Pension Reforms in Liberia

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

04/10/2023 2Civil Service Agency, Liberia

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.

04/10/2023Civil Service Agency, Liberia 3

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


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


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.


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


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)


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.


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.


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.


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


a. Administrative Structureb. Composition of PSP Boardc. Overview of NASSCORP


III. Governance Structure of PSP


III.A. Administrative Structure of PSP

Public Service Pension Board (PSPB)

Civil Service Agency(CSA)

NASSCORP

Regulate

Monitor

Manage


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


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


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


IV.A. Key Stakeholders

1. Role of PSP Board2. Role of CSA3. Role of NASSCORP4. Role of Central Bank5. Role of GAC


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


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).


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



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.





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).


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.


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.


V. Service Level Agreement (SLA) with NASSCORP


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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Pension Reforms in Liberia

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