Pension Governance Model for civil service in Liberia

1. REPUBLIC OF LIBERIA
CIVIL SERVICE AGENCY
Presentation Prepared for Cabinet of the
Government of Liberia
8 August 2012

2. I. Summary of Recommendations for Cabinet approval
II. Main features of the new PSP
III. Governance Structure of PSP
IV. Key Stakeholders/Roles/Options
V. Service Level Agreement CSA/NASSCORP
VI. Proposed Timetable
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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 Secretariat
D. Involve NASSCORP in the design and implementation of the PSP
E. Draft & Implement a Service Level Agreement between CSA & NASSCORP
ensuring the latter’s performance as a service provider.
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4. A. Objectives of PSP
B. Why one integrated Pension Scheme instead of many Acts
C. Benefits
D. Pay Reforms before or with Pension Reform
E. Protection
F. Payment of Contribution
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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 .
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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13. a. Administrative Structure
b. Composition of PSP Board
c. Overview of NASSCORP
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14. Public Service Pension
Board
Regulate
(PSPB)
Monitor Civil Service Agency
(CSA)
Manage
NASSCORP
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15. GOL Representatives No Position
Civil Service Agency 1 Chairman
Ministry of Labor 1 Member
Ministry of Health 1 Member
Ministry of Education 1 Member
Ministry of Finance 1 Member
Judiciary 1 Member
Legislature 2 Member
Law Reform Commission 1 Member/Legal Adviser
Civil Service Agency 1 Secretary
General Auditing Commission 1 Auditor
Civil Service Association of Liberia 1 Member
National Pensioners Association 1 Member
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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.
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17. a. Key Stakeholders
b. Roles & Responsibilities of stakeholders
c. Available Options for GOL
d. Recommended Options
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18. 1. PSP Board – (PSPB) – SPONSOR & REGULATOR
2. CSA – Implementation arm of GOL –
3. NASSCORP - Fund Manager & Administrator
4. Central Bank – Custodian of Funds
5. GAC (General Auditing Commission) – Risk Assessment
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19. 1. Role of PSP Board
2. Role of CSA
3. Role of NASSCORP
4. Role of Central Bank
5. Role of GAC
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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
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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).
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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
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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.
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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
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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).
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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.
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27. CSA to enter into a service level agreement with NASSCORP
that 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.
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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 13
1 Cabinet Approval CSA
2 Legal Drafting LRC
2.1 = Pension Scheme LRC
2.2 = Service Level Agreement LRC
3 Executive Review MOF
/CSA
4 Submission to Legislature CSA
5 Enactment LRC/
CSA
6 Implementation CSA
6.1 Stakeholder’s Commitment
6.2 NASSCORP due diligence
6.3 Organizational Realignment
6.4 Human Resource/Training
6.5 Change Management
6.6 Best Practice Framework
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29. THANK YOU
QUESTIONS?
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