JIS News

The House of Representatives has approved amendments to the National Insurance Act, to support the Government's efforts to improve administration of the National Insurance Fund (NIF) and ensure its sustainability.

The Bill seeks to validate and confirm increases in benefits which came into effect last year, and increase contributions payable by various categories of persons, to sustain the increase in benefits.

Piloting the Bill, Minister of Labour and Social Security, Hon. Pearnel Charles, explained that with the increases in benefits approved last July, it has become critical for contributions to be increased, as his Ministry was paying out more in benefits that it was collecting in contributions.

He said that the Ministry collected $5.5 billion in contributions in 2009/2010, while paying out $9 billion in benefits, a deficit of $3.5 billion.

"As a result, we have had to depend more on investment income to close the gap and, with the July increases it is projected that the annual cost of benefits will increase from $9 billion to $11 billion. If the current trend continues, our consulting actuaries have projected that the NIF could be completely eroded in 20 years," the Minister warned.

The Bill validates increase in the insurable wage ceilings for employed persons from $500,000 to $1 million, and for self-employed persons from a maximum $250,000 per annum, to $1 million per annum. This became effective August 2 of last year.

The flat rate of $20 per week, contributed by self employed persons, will be increased to $50 per week. The flat rate contribution for domestic workers and voluntary contributors will be increased from $20 weekly to $50 weekly.

"It should be noted, however, that the payment of domestic workers are formulated with the employer and the employee both paying $25 per week, each," he pointed out. This change was also effected August 2010.

There are also changes to the contributions rate and the mode of payment by Jamaica Defence Force (JDF) personnel. They will no longer contribute at the flat rate of $20 per week.

"The Act is being amended to change the method of contribution to that of an employed person, so that the rate will be 2.5 per cent of the earning of the JDF member, up to $1 million, matched by the Government of Jamaica," Mr. Charles outlined. This is with effect from August 2, 2010.

The Bill also validates the payroll deduction of NIS contributions for Members of Parliament, to eliminate the previous flat rate contribution of $20 weekly.

"Over the years, there has been a disturbing trend as it relates to our very own members and in the Senate who, at their date of retirement, are unable to receive NIS pension because they have not made enough contributions to the scheme," Mr. Charles pointed out.

He noted that this was because MPs were previously classified as self-employed, and were not liable to contribute as employed persons. They now contribute up to the maximum increase insurable wage ceiling of $1 million, also as of August 2, 2010.

The provisions also validate a 10-per cent biennial increase in NIS benefits, effective July 1, 2010, and confirms the expansion of the category of persons eligible for special pension effective April 1, 2008, and funeral grants of $70,000 payable to the family or personal representative of a deceased special pensioner.

They also facilitate pension benefits for persons who were born in 1906 or before, and who would have been unable to contribute to the NIS in 1969 when pension contributions first became payable, as they would have already been past the age of retirement.

It will unify the regular retirement ages for females and males under the NIS, from 60 to 65 years, and males from 65 to 70 years, respectively, gradually over five years, beginning April 1, 2011. He stressed that there will be a gradual adjustment of the retirement age for females each month over the five-year adjustment period.

"This will ensure that women who are closer to the existing retirement age of 60 years, will not be required to wait the full five years to receive their benefit," Mr. Charles stated.