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.

East Africa

EAC social security negotiations
Les Afriques, New Times
The East African Community (EAC) is holding meetings this week in hopes of completing a multilateral social security agreement (IH 06/23/10). This is said to include some level of harmonisation of social security benefits.

Malawi

Mandatory pension legislation passed; Proposal to tax pension fund investment income
MW Nation, Digital Journal
Parliament has recently approved companion bills that will replace a mandatory end-of-service benefit with a statutory pension. Pension Bill, 2010 supplies the regulatory framework for an occupational pension plan with mandatory employer contributions. Employment (Amendment) Bill, 2010 ends the severance pay requirement, except in cases of wrongful dismissal or retrenchment. The severance pay formula will be used to calculate pension credit for employment periods before June 30, 2010. The President has not yet signed the bills, but he is not reported to have any qualms with them. Thanks to Morgan Murray for flagging this.

Also, the 2010-11 Budget has a provision that would set a 10% tax on pension fund investment income. The Finance Minister explained that pension funds should forfeit their tax exemption because very little of the investment gain is actually passed on to pensioners.

Mali

Corporate deductions for funding benefits lost
IBFD
A set of General Tax Code amendments that took effect on July 1 has ended the employer tax deduction on reserves set aside for employee retirement schemes, paid leave indemnity and self insurance.

Morocco

Comprehensive pension reform proposal due soon
Midipress, Menafin, Le Matin

Repeated attempts to make the social security fund (CNSS) sustainable (IH 04/10/08) have been rebuffed by a population leery of hikes in the CNSS levy or retirement age. Legislators and academics are preparing another attempt at pension reform, but the unions are already warning against alleged plans to raise the retirement age from 60 to 62 and to increase the contribution level by 4%. Negotiators have so far spoken only of introducing a mandatory second pillar, consolidating disparate rules into framework legislation and making financial transactions more transparent.

Australia

Super System Review final report; Minimum hours ruling; Privacy principles
The Australian, AIR, SMH
The Minister for Superannuation announced publication of the Super System Review (Cooper Review) Final Report featuring the “My Super” model for a default universal pension (IH 04/28/10) and the Superstream recommendations (IH 04/07/10) for streamlining administration. It proposes replacing commission-based fees for superannuation-linked life insurance policies with a standard fee. Other major themes in the report’s 177 recommendations include transparency, trustee governance and investment governance. Mercer has issued a bulletin assessing the report.

Meanwhile, Fair Work Australia (FWA) has rejected an application from a trio of retail associations to cut the minimum casual engagement down from three hours to two, one and a half for secondary students. Also, the Senate Finance and Public Administration Committee is reviewing Exposure Drafts of Australian Privacy Amendment Legislation, incorporating 13 Privacy Principles for the management of personal information. One concern is cross-border information sharing. A later report will focus on the protection of medical records.

China

Stock ownership limits in financial sector
Asia Pulse
An interministerial group is preparing regulations on employee shareholding in the banking and finance sector. The rules would set limits on employee stock ownership, and they are due by the end of this year.

Hong Kong

Minimum Wage Bill
The Standard, SCMP

A minimum wage bill (IH 06/23/10) is scheduled for debate in the Legislative Council today. One amendment under consideration would require a minimum wage commission to review minimum pay on an annual basis. The bill will not include a minimum wage figure. The Provisional Minimum Wage Commission will propose a figure by the end of summer recess. The Chief Executive recently had to back-pedal on statements that were interpreted as urging a cautious approach to wage-setting.

India

EPF Act amendments; Various
Business Standard, Deccan Chronicle, Economic Times
A government working group is set to deliver a package of draft amendments to the Employees Provident Fund Act some time this quarter. It would:

• Introduce annuities for pension schemes
  
  
• Convert the Employees Deposit Linked Insurance (EDLI) scheme into a group insurance scheme
  
  
• Stop crediting interest to accounts that have been unclaimed for over five years.
  

In other news:

• The new guidance on ULIPs (IH 06/30/10) drew some flak for a provision setting a minimum guaranteed return of 4.5%. The Insurance Regulatory & Development Authority (IRDA) has since said that the figure is subject to periodic modification based on the economy and interest rate movement.
  
  
• The Labour Ministry has published a notification indicating that the maximum death benefit in an EDLI scheme has risen from Rs. 60,000 to Rs. 100,000.
  
  
• The Reserve Bank of India (RBI) has posted draft guidelines on bank director compensation. Variable pay comprising more than 40% of total pay would have to be deferred at least three years. Comments are welcome through July 31.

