Increase in NIS contributions helping to sustain National Insurance Fund

Tuesday, May 14, 2019

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CONTRIBUTORS to the National Insurance Scheme (NIS) are paying a marginal increase, in an effort to sustain the National Insurance Fund (NIF).

In an interview with JIS News, director of the NIS in the Ministry of Labour and Social Security, Portia Magnus said the finding from an actuarial review in March 2013 revealed that if changes were not made urgently to address what was happening with the NIF, it would be at risk of becoming exhausted by 2033.

Magnus said that in response to that review and other studies that were conducted, a reform committee was created which included members of staff from the labour ministry, the Ministry of Finance and Planning, and the Planning Institute of Jamaica to review the reports.

The committee came up with a slate of reform measures that were submitted to Cabinet and were approved. One of the measures addressed the NIS contribution rate. According to Magnus, all the reviews and studies that were conducted showed that the benefits that were paid out to contributors were generous, relative to the amount of money that was paid into the fund, because the contribution rate is low. Jamaica has the lowest contribution rate in the Caribbean.

Therefore, in order to arrest the rapid depletion of the Fund, the decision was taken by the Government to increase the minimum contribution and contribution rate. The first in the series of increases started in January 2019, with the minimum contribution increasing from $100 to $150 per week. This level of increase is applicable to domestic workers and other categories of workers, called voluntary contributors.

On April 1, 2019, the contribution rate was increased from five per cent to 5.5 per cent. Employers will deduct 2.75 per cent and then match this amount. Self-employed persons will pay the full 5.5 per cent. The insurable wage ceiling is $1.5 million.

Another increase will come into effect January 2020, with the minimum contribution moving to $200. Meanwhile, the contribution rate will be increased to six per cent on April 1, 2020. There will no change in the insurable wage ceiling.

Come January 2021, the minimum contribution will be increased to $250., while the contribution rate remains at six per cent. The insurable wage ceiling will, however, increase to $3 million. For 2022, the minimum contribution amount has not been determined, while the contribution rate will remain at six per cent. However, the insurable wage ceiling will move to $5 million.

According to Magnus, every three years an actuarial review is done to check on the sustainability of the fund, which is being monitored closely. Another review is due this year. She said that if the fund is to remain viable, the number of contributors to the scheme needs to increase, and employers must pay over contributions deducted from workers' salaries.

But she pointed out that when employers deduct contributions but do not pay them over to the scheme it puts the workers in a precarious position when they apply for a benefit.

“There are other circumstances apart from retirement which may arise that cause another benefit to become due, for example, if a person becomes ill and is rendered unable to work, or someone may die before retirement and their survivor benefits may become due. it is at this point we realise that employers never paid over the contributions, and in some instances the NIS is unable to locate the employers,” she noted.

Magnus said that as part of the monitoring mechanism to increase the number of persons complying and reduce the number of persons who stand the risk of not getting a benefit in the future, more and more employers are taken before the courts.

She has encouraged delinquent employers who are finding it difficult to pay over contributions owed to visit the nearest NIS office and speak to someone. Delinquent employers will incur a 20 per cent penalty on outstanding contributions.

“We stand ready and willing to work out payment arrangements — because, at the end of the day, we do not want anyone to be disenfranchised. We want every person to have the opportunity to qualify for a benefit whenever they need it,” she said.

Workers were also advised to call any of the 13 NIS offices across the island to ensure that their contributions are being paid over. The NIS has the capacity, through its electronic system, to determine if there are any gaps in a worker's contribution history, and will take the necessary steps to make sure the contributions are paid over. The amount pensioners receive in terms of benefits varies, depending on what they have qualified for, because of the different rates of pension that are paid into the scheme. Therefore, contributors are being encouraged to contribute consistently to the scheme throughout their working life.

Magnus has also implored employers to comply with the requirements of the National Insurance Act and Regulations, because contributing to the scheme is not an option for employees.

Meanwhile, she has advised self-employed persons who are responsible for full payment of their contribution to ensure that they remain abreast of any changes when information is aired in the media or on the ministry's website at: www.mlss.gov.jm.


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