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.

Egypt

Social security thresholds rise
IBFD
Last month, the Minister of Finance and Social Insurance issued decree No. 364, which raised the variable monthly salary subject to social security contributions from LE 750 (US $132.13) to LE 900. The limit for fixed monthly salary rose from LE 800 to LE 850. The decree took effect on July 1, 2010.

Uganda

Second pension reform bill
The Monitor

The Cabinet has approved Uganda Retirement Benefits Regulatory Authority Bill, 2010, a companion to Uganda Retirement Benefits Authority Bill 2010 (IH 05/19/10). Together, the bills would establish a regulatory framework for retirement benefit schemes to compete with the National Social Security Fund (NSSF). The new bill is now before Parliament’s Finance Committee.

Zimbabwe

Stock option regulations
Zimbabwe Independent
The Zimbabwe Stock Exchange (ZSE) has determined that some enterprises took advantage of wild currency fluctuations in recent years to design very lucrative stock option schemes for top management. ZSE is drafting measures to curtail such windfall benefits. ZSE has also had to contend with the practice of backdating stock options to maximum advantage.

Australia

Mining tax agreement to benefit superannuation guarantee; Various
AAP, Global Pensions, Herald Sun
The Prime Minister lost a confidence vote last month over his endorsement of a Henry Tax Review (IH 05/05/10) proposal to impose a 40% tax on mining sector profits. This would have offset the cost of raising the superannuation guarantee by 0.25% in 2013. The new Prime Minister has negotiated a compromise with the mining industry that would cap the tax on profits at 30% and narrow the range of companies affected. The Deputy Prime Minister said that this revenue would suffice to fund the higher guarantee.

In other news:

• A leaked draft of the National Partnership Agreement on Improving Public Hospital Services alarmed stakeholders with the concession that the performance links under federal funding of the public health system (IH 06/30/10) would not be legally enforceable.  Western Australia remains a holdout on this deal and other states have claimed that the plan's elective surgery guarantee, which would use private hospitals as a last resort to reduce queues for surgery, was not in the original agreement (IH 04/21/10).  Nonetheless, the Health Minister's timeline for health reform noted that initial stages of implementation are "already underway."
  
  
• The Australian Stock Exchange’s (ASX) Corporate Governance Council has issued a press release on listing rules due later this month that will require publicly traded companies to staff their remuneration committees with nonexecutive directors. The exposure draft for these rules was circulated last April.
  
  
• The ASX has also revised corporate governance guidelines that call on boards to have a majority of independent directors and to increase gender diversity. There are “comply or explain” provisions on disclosing the gender composition of both boards and upper management and on publishing progress reports on diversification.
  
  
• The government has implemented its new assessment processes for Disability Support Pensions (DSP, IH 05/19/10). This coincides with the launch of a workforce re-engagement pilot offering job training and employment incentives to the partially disabled.

Bangladesh

Higher deduction for perquisites
IBFD

The 2010-11 Budget features a measure that would raise an employer’s deduction limit for perquisites from BDT 2 Million (US $28,877 to BDT 2.5 Million. The legislation is now before Parliament and its effective date would be July 1, 2010.

India

Apprentice program revamped
Economic Times

The National Council on Skill Development commissioned a review of Apprentices Act of 1961 last year in the hope that the apprenticeship training scheme (ATS) could be more appealing to the private sector. Under a revised model, the monthly stipend capped at Rs 1,620 (US $34.60) would be doubled, with the government subsidizing the increase and far more occupations would be eligible for the program. Administrative barriers would be removed and only the most delinquent employers would face the prospect of imprisonment. Employers still object that the 50% quota for hiring apprentices is too high, and observers have noted that onsite training is no longer a valid model for many occupations.

Israel

Corporate Governance Code
IBA, Jerusalem Post, Globes

The head of the Israel Securities Authority (ISA) recently chaired a corporate governance committee that approved a set of corporate governance principles that drew heavily from the Sarbanes-Oxley Act, the US corporate governance law. They include more detailed financial disclosure, a higher percentage of independent directors on boards and top management accountability for financial reports. For now, they are voluntary (comply or explain), but this is envisioned as evolving into a mandatory corporate governance code in a few years. This coincides with an ISA campaign to compel greater transparency in executive pay policies. The first stage was ordering dozens of public companies to fully disclose their processes for setting executive remuneration, because errors had turned up in their financial reporting. The net will soon expand to companies that gave insufficient details on executive pay and to the accounting firms that advise companies on financial reporting.