Indonesia

Social security law update; Labour law review
Jakarta Post, Reuters, Bisnis Indonesia

The Central Jakarta District Court will re-issue summonses to the President and eight Cabinet members for snubbing a court date in a class action suit over failure to implement the 2004 social security reform (IH 03/10/10). Key legislation on establishing the Social Insurance Management Board is moving slowly through the legislature, which hopes to pass it by the end of this year.

Meanwhile, a Manpower Ministry official said that a comprehensive labour law review will take two years. Besides consolidating often contradictory clauses, the new law would make Indonesia more hospitable to foreign investment, with looser rules on severance pay and employee termination. An analyst noted that this project would conclude a little too close to the 2014 elections and predicted that its report would not surface before the elections.

Japan

Ruling on double taxation
DRE; Kyodo News, Mainichi Daily

The Supreme Court has issued a decision reversing lower court rulings that had approved the National Tax Administration’s (NTA) charging both estate tax on a widow’s pension and income tax on the annuity it generated. The NTA will now have to rescind a circular advising its officials that double taxation is appropriate under these circumstances.

Kuwait

Health reform bill
Zawya, Arab Times

The Health Ministry has drafted legislation on providing a package of basic health insurance at no cost to citizens. Expatriates are no longer included in the proposal (IH 01/21/10). Many stakeholders have expressed concern that the scope of coverage will make private health insurance necessary for all, and a ministry official has conceded that mandatory supplemental health insurance has not been ruled out.

Malaysia

Mandatory retirement age proposed
Bernama, Asia Pulse

The Malaysia Trades Union Congress (MTUC) has urged the government to set a mandatory retirement age of 60 for the private sector. Men typically retire at 55 and women at 45, often living out a long retirement on meager Employees Provident Fund savings.

Thailand

Disabled worker rule revision
Bangkok Post, Thailand Times

Existing legislation requires employers to maintain a 0.5% quota of disabled workers or be penalized with a full minimum wage payment  for each worker on which  they fall short. The Cabinet has now approved a draft ministerial regulation doubling the quota to 1%. Business groups have made a counter proposal that would spare companies the penalty if they can document that they posted job openings and that not enough disabled people applied.

Bulgaria

Leave carryover provision vetoed
BTA, IBFD

The President has vetoed the measures in the anti-crisis package that would have required relatively quick use of the traditionally backlogged vacation carryover (IH 06/30/10). He reasoned that this legislation would have compromised a constitutional right.

Croatia

Personal Income Tax Law amendments
IBFD

Parliament has passed a set of amendments to the Personal Income Tax Law (IH 05/19/10), effective July 1, 2010, that offset lower income tax rates with the removal of many tax exemptions, including voluntary health insurance premiums, life insurance premiums, and voluntary pension insurance contributions. Transitional arrangements for tax year 2010 will halve the maximum deduction for these items to HRK 6,000 (US $1055.45).

Czech Republic

Coalition government reform agenda
Ceske Noviny, Prague Monitor, CTK
The new coalition government appointed a Cabinet yesterday. It has publicized additional points of agreement (IH 06/30/10) on health and social security reform:

• The peg for the maximum social security contribution would be halved to three times the average wage in 2012.
  
  
• The coalition broadly embraces the conclusions of the Bezdek Report on pension reform (IH 06/16/10) and will consult with social partners on the details.
  
  
• Patients would pay out of pocket for “cheap” medications and copayments would rise for medical procedures and hospital stays.
  
  
• There would be new standards for geographical access to health professionals and the queue system for surgery would be transparent.
  
  
• The state would compensate patients for a basic level of medical care, evidently expanding the market for supplementary health insurance.
  
  
• The Finance Minister plans to reduce social allowances including sick pay.

EU

Directive on intra-company transfers proposed; Resolution on equal rights for atypical workers; Various
EU Business, Euractiv, IPE
The next stage in mobilization for highly-skilled staff from non-EU countries is previewed in a European Commission press release proposing a directive that would set some common rules on temporary intracorporate transfers.  Specialized workers and upper management from non-EU states would have “fast-track” access to work/residence permits in member states.  They would have the same employment rights as citizens. Individual states would determine additional details such as maximum duration of these permits and any limits on their volume.
 
Also, Parliament has adopted a resolution on equal rights for “atypical” workers. Noting a surge in part-time and temporary work, legislators resolved that future employment reform would extend employment rights and social protection to workers who are not on permanent contracts. The resolution affirmed that permanent jobs should be the norm in the job market. To the extent that flexible job models do benefit both employers and employees, there should be core rights to differentiate atypical employment from precarious employment. The resolution asked the Commission to review member state flexicurity reforms to ensure that fair trade-offs are in place.

In other news:

• A pair of CEIOPS (Committee of European Insurance and Occupational Pensions Supervisors) reports examine the status of cross-border pensions. Ring-fencing in Stress Situations explores how member state measures to protect pensions in times of financial hardship could prove an obstacle to the development of IORP (Institutions for Occupational Retirement Provision) schemes. 2010 Report on Market Developments finds that the new IORPs from the June 2009 through June 2010 year barely outnumber those that have ceased operation.
  
