Pension Reforms in Liberia


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Pension Governance Model for civil service in Liberia

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  • NOTES1. The third bullet mean 75% of compensation provided jointly from NPS/NASSCORP and Government Service Pension Scheme (PSP)2. The last bullet means that, unlike under current civil service pensions, all service is counted even if there are breaks when the worker was not in government service. Also, if employee moves from one type of service (legislator) to another (judge or political appointee), service of both types will be tracked and included in final pension computation. 3. 5th bullet: invalidity and benefits to survivors of workers who die while in service are currently not covered under any government service scheme. NASSCORP benefits are adequate for benefits provided under a social security scheme but should be supplemented by employer-sponsored scheme as is the usual (near universal) practice.
  • NOTES1. Last bullet: Allowances are currently handled as a shadow payroll that can not be connected easily with the salary payroll. The two payrolls must be joined to maintain contribution records in the pension division of CSA. Such records are required to ensure proper tracking of years of service for those who change types of service or even civil servants that move from on ministry to another. The two payrolls also have to be joined to compute the final pension amount. Salary reform will reduce the administrative burden of trying to match two payrolls that have intentionally been made difficult to merge.
  • NOTES1. Bullet 3: This is absolutely standard. Governments do not contribute any fixed amount to defined contribution schemes for their employees. Government only contributes if the scheme is a defined contribution (savings/IRA type) scheme. For defined benefit schemes the government is responsible for all costs that are not covered by employee contributions.
  • Pension Reforms in Liberia

    1. 1. REPUBLIC OF LIBERIACIVIL SERVICE AGENCY Presentation Prepared for Cabinet of the Government of Liberia 8 August 2012
    2. 2. I. Summary of Recommendations for Cabinet approvalII. Main features of the new PSPIII. Governance Structure of PSPIV. Key Stakeholders/Roles/OptionsV. Service Level Agreement CSA/NASSCORPVI. Proposed Timetable Civil Service Agency, Liberia 3/6/2013 2
    3. 3. A. Create a single integrated pension scheme that covers all branches of government including civil service, foreign service, political appointees, judges, and legislators (military and paramilitary not included);B. Establish a high level “Public Service Pension Board” to regulate Pension schemes and oversee Pension Funds management and provide guidelines from time to time;C. CSA Pension Division enhanced to function as Board SecretariatD. Involve NASSCORP in the design and implementation of the PSPE. Draft & Implement a Service Level Agreement between CSA & NASSCORP ensuring the latter’s performance as a service provider. Civil Service Agency, Liberia 3/6/2013 3
    4. 4. A. Objectives of PSPB. Why one integrated Pension Scheme instead of many ActsC. BenefitsD. Pay Reforms before or with Pension ReformE. ProtectionF. Payment of Contribution Civil Service Agency, Liberia 3/6/2013 4
    5. 5. 1. Create a single integrated pension scheme that covers all branches of government including civil service, foreign service, public service, judges, and legislators (military and paramilitary not included);2. Ensure that every person who has worked in the civil service and public service receives his/her retirement benefits as and when due ;3. Assist GOL employees by ensuring that they save for their livelihood during old age;4. Establish a uniform set of rules and regulations for the administration and payment of retirement benefits in the public sector;5. Ensure that disability and survivor pension benefits are provided;6. Restrict the growth of outstanding pension liabilities . Civil Service Agency, Liberia 3/6/2013 5
    6. 6. 1. Equity: Reduction in distortions and inequity between government service employees in the same country (except, for military & paramilitary personnel);2. Redundancy: Elimination of duplication of administrative functions , such as recordkeeping, payment of pensions and other activities of mandatory pension funds. This duplication represents an unnecessary cost that ultimately reduces the financially sustainable benefit level;3. GOL Liability: Reduction of pension liabilities by harmonizing the proposed pension rules of the civil servants with the existing ones. With harmonization and integration fiscal liabilities decrease;4. Best Practice: The long-term goal thus should be a single, national scheme for reasons of equity, administrative efficiency and labor market flexibility . This does not preclude, however, additional top-up schemes designed to achieve specific human resource objectives. Civil Service Agency, Liberia 3/6/2013 6