Japan

Seven principles of pension reform
Kyodo, Daily Yomiuri, Jiji Press
An advisory panel has been discussing pension reform (IH 06/03/10) since last March. The first fruit of its labor is a set of very broad principles that will frame extensive consultations with the opposition parties. All state pension programs would be consolidated into a single universal scheme with a guaranteed minimum pension. The other principles are relatively nebulous things like sustainability and improved recordkeeping.

Philippines

Consolidation of OFW programs
Business World, Manila Bulletin
The Department of Labor and Employment (DOLE) announced that six government agencies will integrate their social welfare services for overseas Filipino workers (OFWs) to make the support more affordable and accessible.

UAE

Disease-based discrimination
The National, Gulf News, Business Maktoob

The Council of Minister has passed and the President is expected to sign a bill to combat discrimination against UAE nationals with HIV/AIDS. It would ban AIDS discrimination in the workplace and allow anonymous HIV testing. HIV status remains a legitimate reason to deport expatriates. Dubai and Abu Dhabi health officials have been sensitized to communicable diseases having a chance to spread or develop more virulent strains when sufferers avoid treatment for fear of deportation. In an anticipated initial response, Dubai is reportedly close to announcing an opt-out of the federal requirement to deport foreigners with tuberculosis.

Armenia

Second pillar phase-in
Armenia Now, ARKA, PanArmenian Net

Parliament has adopted the administration’s pension reform bill (IH 06/16/10). The privately managed second pillar scheme would debut on January 1, 2011, as optional and would become mandatory on January 1, 2014. Participants would divert 5% of social payments to the fund and the government would match it. A fund would be created to guarantee participant deposits. The combined pillars would double the state pension to 50% of the average salary.

Belgium

Anti-crisis package extension
Elexica, Belgium at Work

Well in advance of the June 30 expiration date for the extended anti-crisis measures (IH 12/23/09), the government pushed the final date back to September 30, 2010, and introduced a mechanism for declaring a further three-month extension by Royal Decree.

Channel Islands

Jersey Social Security contribution hike
LTN

The Jersey government has released a Green Paper on the findings of its Fiscal Strategy Review. One of the review’s conclusions is that the £43,752 cap on pensionable salary is abnormally low and should be raised to £115,000. Comments are welcome through August 30, 2010.

EU

Pension reform Green Paper; Various
EU Observer, IPE, Euractiv
The Green Paper on Pensions (IH 06/30/10) was published yesterday. The document sets broad goals for pension sustainability, benefit security and an obstacle-free internal market for pension products.  It warns that a “painful combination of lower benefits and higher contributions would be inevitable” if governments continue to play down the impact of demographic changes on state pensions and it urges nations to peg the retirement age to life expectancy.  There is also discussion of a solvency regime "equivalent" to the one proposed for insurers in the Solvency II Directive (IH 06/23/10). A public consultation will close on November 15. The European Federation for Retirement Provision (EFRP) has launched a website to showcase the coming debate.

In other news:

• Parliament’s Economic and Monetary Affairs Committee has negotiated a compromise with the European Council and the European Commission on bankers’ bonus provisions of the Capital Requirements Directive. Yesterday  legislators approved the rules in a final plenary vote. The cash component of a bonus will range from 20 % to 30%, at least 40% will be deferred for at least three years and 50% of non-deferred income will be “contingent capital,” subject to clawback in times of financial hardship. The European Council’s formal endorsement will come next week. The bonus measures will come into effect in January 2011.
  
  
• The European Commission has opened a consultation on more quickly identifying and removing state-level obstacles to free movement of services under the Services Directive. Feedback is welcome through September 13, 2010.
  
  
• The European Court of Justice has handed down a pair of rulings clarifying the requirement to maintain a pregnant worker’s salary. C-194/08 confirmed that an allowance for on-call status need not be paid to a pregnant worker whose modified duties left her no longer on call. In C-471/08, judges agreed that a worker’s temporary change of duties during pregnancy maintained her base salary and legitimately suspended eligibility to certain activity-passed allowances.

Germany

Drug price negotiations; ELENA dismissal field debuts
Expatica, Reuters

The Cabinet has approved draft legislation that would enable health insurers to negotiate drug prices with pharmaceutical companies based on cost-benefit analysis of their products. Parliament is expected to pass the law this fall and it should take effect on January 1, 2011. Meanwhile, the obligation to record reasons for dismissal on the controversial ELENA database (IH 04/14/10) went into effect on July 1. The present format for this data is particularly vulnerable to inaccurate information and privacy violations. A working group is preparing recommendations for refining the ELENA database and should complete its report later this summer. The Minister for Economic Affairs, citing cost overruns, administrative hardships and technical shortcomings, is suggesting that ELENA be suspended until it is viable. The Labour Minister has conceded that technical difficulties may sideline the database.