  
• Another resolution adopted in Parliament promotes a “European Youth Guarantee” that would promise people below age 25 the right to employment, apprenticeship or training after four months out of work. It asks the Commission to create a European Quality Charter to assure that training arrangements are not exploitative.
  
  
• Responses to last week’s Green Paper on Pensions (IH 07/08/10) are very mixed. The solvency model and an EU-wide pension protection fund have alarmed some stakeholders, but the launch of a dialogue and the proposals to refine the IORP Directive are welcome.

France

Committee on women and pensions
AFP, 20Minutes.fr, L’Expansion

The High Authority against Discrimination and for Equality (HALDE) has determined that the salary gap between men and women is eclipsed by the disparity in pension benefits. It has created a committee to draw up proposals on more equitable pension policies.

Germany

Cabinet agreement on health reform; Various
Spiegel Online, GIDA, Deutsche Welle
The Cabinet has endorsed a health reform plan (German only) that reverses an earlier economic stimulus measure by raising the 14.9% health levy back to 15.5%. The employer share would rise to 7.3% while workers would pay 8.2% and any further increases would be paid by workers. The statutory copayment would double to 2% of salary and health insurers would be allowed to raise their charges, but the government would subsidize the payments when these increases rose above 2% of salary. Backers hope to implement these measures at the start of 2011, but there is vigorous opposition to the bill.

In other news:

• The Cabinet also approved a draft budget for 2011 and the 2011-14 austerity package (IH 06/16/10). There are several cutbacks on unemployment benefits, including termination of pension contributions and paid parental leave for people collecting unemployment.
  
  
• The pension insolvency fund (PSV) has determined that its levy formula is outdated and is leaning toward a risk-based levy.
  
  
• The Labour Minister has welcomed a report from the CSR (Corporate Social Responsibility) Forum that proposes a national CSR strategy.

Gibraltar

Draft Income Tax Act
Tax Analysts
The government has posted a draft of the new Income Tax Act online for a brief consultation. Schedule 7 goes into detail on the tax treatment of benefits-in-kind, including vouchers, low-interest loans and personal use of a company car. The consultation will end on July 21.

Greece

Parliament passes pension/ labor reform package

Reuters, ANA, AFP

Parliament approved the pension reform bill (IH 06/30/10) in its final vote during a 24-hour general strike. The report on the Christmas and Easter bonuses being removed and a flat €800 payment reducing the shortfall for low-income workers proved true. Also, the benefit levels will be frozen from 2011-13.

Iceland

European Parliament approves accession bid
Euractiv

The European Parliament has adopted a resolution inviting Iceland into the EU accession process, provided it abandons whaling. Formal accession talks will start later this year and membership could come as early as 2012.

Netherlands

House of Representatives approves PPI cross-border scheme
Global Pensions, IPE

The lower chamber of Parliament has passed legislation outlining the framework for the Premium Pension Institution (PPI), a pan-European pension vehicle based on the Institutions for Occupational Retirement Provision (IORP) model. In 2009, the Finance Ministry published an unofficial English-language translation of the Explanatory Memorandum that can still be useful as a primer on PPIs, but may differ significantly from the current legislation.

Romania

Tax mulled for pensions and social benefits; Consultations on pension governance
Rompres, Mediafax

The Prime Minister is already preparing for the next austerity agreement with the International Monetary Fund (IMF), and he recently made a televised statement about all income being subject to income tax and social security contributions. This would include pensions, unemployment benefits and the pre-tax withdrawal for social security contributions. The Labour Ministry is looking into the prospect of removing the tax exemption for disability pensions. A minority party in the coalition government has proposed limiting the tax expansion to pensions above a certain level.

Also, pension regulator CSSPP is holding a consultation on draft legislation addressing governance issues in both voluntary and mandatory private pensions. There are provisions on risk management, board composition, conflicts of interest and licensing of board members.

Russia

ILO convention on paid holidays ratified
Itar-Tass, RIAN

The President has signed the International Labour Organization’s C 132 Holidays with Pay Convention. While the press release claims that the Russian Labour Code is fully compatible with the convention, Russia will reportedly  need to sacrifice a little flexibility to comply. Carried-over vacations would have to be taken within 18 months of the year they were earned.

Spain

Strike law mulled
El Pais
A transit strike in Madrid has resurrected the debate about legislation on strikes in essential services. The Constitution established the right to strike and included a broad statement about preserving minimum provision of essential services.  Other than that, there is a 1977 decree on the issue and a handful of court rulings, but there is no law spelling out the right to strike or defining essential services. Academics have dusted off an aborted 1993 strike law defining minimum essential services in 17 sectors, and they plan to engage trade unions in drawing up new legislation.

