(Jamaica Observer) The Ministry of Labour and Social Security says it is unable to implement an annual five per cent increase in the wage ceiling for contributions to the National Insurance Scheme (NIS), due to losses suffered under the Jamaica Debt Exchange (JDX).
Minister of Justice Senator Mark Golding informed the Senate of the situation during Friday’s debate on a Bill which will increase the ceiling by 50 per cent, from J$1 million to J$1.5 million as of January 7, 2013.
Senator Golding said the ministry has informed him that the annual five per cent increase, proposed by actuaries in 2010, would have been inadequate in light of the fact that the JDX — which was introduced the same year — has reduced returns on the National Insurance Fund’s (NIF) investments in government paper.
“Therefore, the fund needs to be supplemented by increased inflows from contributions in order to secure its viability in the long term,” Golding said.
He was responding to a suggestion from the president of the Bustamante Industrial Trade Union (BITU), Opposition Senator Kavan Gayle, that the Government avoid burdening contributors to the scheme with increased payments occasioned by lifting the wage ceiling by 100 per cent in 2010 and 50 per cent in 2012.
The Bill also provides for a 100 per cent increase, to J$100 per week, in the contributions of domestic workers, the self-employed and voluntary contributors.
Senator Gayle said the suddeness and the size of the increases will create problems for workers, especially in the current economic environment.
The NIS Insurable Wage Ceiling is the maximum salary level from which mandatory contributions are withdrawn from workers’ salaries and paid into the NIF. The increases, which were approved by the House of Representatives on Tuesday and by the Senate on Friday, mean that workers contributing to the scheme will now be required to contribute at a rate of 2.5 per cent of gross salary up to J$1.5 million, and the employer pays a matching 2.5 per cent. The current ceiling has been at J$1 million since August 2, 2010.
In response to a request from Government Senator Angela Brown Burke for more punitive sanctions against employers who withhold the contributions, Senator Golding told the Senate that there are provisions already within the NIS Act for employees to sue their employers for up to 12 1/2 times the loss in benefits caused by the delayed contributions, and that the ministry also takes delinquent employers to court.
Golding said the changes to the NIS Act were based on the report of a recent actuarial review of the fund.
“The amendments will ensure the long-term sustainability of the National Insurance Fund, while continuing to provide meaningful benefits to pensioners and contributors,” he said.
The Bill also proposes to increase NIS pension benefits by 16.67 per cent to cover a similar increase in inflation since July 2010. As at March 31, 2012, the net assets of the NIS totalled J$71.5 billion.
The Bill will now go back to the House of Representatives tomorrow for final approval in order to meet the January deadline.
