Public Service Pension (PSP) Reform Presentation Prepared for Cabinet of the Government of Liberia 8 August 2012 REPUBLIC OF LIBERIA CIVIL SERVICE AGENCY
Public Service Pension (PSP) Reform
Presentation Prepared for Cabinet of the Government of Liberia
8 August 2012
REPUBLIC OF LIBERIA
CIVIL SERVICE AGENCY
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
Table of Contents
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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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I. Recommendations for Cabinet Approval
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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II. Main Features of PSP
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.
II. A. Objectives of PSP
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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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II.B. Why one integrated Pension Scheme?
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.
II.C. Benefits
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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.
II.C. Benefits (Continued)
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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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II.C. Benefits (Continued)
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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II.D. Pay Reforms
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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II.E. Protection
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.
II.F. Payment of Contribution
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a. Administrative Structureb. Composition of PSP Boardc. Overview of NASSCORP
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III. Governance Structure of PSP
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III.A. Administrative Structure of PSP
Public Service Pension Board (PSPB)
Civil Service Agency(CSA)
NASSCORP
Regulate
Monitor
Manage
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III.B. Composition of PSP Board
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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III.D. Overview of NASSCORP
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.
a. Key Stakeholdersb. Roles & Responsibilities of stakeholdersc. Available Options for GOLd. Recommended Options
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IV. Key Stakeholders/Roles/Options
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
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IV.A. Key Stakeholders
1. Role of PSP Board2. Role of CSA3. Role of NASSCORP4. Role of Central Bank5. Role of GAC
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IV.B. Roles & responsibilities of Stakeholders
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:
d. Ensure that payment and remittance of contributions are made
e. Ensure beneficiaries of retirement savings accounts are paid
when due.
f. Ensure safeguarding of pension fund by issuing guidelines
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IV.B.Roles & responsibilities of Stakeholders
2. Role of CSAa. Determine and document who is responsible for what
componentsb. Determine and document the chain of delegationc. Circulate to all participants in the pension governance process
the components, responsibilities and reporting relationshipsd. Provide ongoing training and education e. Regularly review the assigned roles and responsibilities and
updatef. Provide goals for the administration of the plang. 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 plansi. Document all key decisionsj. 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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IV.B. Roles & responsibilities of Stakeholders
3. Role of NASSCORPa. 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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IV.B.Roles & responsibilities of Stakeholders
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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IV.B.Roles & responsibilities of Stakeholders
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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
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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IV.C. Available Options
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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IV.D. Recommended Option
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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V. Service Level Agreement (SLA) with NASSCORP
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VI. Proposed TimelineNo Activities Res. Au
g 12
Sep12
Oct 12
Nov 12
Dec 12
Jan 13
Feb 13
Mar 13
Apr 13
May 13
Jun 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
THANK YOUQUESTIONS?
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