to promptly catch irregularities in the records of its 6.4 million members.
Minimum wage impasse ends
Himalayan Times, Republica, Katmandu Post
The tripartite minimum wage determination committee was unable to reach accord on whether the second-stage minimum wage hike negotiated with unions that rejected the initial agreement (IH 05/04/11) is legitimate, so it deferred to the Ministry of Labour and Transport Management. The ministry chose the higher figure, Rs6,200 (US$86.13) per month, and promptly gazetted a wage notice to that effect. The increase is retroactive to 15 Mar 2011.
Guidance on KiwiSaver changes, Correction
Since the initial posting of the 2011 Budget (IH 05/25/11), the government has issued some explanatory releases. Fact Sheet – KiwiSaver Changes offers a succinct bullet-point synopsis of the new measures. KiwiSaver – How changes affect New Zealanders provides several different scenarios to illustrate the changes. Incidentally, the new KiwiSaver tax regime has become a big campaign issue because the Prime Minister pledged that it would have “no impact” until after the 26 Nov 2011 election, but the reduced Member Tax Credit is effective from 1 Jul 2011 (this was misreported earlier as 1 Jun 2011). He maintained that he has kept his promise because the reduced payment reflecting next month’s change does not arrive until 1 Jul 2012.
Devolution delay mooted.
Pakistan Observer, The Nation, International News
Unnamed government sources have advised the press that the 30 June deadline for devolution of labour laws (IH 05/18/11) and management of the Employees Old-Age Benefits Institution (EOBI) is being reconsidered. A decree delaying it by a full year is reportedly the response of choice to both logistical problems and stakeholder objections. The situation is further complicated by the Labour Ministry’s publication last month of Industrial Relations Act, 2011, a draft consolidation of trade union law at a “trans-provincial level” that would appear to violate the law on devolution to the provinces. This has prompted a debate over whether the federal government maintains jurisdiction over inter-provincial unions and federations.
Mandatory compensation committees, Various
Focus Taiwan, China Post, Asia Pulse
As the compliance deadline nears, stakeholders are paying more attention to a Securities Transaction Law amendment that passed in the Legislative Yuan last November and was promulgated in March. Effective 30 Sep 2011, all publicly listed companies with at least NT$10 billion (US$3.5m) in capitalization must appoint compensation committees to review executive pay. Smaller public companies have until 31 December. A committee must have at least three members, including at least one independent director if there are any on the board. It must meet at least twice a year to review remuneration policy and performance rewards. Any dissenting opinions must be publicly disclosed in meeting minutes. The committees will make recommendations and the shareholders generally will have final say.
In other news:
- A “program for coping with the trend of few offspring” is about to be unveiled. Its family-friendly measures are said to include flexible hours, employer-sponsored day care and a more hospitable environment for parental leave.
- The Council of Labor Affairs (CLA) has opened a dialogue with stakeholders on a possible liberalization of the laws on hiring skilled foreign workers. One good faith gesture due soon will extend work rights to spouses when foreign workers with visas die or divorce.
- The labor pension fund supervisory board is securing arrangements for a special fund that will invest exclusively in companies that are doing a significant amount of hiring. A formula will peg the investment amount to the number of new hires.
- The Legislative Yuan has passed a measure implementing the U.N. Convention on the Elimination of All Forms of Discrimination against Women. It includes employment discrimination measures.
Lower deduction for directors vindicated
The Income Tax Act caps the annual employment cost deduction for directors at €2,150 while the employee deduction limit is €3,590. This discrepancy was challenged in Constitutional Court. The judges ruled last month that the law is not discriminatory because directors are in a position to claim reimbursement from the employer for a wide range of professional costs and companies are able to deduct the reimbursements.
Pension company profit sharing
The Financial Services Supervisory Agency (Hanfa) has published draft legislation on compulsory and voluntary pension funds that reportedly surprised the pension sector with a provision stating that members of compulsory pension funds would be entitled to a portion of the pension companies’ profits. The association of pension companies has threatened various attacks, including a constitutional challenge, but Hanfa maintains that the bill was drawn up in close consultation with the sector.