Gibraltar

2010 Budget
Gibraltar Chronicle
The 2010 Budget includes a few provisions that are worth tracking:

• Retroactive to July 1, 2009, the annual tax break on contributions to Retirement Annuity Contracts and Personal Pension Schemes would be the lesser of 20% of earned income or £35,000.
  
  
• Company directors would be “criminally liable” for failure to make social insurance contributions.
  
  
• Obligations for social insurance contributions to contractors and a contractor’s requirement to contribute for a subcontractor are clarified and will be strictly enforced.

Greece

Pension reform provisions found unconstitutional
ANA, Kathimerini, Dow Jones

The Court of Audit has reviewed the administration’s pension reform plan (IH 06/30/10) and flagged five provisions as unconstitutional. There are no fatal wounds here, but the administration will have to do without the measures on merging private and public sector pension funds and a clause that would have allowed ministers to bypass the legislature when changing the benefit level. Further constitutional challenges are in preparation.

Lithuania

Anti-crisis measures passed
ELTA, Baltic Daily, AFP
The Seimas fielded some key anti-crisis measures last week, giving the administration two victories and one setback:

• The paid parental leave cutbacks (IH 06/23/10) were approved intact.
  
  
• The second-pillar pension contribution that was cut to 2% last year (IH 05/13/09) and is scheduled to rise again next year is now frozen indefinitely at 2%, but the President aims to end the freeze in 2014 if at all possible.
  
  
• The opposition blocked the minority government’s proposal to raise the retirement age (IH 05/19/10).

Netherlands

Multi-OPF precedent
NPW, IPE

The law establishing the multi-OPF model for company pension funds merging their boards while keeping their funds segregated (IH 10/28/09) was passed in May and gazetted on June 11. Two company schemes have now signed a letter of intent to create the first multi-OPF, set to launch on January 1, 2011.

Norway

Consultation on financial sector bonuses
Esmerk
The Finance Ministry has drafted a public consultation on draft regulations that would reportedly require a two-year deferral for all variable pay schemes. The comment period will close in September and the final regulations are expected to take effect in 2011.

Poland

Constitutional challenge to women’s retirement age
PNB

A long-running dispute on the constitutionality of a lower retirement age for women (IH 12/05/07) will finally get its day in court next week. Women, who have greater longevity, retire at 60 and men at 65, so women end up having a longer retirement on a much lower pension. A motion from the Ombudsman for Citizen’s Rights questioning the policy’s constitutionality is scheduled for a hearing in the Constitutional Tribunal on July 15.

Romania

Austerity package revised, passed
GIDA, Mediafax, Rompres

Rather than taking a couple of months to revise the austerity package when some key provisions were found unconstitutional (IH 06/30/10), the administration raised the 19% value-added tax (VAT) to 24% and secured quick passage in Parliament. The opposition is preparing a censure motion in response. Incidentally, one provision that was underreported until after passage will cut off the supply of free health spa vouchers to retirees.

UK

Finance Bill 2010-11; Several more major developments
Pensions Week, Global Pensions, IPE
The House of Commons has held second reading debate on Finance Bill 2010-11 and forwarded it to a Committee of the Whole House. The bill features several key provisions of the 2010 emergency Budget (IH 06/23/10) including:

• Withdrawal of the requirement to purchase an annuity at age 75
  
  
• A provision granting HM Treasury the power to repeal the new law limiting pension tax relief for high-income persons. The Treasury will consult with stakeholders on its alternative plan to lower the annual limit on tax deductible pension contributions.
  
  
• A measure raising the standard insurance premium tax from 5% to 6% and the higher rate from 17.5% to 20%.
  
  

Some other highlights of an eventful week:

• The Migration Advisory Committee has opened a consultation on annual migration caps for non-EU foreign workers. The limit would be paired with tougher grading in the points-based immigration system. The Home Secretary has implied that immigration reform could entail requiring employers to enroll their foreign workers in private health insurance plans so they aren’t a burden on the National Health Service.
  
  
• The current and the previous administration have hinted at new directions for pension reform in their choice of review topics. The Department for Work and Pensions (DWP) has assigned an auto-enrolment review task force to examine the option of a higher state pension, prompting speculation that this approach is a possible substitute for the National Employment Savings Trust (NEST). DWP reports 652 and 662 consider the impact of NEST on small employers and existing occupational schemes respectively. Report 663 gleans lessons from the introduction of workplace pension reform in eight other countries.
  
