The Retirement Benefits Authority (RBA) has invited applications from employers seeking to channel their newly raised National Social Security Fund (NSSF) contributions into already existing contracted-out schemes.
Under the NSSF Act, 2013, employers are allowed to save pension contributions of their employees under the Tier 2 category in retirement benefit schemes other than the NSSF.
Tier 2 contributions are those paid by both employers and employees on top of the basic Sh720 they equally contribute (Tier 1). All employees contribute to NSSF under Tier 1.
“Employers who wish to remit Tier 2 contributions into a contracted-out scheme as provided under section 21 of the NSSF Act may apply to the RBA,” the authority said yesterday.
The amount an employee contributes to the Tier 2 account depends on their salary, with the highest earners paying up to Sh720, with employers matching the amount. Combined with the Tier 1 contribution, this makes for a total contribution of Sh2,160.
The window by RBA serves to calm concerns earlier raised that if privately-run schemes are locked out their operations would be crippled.
The NSSF (Contracting out by employers) Regulations, 2014 says that while applying for contracting-out to channel Tier 2 pension contributions to a privately-run scheme, an employer shall state the scheme, categories of employees to be included and names and addresses of the trustees and administrator of the scheme, among other requirements.
“An application for contracting out by an employer shall be made in writing to the Authority and shall include an undertaking by the employer that it will comply with the obligations concerning minimum payments and an undertaking by the administrator that it will comply with the provisions of the Act and these Regulations in relation to the administration of Protected Rights in the scheme,” the law adds.
RBA yesterday said schemes must meet a “Reference Scheme Test” to qualify to receive the Tier 2 contributions.
“The authority shall issue a Reference Scheme Certificate to schemes that have met the said qualifications,” RBA said.
The new pension contributions, which raised the lowest contribution from Sh200 to Sh360 for an employee as the employer matches the amount, have drawn support from workers as employers protest.
The Federation of Kenya Employers and the Kenya Flower Council have so far indicated that the increased rates, which mean more payroll costs, will affect many companies negatively. But the Central Organisation of Trade Unions last week supported the move, praising it as what will rescue retirees from living in poverty in the coming years.