UK

Pension indexing switch; TPR FSDs, consultation; Various
Professional Pensions, Global Pensions, IPE
The Minister of State for Pensions has advised Parliament of plans to swap the retail price inflation (RPI) peg used for occupational defined benefit plans for a consumer price inflation (CPI) link. The CPI index is intended to apply to the year ending September 30, 2010, so the necessary legislation must reach Parliament soon. This would give plan sponsors some funding relief and it would tend to result in significantly lower pension benefits. Depending on how the rules are drafted, the level of relief and the difficulty of adapting to the change could vary considerably by plan.

Also, the Pensions Regulator (TPR) has recently issued its first two Financial Support Directive (FSD) determination letters. The first ordered a modest contribution. It was derided as the strongest remedy of a toothless regulator and did not make the cutoff for last week’s IH. The second takes on the Gordian knot of Nortel liabilities (IH 03/17/10), slapping 25 Canadian, US, European and African  companies of the global enterprise with a £2.1 billion charge for the Nortel UK pension plan. In addition, the TPR opened a consultation this month on draft guidance for employer responsibility toward multi-employer schemes. The consultation will close on September 23.

In other news:

• After some mixed signals on its commitment to the Equality Act (IH 06/23/10), the administration has confirmed that it fully backs that law and that most of it will be implemented on schedule on October 1, 2010. A new Government Equalities Office website provides guidance on the law to various stakeholder populations.
  
  
• The Employment Minister has announced a pilot project for administering a Work Capability Assessment to people on incapacity benefits. This announcement coincided with reports of an independent review of current disability assessment tests that is due by the end of the year. Anecdotal evidence has accumulated in support of charges that gravely ill people are often pushed back into the job market under the “fit note” reform (IH 12/04/08).
  
  
• When the minimum pension age rose from 50 to 55, on April 6, 2010, it had the unintended consequence of imposing an unauthorized payments charge on people ages 50 to55 who transfer their pensions. HM Revenue & Customs announced that forthcoming regulations will remedy this, retroactive to April 6.
  
  
• The Confederation of British Industry (CBI) recently prompted debate on employment law reform with Making Britain the place to work; An employment agenda for the new government, which proposes restricting the right to strike and reducing the consultation period before a collective redundancy by two-thirds. It was initially reported that the government supported these proposals, but a spokesman for the Prime Minister said, “There are no plans to change the existing legislation.”
  

Canada

Mandatory pension bill update
Benefits Canada

Bill 54, An act respecting retirement savings plans for employees and for self employed persons 2010 (IH 05/19/10) – the Ontario legislation that would require auto-enrolment in occupational pensions in enterprises with more than 20 workers – has survived through its second reading and is now before the Standing Committee on Finance and Economic Affairs. Another notable feature of this bill is a multi-employer defined contribution scheme model to minimize the burden on employers. Employer contributions would be voluntary and could not be tapped before retirement.

US

Health reform developments; Wall Street reform bill update
Workforce Management, Inside Health Reform, TR Daily
Recent weeks have seen some milestones in the progress of health reform:

• The Department of Health & Human Services (HHS) recently introduced a new website to help consumers navigate the new health reform terrain.
  
  
• The Pre-Existing Condition Insurance Plan (PCIP) is a transitional plan for people whose pre-existing conditions have been a barrier to health insurance coverage. It will be superseded by the new insurance exchanges in 2014.
  
  
• A new HHS website provides a wealth of data on quality of care at over 4,700 hospitals.
  
  
• The early retiree reinsurance program (IH 05/19/10) is now accepting applications.
  
  
• HHS has announced both draft regulations and a dedicated website supporting health information privacy under the Health Information Portability and Accountability Act of 1996 (HIPAA).
  

Incidentally, the President appears confident that the Dodd-Frank Wall Street Reform and Consumer Protection Act (IH 06/30/10)  faces no further impediments to final passage in a Senate vote scheduled for tomorrow.  A similar breakthrough on an unemployment extension bill (IH 07/08/10) is anticipated, but not quite as certain.

Chile

Mutual funds unwelcome in pensions sector; Pension contribution arrangements in earthquake zone
BNamericas

AFP private pension fund managers have called on the government to withdraw its proposal for allowing mutual funds into the pensions marketplace. A spokesman noted that earlier attempts to bring diversified financial institutions into the sector had failed because there is legitimate concern about conflicts of interest. Also, pension supervisor SP has posted a notice (Spanish only) on the entry into force of legislation setting the arrangements for repayment of employer pension contributions stalled by last February’s earthquake.

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.