Pension reform disputed
CTK, Prague Monitor, Dow Jones
The administration’s pension reform legislation (IH 05/18/11) has come under attack from workers, employers and pension experts, further diminishing its prospects in the Senate. The press is now reporting that the bill would harmonize the retirement age for men and women at 65 by 2035. A longevity peg is forecast to bring a subsequent rise to 70-71 for those born at the start of the century. The Labour and Social Affairs Minister has tried to reassure stakeholders that further increases in retirement age may come more slowly if life expectancy improvements slow down.
Free pension transfers curbed; Statute of limitations on occupational diseases removed
Just six months after agreeing on no transfer fees for pension amounts below DKK46,000 (IH 11/10/10), the pension sector has slashed the ceiling to DKK20,000 (US$3,842.03). Also, Parliament has passed a Limitation Act amendment removing the 30-year limit on compensation claims for people with long-gestating occupational diseases.
“Special regime” for pension fund derivatives trading; Committee approves board quota measure
Financial News, Reuters, IPE
Parliament’s Economic and Monetary Affairs Committee announced a vote advancing draft rules on derivatives trading (See agenda item #7). As expected (IH 04/27/11), pensions are at least temporarily spared. Under a new amendment, a “special regime” for pension fund trades would waive the requirement to use counterparty clearinghouses, provided they can be objectively determined as reducing risk for the fund. This is a three-year exemption with review – and likely continuation – to follow. A plenary session of Parliament will vote on the amended text in July. This legislation will have to be reconciled with a version under review in the European Council.
Parliament’s Women’s Rights Committee endorsed a report proposing mandatory quotas for women on the boards of public companies (IH 04/06/11). It called on the European Commission to draft the necessary legislation in 2012. The minimum would hit 30% by 2015 and 40% by 2020. The ratio now stands at 10%.
Profit-sharing bill advances
L’Express, Le Télégramme, Info.France
The Council of Ministers had adopted Loi de financement rectificative de la sécurité sociale pour 2011 (French only) , featuring the measure that would make a profit-sharing “premium” mandatory when enterprises with at least 50 workers pay shareholder dividends higher than the average of the two previous years (IH 04/27/11). This bonus would be exempt from social security on up to €1,200 per year but still subject to the general social contribution.
ERO /REA reform report; Various
The Independent, Irish Times, RTE
The Department of Enterprise, Trade and Innovation (DETI) has posted the Report of the Independent Review of Employment Regulation Orders (EROs) and Registered Employment Agreement (REA) Wage Setting Mechanisms, aka the Duffy-Walsh review. The widely used EROs, REAs and JLCs (Joint Labour Committees) have been demonized in some circles, but the report concludes that a “radical overhaul” is preferable to abandoning this model. The overhaul would entail some consolidation of JLCs and standardizing certain conditions such as overtime and Sunday premiums. The head of the DETI will use the report as the basis for an “action plan” due for delivery to the Cabinet at the end of June.
In other news:
- A broad backlash against the pension levy (IH 05/25/11) now features forecasts that many pension funds will move offshore as well as growing support for an Irish Association of Pension Funds (IAPF) proposal to deliver an equivalent boost to the economy with a €4b infrastructure investment scheme for which pension funds would be “requested” to reserve a set portion of their assets. The Finance Minister aggressively defended the government’s position in the levy bill’s Second Stage Speech and has elsewhere characterized the pension industry resistance to the measure as “hysterical.”
- The trade union Unite announced that the European Court of Justice (ECJ) will soon hear its case against the Irish government for failing to transpose the EU directive on pension protection funds (IH 05/06/09).
- The deputy governor of the Central Bank has endorsed one bank’s request for the first exemption yet from the banking sector executive pay cap (IH 03/25/09) and the Taioseach has allowed that it is legitimate to exceed the cap in exceptional circumstances.
Petition over registered partner law
TNS, ILGA, BAR
Parliament passed a bill last March establishing a “registered partnership” status for same-sex couples. Registered partners would have many of the same legal rights as married couples. Opponents of the new law collected enough signatures for a referendum that will run 17-19 June. If not overturned, the law is scheduled to take effect on 1 Sep 2011.
Pension reform update
Times of Malta, IPE
Last week, the Maltese Pensions Working Group concluded a round of town-hall style consultations on a report proposing 45 pension reform measures. It initially included immediate introduction of a mandatory second pillar scheme funded by employer and employee contributions for people under age 45. The administration has since backed down on this but is still considering an “incentivized” voluntary scheme. Other proposals include a life expectancy peg for the pensionable age, a number of work/life balance measures to keep people in the workforce longer, modifications to the pension benefit formula and a more robust environment for the third pillar pension.