  
• HM Revenue & Customs has published Technical Guidance on the transition period for the removal of the obligation to purchase an annuity at age 75 (IH 06/23/10). Issues include lump sum death benefits, inheritance tax and dependants’ pensions.
  
  
• The Financial Reporting Council (FRC) has released a Stewardship Code for institutional investors. The corporate governance principles include disclosure of both voting records and voting policy.
  
  
• The Work and Pensions Secretary has advised the press of plans to relocate the unemployed to places with better job markets. This plan would involve assistance and incentives rather than compulsion, but it will accompany proposals to increase penalties for unemployed people who turn down job offers.
  
  
• The High Court has delivered a landmark ruling that confirmed the extent of an employer's funding responsibility to a multiemployer defined benefit plan that includes some of its employees.
  
  
• Another recent High Court decision examined the issue of when a preview of a company’s bonus pool becomes a binding commitment.

Ukraine

Retirement age hike timetable
Interfax, Ukrainian News

The 2010-14 Economic Reform Program provides a timeframe for raising the retirement age for women from 55 to 60 (IH 06/09/10). From January 1, 2012, the retirement age for women would rise in annual six-month increments. Soon afterward, assuming that life expectancy figures have improved, the climb to 65 for both sexes would start.

Canada

TFSA flexibility; New limits on skilled migrants; Communiqué on pension protection
VTC, LTN, Toronto Star
The government issued a joint ministerial statement recognizing “some general confusion” over the rules on contributions to Tax Free Savings Accounts – particularly a tendency to treat them like standard savings accounts – and disclosing that it will review cases of over contribution to determine whether the taxes should be waived. The June 30 deadline for reporting contribution mistakes has been pushed back to August 3, 2010.

Also, the Immigration Department announced that it will cap the annual number of skilled foreign worker visas at 20,000 and cut the list of target occupations from 38 to 29. In addition, Mercer has issued a Communiqué on current legislation that seeks to better protect worker pensions in a bankruptcy (IH 06/03/10).

Mexico

Labor reform update
El Financiero,El Economista, La Prensa
The ruling party’s labor reform proposal (IH 03/24/10) has been held up in the House of Representatives since last March. The Ministry of Labor and Social Welfare (STPS) is under pressure to rewrite it from scratch but plans instead to consult widely – including the opposition, who have a comprehensive counterproposal, and international experts – inviting improvements and trying to allay fears. STPS holds that labor reforms are long overdue and must be a top priority in the next session of Congress. One measure that has kept a low profile so far would oblige all employers to register with INFONACOT, the National Foundation for Workers’ Consumption, a low-cost consumer credit service with voluntary employer registration and low utilization.

US

Struggle over unemployment extension bill
GIDA, AP, Marketwire

A new bill that would have renewed the lapsed extension of unemployment benefits and continued it through November 2010 was filibustered by the opposition just before the holiday recess. It will be a top priority when legislators return from vacation on July 12.

Argentina

Dispute over minimum pension
Reuters, Buenos Aires Herald

In the latest stage of an ongoing battle over Supreme Court rulings on an inflation peg for state pensions (IH 12/05/07), the Lower House’s Social Security Committee has approved a resolution that would replace a complex formula for pension increases with a simple link to wage inflation. The measure would also raise the minimum monthly pension from 895 pesos (US $228.24) to 1,230 pesos, 82% of the minimum wage. The resolution’s supporters propose tapping the recently nationalized AFJP second-pillar funds to finance the increase. The administration opposes this measure and, despite a minority in Congress, has fair prospects for blocking it.

Chile

State-owned AFP proposed
La Nacion, BNamericas

A plan for a state-owned AFP private pension manager to make the sector more competitive fizzled out during the administration of the center-left Concertation coalition (IH 03/25/09). Now the opposition, Concertation has introduced a bill on state-owned AFP in Congress. The Labor Minister said that the government recognizes a need for AFP reform but rejects this legislation.

Peru

Congress passes health insurance portability bill
El Comercio, GIDA, Peru21

Congress has unanimously approved legislation that will require private health insurers (EPS) to accept and fully cover workers with pre-existing conditions. To qualify for this portability, a worker will have to sign on with the new health insurance company within 90 days of leaving his or her  previous health insurer or employer medical plan. The social security scheme EsSalud will raise its subsidy to EPSs to offset the higher costs of coverage.

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.