CABINET has approved recommendations for changes to the National Insurance Scheme an (NIS) aimed at protecting the 50-year-old social security programme from the threat of bankruptcy.

Details of the recommendations, which evolved from the intervention of a NIS Reform Committee established to review the 2014 actuarial review conducted by Eckler Limited (Consultants and actuaries), were discussed and approved by the Cabinet last week.

However, at least one change is already clear, and that is the reduction of the time cycle for the regular actuarial reviews from five to three years. This was approved under the National Insurance (Amendment) Act (2016) passed in the House of Representatives on September 28.

In piloting the Bill, Minister of Labour and Social Security Shahine Robinson noted that the 2014 actuarial review projected that the NIS cash flow is at risk of being depleted by 2033 if serious efforts are not made to reform the present structure and operation of the scheme.

She said that, in the circumstances, the reform of the NIS must be a priority.

Robinson noted, in her Sectoral Debate contribution earlier this year, that she had indicated that an NIS Reform Committee had been established to review the actuarial report and make recommendations for the reform. She said that the committee had completed its work and its recommendations would be presented to the Cabinet.

However, she said that the urgent matter of concern then was the timing of the actuarial reviews, which are currently done every five years.

“Clearly, the prevailing interval of five years is too long. A reduction in the review period to three years would place my ministry in a better position to more closely monitor and introduce pre-emptive measures, or timely interventions, to ensure the long-term sustainability of the NIS,” the minister said.

She said that more frequent actuarial reviews would provide critical information to support risk management and improve governance of the NIS pension funds.

“More frequent actuarial reviews will also assist in making long-term financial and investment decisions of the fund. In addition, these reviews will allow for greater transparency and accountability and will enable us to monitor the effectiveness of the reform initiatives,” she added.

She pointed out that, at present, more than 112,000 people are in receipt of benefits from the NIS. In the 2015-2016 financial year, more than $15.4 billion was spent on NIS benefits, while only $12.8 billion was collected in contributions. This represented a gap of $2.6 billion between revenue and expenditure.

Robinson said that, while the gap between contributions and benefits is covered by investment incomes, the trend needs to be arrested.

“The gap is widening, and this is not a desirable state of affairs. Indeed, the long-term sustainability of the fund will be compromised if this trend continues,” Minister Robinson told the House.

Minister with responsibility for Information Senator Ruel Reid is expected to update the press on these developments concerning the NIS at this week’s post-Cabinet press briefing at Jamaica House.

— Balford Henry