Vacation carryover cut back
NIS News, DutchNews.nl
Parliament has passed legislation cutting the five-year carryover period for 20-day statutory annual leave down to six months. This will initially apply to leave days credited in 2012 and it will not be retroactive for days already banked.
Longer vesting period proposed for incapacity pensions
The administration aims to amend the regulations on eligibility for disability pensions in order to curb the scheme’s abuse. It is now open to people above age 30 who become incapacitated after paying premiums at least 5 of the past 10 years. It would now be open to men who had contributed at least 35 years and women with a 30-year premium history, raising the de facto eligibility age above 50 for most.
AG opinion on discriminatory pension tax
The European Court of Justice (ECJ) Advocate General has delivered an opinion in case C-493/09 (Several languages but not English) that found Portugal’s pension tax regime in violation of the free movement of capital rules. The tax rate on dividends paid by a Portuguese pension fund is lower than for those paid by foreign pension funds, including EU and EEA states. It is uncommon, but not unheard of, for the actual court ruling to disagree with the AG opinion.
Parental leave bill advances; Various
Rompres, Mediafax, Nine O’Clock
The government-sponsored parental leave bill (IH 12/15/10) has passed in the Chamber of Deputies with most of its major provisions intact. Those parents taking a second year of leave would now be entitled to a smaller benefit capped at 1,200 lei (US$412.74 ) per month. For both years 1 and 2, the minimum monthly benefit would be 600 lei.
In other news:
- A temporary measure setting a 5.5% health insurance levy for pensioners with income above 740 lei per month has now been extended through 2012.
- Pension regulator CSSPP now requires twice yearly disclosure of pension fund asset allocation. The existing annual report to participants will gain new information on investment policy, risk exposure and administrative costs.
- The Senate has passed and the Chamber of Deputies is expected to endorse legislation that would ban smoking in most public enclosures. Certain bars, discos and restaurants would be designated as officially for smokers.
Poor prospects for pension reform surviving referendum
The administration and most financial experts have kept up a steady drumbeat about the urgency of upholding the recent pension reform in next Sunday’s referendum (IH 04/27/11), but the polls consistently show it headed for defeat. A snap election to bring in a government capable of passing reforms is likely to ensue.
Petition to reverse labor market reform
El Pais, NYT, EFE
Umbrella union UGT reported that it has collected enough signatures for a “popular legislative initiative” for both electoral reform and a reversal of last year’s labour market reform (IH 09/29/10). This coincides with a wave of street protests over the same issues and the ruling party – mauled in recent regional elections – has indicated that it will seriously study the protestors’ grievances.
Transfer incentives targeted; Guidance on default fund for auto-enrolment DC schemes; Various
Professional Pensions, BBC, Tax Analysts
The Pensions Minister has served notice that he plans to “root out … dangerous and disingenuous” practices in the ETC (enhanced transfer value) market for luring members out of defined benefit schemes. He recently met with regulators and industry representatives to determine what additional regulations or enforcement mechanisms are needed to protect consumers. An outright ban on cash incentives for transfers is among the options under consideration. The Pensions Regulator (TPR) has also raised alarms over marketing practices in this sector and the Professional Standards Body for Transfer Incentive Exercises (PSBTIE), an industry group, recently released a charter outlining best practices in TIEs.
Also, the Department for Work and Pensions (DWP) has published Guidance for offering a default option for defined contribution automatic enrolment pension schemes along with the government response to an earlier consultation on the topic. This guidance is non-regulatory but DWP has not ruled out resorting to statutory reinforcement of its protection. The department also decided to keep the guidance principles-based to allow for flexibility in plan design as well as evolution of the DC product.
In other news:
- Last week, the Exchequer Secretary to the Treasury announced a brief (closed 1 June) consultation that would plug a tax loophole for UK citizens receiving foreign pensions. It clarifies the terms under which the pension would be subject to UK tax. The measure will soon reach Parliament as part of Finance (No.3) Bill and, if passed, would be retroactive to 6 Apr 2011.
- HM Revenue and Customs (HMRC) has opened a consultation on alterations to the tax regime for asset-backed employer contributions to defined contribution schemes. It considers two options for more accurately valuing the contributions for tax purposes. The consultation runs through 16 Aug 2011.