    7. 7. 1. PSP is a contributory defined benefit pension scheme in addition to the existing NPS/NASSCORP;2. Pensions will be awarded according to pre- established, legislated benefit formulas;3. Service will be rewarded based on tenure;4. Each year of service will earn a benefit equal to a fixed percentage of total remuneration. Civil Service Agency, Liberia 3/6/2013 7
    8. 8. 6. Pensions will be based on total remuneration as defined in the amended NASSCORP Act 89.70 “Definitions” (section 15) that includes wages, salaries, incentive payments and allowances;7. Coordinated government plus NASSCORP is expected to replace 75% of cash compensation for full career employees;8. All government service will count toward the pension regardless of branch of service or when service was rendered (excluding military & paramilitary);9. Pensions for disability and survivors of workers who die in service will be added as new benefits. Civil Service Agency, Liberia 3/6/2013 8
    9. 9. 10. Retirees with 40 years of service will receive a maximum of 75% of earnings (40% from NASSCORP + 35% from PSP): subject to Actuarial Calculations;11. When pensioner dies, widow/widower will receives 50% of the pension in addition to NASSCORP widow’s pension until she remarries or dies;12. Minor child/children will receive benefits until age 18 if there is no widow, or if the widow remarries;13. New disability pension replaces 15% to 35% of wages . The NASSCORP invalidity pension will be added to this;14. If the worker dies while still active, the widow/widower receives the amount of the worker’s disability pension plus the NASSCORP widow’s pension. Civil Service Agency, Liberia 3/6/2013 9
    10. 10. 1. Pay reform will eliminate hidden salary disparities that will be more visible after pension reform;2. Pay reform will eliminate dual compensation that will make implementation of pension reform possible;3. Experience indicates employees and the public do not resent significant salary differentials if they are based on education, skill ,competency and responsibility. Civil Service Agency, Liberia 3/6/2013 10
    11. 11. 1. Purpose: Protect pension accumulations when workers move among government services and in and out of government service;2. Vesting: After one year of service, all future service is counted toward pension;3. Non-forfeiture: Once vested, credited service cannot be reduced regardless of months or years not in government service;4. Retirement benefits: Employees may receive retirement benefits after 25 years of service or at age 65 with a minimum of 10 years of service ;5. Deferred retirement: Current or former employees who meet age and service requirements may receive a pension regardless of years since last served. Civil Service Agency, Liberia 3/6/2013 11
    12. 12. 1. Members of all services will contribute 3% of cash compensation;2. Government will make a matching contribution of 3% for each employee;3. Contributions with interest will be refunded if not eligible for a pension;4. A reserve fund of twelve months of benefit payments is contemplated to be maintained at the Central Bank. The fund will ensure all pensions are paid in full when due at all times. Civil Service Agency, Liberia 3/6/2013 12
    13. 13. a. Administrative Structureb. Composition of PSP Boardc. Overview of NASSCORP Civil Service Agency, Liberia 3/6/2013 13
    14. 14. Public Service Pension BoardRegulate (PSPB)Monitor Civil Service Agency (CSA)Manage NASSCORP Civil Service Agency, Liberia 3/6/2013 14
    15. 15. GOL Representatives No PositionCivil Service Agency 1 ChairmanMinistry of Labor 1 MemberMinistry of Health 1 MemberMinistry of Education 1 MemberMinistry of Finance 1 MemberJudiciary 1 MemberLegislature 2 MemberLaw Reform Commission 1 Member/Legal AdviserCivil Service Agency 1 SecretaryGeneral Auditing Commission 1 AuditorCivil Service Association of Liberia 1 MemberNational Pensioners Association 1 Member Civil Service Agency, Liberia 3/6/2013 15
    16. 16. 1. NASSCORP presently has 87,000 registered members;2. Around 22,000 government employees are already registered with NASSCORP under NPS & EIS;3. NASSCORP has automated systems to record and manage membership and funds under the NPS Contributory Scheme;4. An Actuarial review of NASSCORP has been conducted and the preliminary report has already been submitted to NASSCORP management;5. It would be interesting to review the final recommendations of the Actuaries once they are done;6. Before outsourcing the proposed PSP, it would be advisable to conduct due diligence of NASSCORP and assess their capability. Civil Service Agency, Liberia 3/6/2013 16
    17. 17. a. Key Stakeholdersb. Roles & Responsibilities of stakeholdersc. Available Options for GOLd. Recommended Options Civil Service Agency, Liberia 3/6/2013 17