- The House of Commons Public Accounts Committee has released a report, Immigration: the Points Based System – Work Routes offering a mixed review of the points-based system for immigration. It welcomes the system but calls for tighter controls, particularly for intra-company transfers, which multinationals are perceived as using to skirt immigration quotas.
- The DWP has opened a consultation on draft regulations covering the option of paying charges for excess pension contributions directly from one’s pension scheme (IH 03/09/11). This consultation – please note it’s another brief one – closes on 17 Jun 2011.
Multi-jurisdictional pension agreement; Ontario passes occupational safety bill
Investment Executive, Mondaq, ACC
The Ontario government has announced the signing of Agreement Respecting Multi-jurisdictional Pension Plans the culmination of over 10 years of negotiations between the provinces of Ontario and Quebec and their stakeholders. Part of the regulatory arrangement for multi-jurisdictional pension plans (MJPP) will be the establishment of a single supervisory authority for them. The signatories "anticipate" that all the other provinces will also sign this accord.
Also, last month the Ontario legislature passed Bill 160 The Occupational Health and Safety Statute Law Amendment Act, 2011 (IH 03/16/11). The Ministry of Labour, assisted by a tripartite Prevention Council, would assume occupational safety oversight duties. Mandatory safety training for new workers and codes of practice for safe workplaces reportedly top its agenda.
Medicare voucher bill defeated; Second thoughts on swaps rules; Various
Tax Analysts, Chicago Tribune, Global Pensions
The opposition-backed alternative budget legislation featuring a contentious proposal to turn Medicare into a private health insurance voucher system (IH 05/04/11) was soundly defeated in the Senate. Medicare is due (IH 05/18/11) for some kind of a fix, but analysts fear that the bitter voucher debate has left the atmosphere too testy for pragmatic compromise any time soon.
Also, the consultation is still open on the Commodity Futures Trading Commission (CFTC) draft regulations covering the swaps provisions in the Dodd-Frank financial services reform law (IH 05/11/11) and a CFTC commissioner has weighed in at a congressional hearing with misgivings about the draft. Her concerns include the lack of clarity on extraterritoriality and the need for greater harmonization with the EU on derivatives rules. Part of the discord is the EU’s proposed temporary exemption for pension funds (c.f. EU, par 1). The CFTC recently opened a consultation on draft rules defining swaps that considers whether there should be a broad exemption for insurance products that are already adequately regulated. Comments are welcome through 22 Jul 2011.
In other news:
- The Supreme Court has upheld the authority of a state government to impose sanctions on companies that knowingly hire undocumented workers. A two-strike mechanism under the Legal Arizona Workers Act allows the state to revoke the licenses of companies found in violation twice. The court found that this measure did not violate a federal pre-emption of state sanctions against employers of illegal workers under the Immigration Reform and Control Act. Several other states have similar measures in effect.
- Last week, Mercer noted that an insurer had blazed a trail, navigating an array of “complexities,” to accomplish the US’s first pension “buy-in.” The employer gave an insurer a quantity of pension plan assets in exchange for the insurer taking on the longevity and investment risk of delivering an annuity to a fixed group of pensioners.
- A bipartisan Senate bill, S.1020, Savings Enhancement by Alleviating Leakage n 401(k) Savings Act of 2011, would both reduce pre-retirement access to 401(k) loans and amend the tax rules to ease penalties during 401(k) loan repayment. There is also a provision allowing workers to continue contributions in the six months following a hardship withdrawal.
- Another case hinging on the alien tort statute will proceed following a ruling by the 9th US Circuit Court of Appeals. This one has some additional extraterritorial spin because it involves allegations of criminal activity in Argentina by a German company with significant subsidiary presence in the US.
New OECD guidelines for multinationals
The revised OECD Guidelines for Multinational Enterprises have been adopted by the 34 member states and eight additional countries. A “non-binding code of conduct,” it advances a set of goals for cross-border companies, including:
- Corporate social responsibility
- Disclosure of executive remuneration policy
- Worker rights, including union representation
- No employment discrimination on any grounds
- High standards for wages, benefits and working conditions in developing countries where benchmarking against competitors is not possible
- Advance notice to/consultation with local authorities and worker representatives when an impending change will have an impact on the workforce