    18. 18. 1. PSP Board – (PSPB) – SPONSOR & REGULATOR2. CSA – Implementation arm of GOL –3. NASSCORP - Fund Manager & Administrator4. Central Bank – Custodian of Funds5. GAC (General Auditing Commission) – Risk Assessment Civil Service Agency, Liberia 3/6/2013 18
    19. 19. 1. Role of PSP Board2. Role of CSA3. Role of NASSCORP4. Role of Central Bank5. Role of GAC Civil Service Agency, Liberia 3/6/2013 19
    20. 20. 1. Role of PSP Board (PSPB) a. Regulate b. Supervise c. Ensure the effective administration of pension matters.The Board will achieve the above as follows: a. Ensure that payment and remittance of contributions are made b. Ensure beneficiaries of retirement savings accounts are paid when due. c. Ensure safeguarding of pension fund by issuing guidelines Civil Service Agency, Liberia 3/6/2013 20
    21. 21. 2. Role of CSA a. Determine and document who is responsible for what components b. Determine and document the chain of delegation c. Circulate to all participants in the pension governance process the components, responsibilities and reporting relationships d. Provide ongoing training and education e. Regularly review the assigned roles and responsibilities and update f. Provide goals for the administration of the plan g. Monitoring self-assessment of NASSCORP’s pension governance at regular intervals (at least once a year) h. Facilitate PSP Board meetings, take minutes and document Action plans i. Document all key decisions j. Have an external governance audit performed on the pension plan at regular set intervals (Frequency of audit will depend on the assessment of risk by GAC). Civil Service Agency, Liberia 3/6/2013 21
    22. 22. 3. Role of NASSCORP a. Open retirement savings accounts for employees b. Invest and manage the pension funds in domestic fixed income securities listed and other instruments as the PSP Board may from time to time prescribe c. Maintain books of accounts on all transactions relating to the pension funds managed d. Provide regular information on investment strategy to the employees or beneficiaries & annual benefits statements e. Pay retirement benefits to employees in accordance with the provisions of the Act. f. Credit the retirement savings account of the employee g. Conduct regular self-audit and ensure external audit Civil Service Agency, Liberia 3/6/2013 22
    23. 23. 4. Role of Central Bank – Custodian a. Warehousing of the pension fund assets; b. At no time will the Fund managers/Administrators hold the pension funds assets; c. The employer sends the contributions directly to the Custodian, who notifies the Fund managers/Administrators of the receipt of the contribution; d. The Custodian will execute transactions and undertake activities relating to the administration of pension fund investments upon instructions by the Fund Managers. Civil Service Agency, Liberia 3/6/2013 23
    24. 24. IV.B. Roles & responsibilities of Stakeholders 5. Role of General Auditing Commission (GAC): a. Risk based audit b. Compliance audit c. Financial Audit d. Performance audit Civil Service Agency, Liberia 3/6/2013 24
    25. 25. 1. In-Source (New Structure within CSA)  Requires substantial investments in additional manpower, physical facilities, hardware & software;2. Co-Source (CSA & NASSCORP)  Cost effective;  CSA & NASSCORP sharing management responsibility;3. Outsource (NASSCORP)  Cost effective;  CSA Monitoring through SLA (Service Level Agreement). Civil Service Agency, Liberia 3/6/2013 25
    26. 26. 1. Outsource to NASSCORP;2. CSA supervises & monitors through SLA (Service Level Agreement);3. NASSCORP manages the Pension process;4. PSP Board to regulate, provide guidelines and ensure safeguarding of funds;5. CSA to define roles & responsibilities of each stakeholder. Civil Service Agency, Liberia 3/6/2013 26
    27. 27. CSA to enter into a service level agreement with NASSCORPthat will include the following services:1. Updating & automation of personal records of employees;2. Registration & Enrollment;3. Collection of Contributions from employers;4. Administration & Investment of Pension Fund;5. Claims handling & payments;6. Book keeping & accounting;7. Monitoring & Evaluation: a) Operating Cost controls; b) Risk management; c) Compliance with regulations; d) Reporting requirements; e) Self-assessment;8. Customer satisfaction;9. Communication with stakeholders. Civil Service Agency, Liberia 3/6/2013 27
    28. 28. No Activities Res. Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 12 12 12 12 12 13 13 13 13 13 131 Cabinet Approval CSA2 Legal Drafting LRC2.1 = Pension Scheme LRC2.2 = Service Level Agreement LRC3 Executive Review MOF /CSA4 Submission to Legislature CSA5 Enactment LRC/ CSA6 Implementation CSA6.1 Stakeholder’s Commitment6.2 NASSCORP due diligence6.3 Organizational Realignment6.4 Human Resource/Training6.5 Change Management6.6 Best Practice Framework Civil Service Agency, Liberia 3/6/2013 28
    29. 29. THANK YOU QUESTIONS? Civil Service Agency, Liberia 3/6/2013 29