The major highlights of the Pension Reform Act 2014

The following are the major highlights of the Pension Reform Act 2014 
Upward Review of the Penalties and Sanctions
The sanctions provided under the Pension Reform Act 2004 were no longer sufficient deterrents against infractions of the law. Furthermore, there are currently more sophisticated mode of diversion of pension assets, such as diversion and/or non-disclosure of interests and commissions accruable to pension fund assets, which were not addressed by the PRA 2004. Consequently, the Pension Reform Act 2014 has created new offences and provided for stiffer penalties that will serve as deterrence against mismanagement or diversion of pension funds assets under any guise. Thus, operators who mismanage pension fund will be liable on conviction to not less than 10 years imprisonment or fine of an amount equal to three-times the amount so misappropriated or diverted oe both imprisonment and fine. 
Power to Institute Criminal Proceedings against Employers for Persistent Refusal to Remit Pension Contributions 
The 2014 Act also empowers PenCom, subject to the fiat of the Attorney General of the Federation, to institute criminal proceedings against employers who persistently fail to deduct and/or remit pension contributions of their employees within the stipulated time. This was not provided for by the 2004 Act.

Corrective Actions on Failing Licensed Operators
The Pension Reform Act 2004 only allowed PenCom to revoke the licence of erring pension operators but does not provide for other interim remedial measures that may be taken by PenCom to resolve identified challenges in licensed operators. Accordingly, the Pension Reform Act 2014 now empowers PenCom to take proactive corrective measures on licensed operators whose situations, actions or inactions jeopardize the safety of pension assets. This provision further fortifies the pension assets against mismanagement and/or systemic risks.
Restructuring the System of Administration of Pensions under the Defined Benefits Scheme (PTAD)
The Pension Reform Act 2014 makes provisions for the repositioning of the Pension Transition Arrangement Directorate (PTAD) to ensure greater efficiency and accountability in the administration of the Defined Benefits Scheme in the federal public service such that payment of pensions would be made directly into pensioners’ bank accounts in line with the current policy of the Federal Government.
Utilization of Pension Funds for National Development
The Pension Reform Act 2014 also makes provisions that will enable the creation of additional permissible investment instruments to accommodate initiatives for national development, such as investment in the real sector, including infrastructure and real estate development. This is provided without compromising the paramount principle of ensuring the safety of pension fund assets.
Enhanced Coverage of the CPS and Informal Sector Participation 
The Act expanded the coverage of the Contributory Pension Scheme (CPS) in the private sector organizations with three (3) employees and above, in line with the drive towards informal sector participation. 

Upward Review of Rate of Pension Contribution
The Pension Reform Act 2014 reviewed upwards, the minimum rate of Pension Contribution from 15% to 18% of monthly emolument, where 8% will be contributed by employee and 10% by the employer. This will provide additional benefits to workers’ Retirement Savings Accounts and thereby enhance their monthly pension benefits at retirement. 

Access to Benefits in Event of Loss of Job
The Pension Reform Act 2014 has reduced the waiting period for accessing benefits in the event of loss of job by employees from six (6) months to four (4) months. This is done in order to identify with the yearning of contributors and labour.
Opening of Temporary RSA for Employees that Failed to do so: 
The Pension Reform Act 2014 makes provision that would compel an employer to open a Temporary Retirement Savings Account (TRSA) on behalf of an employee that failed to open an RSA within three (3) months of assumption of duty. This was not required under 2004 Act. 

Consolidation of Previous Legislations Amending the PRA 2004
The Pension Reform Act 2014 has consolidated earlier amendments to the 2004 Act, which were passed by the National Assembly. These include the Pension Reform (Amendment) Act 2011 which exempts the personnel of the Military and the Security Agencies from the CPS as well as the Universities (Miscellaneous) Provisions Act 2012, which reviewed the retirement age and benefits of University Professors. Furthermore, the 2014 Act has incorporated the Third Alteration Act, which amended the 1999 Constitution by vesting jurisdiction on pension matters in the National Industrial Court. 

Culled from Reuben Abati
- See more at: http://reubenabati.com.ng/MAJOR-HIGHLIGHTS-OF-THE-PENSION-REFORM.html#sthash.ehKxtMWP.dpuf

Pension agency says plans for 1.5 million at risk- Tom Raum(AP)

WASHINGTON (AP) — Despite an improving U.S. economy, retirement plans covering roughly 1.5 million workers are severely underfunded, threatening benefit cuts for current and future retirees, a federal watchdog agency warned Monday.
The Pension Benefit Guaranty Corporation (PBGC) said multi-employer plans, which are collectively bargained retirement plans maintained by more than one employer, are most at risk. "Plan insolvencies ... are now both more likely and more imminent than in our last report," the report said.
At the same time, the agency said single-employer pension plans — covering just over 30 million participants — are on firmer financial footing and are likely to remain so at least over the next 10 years.
The report concluded that, as shaky as the situation is for the underfunded multi-employer plans, the outlook is slightly better than it was just a year ago as the nation's economy gradually improves from the severe 2007-2009 recession.
"In the past year, economic conditions have improved significantly and most plans are projected to remain solvent," said the agency, which was created under the Employee Retirement Income Security Act of 1974 (ERISA).
But, it added, that research over the past year had made clear that, for some multi-employer plans, "even the improving economy will not be sufficient to maintain their solvency."
If a company goes bankrupt and is forced to terminate its pension plan, the PBGC will generally take over making sure that retirees continue to draw pension benefits, at least up to certain limits. It's a form of insurance. The maximum guaranteed amount paid by PBGC in 2013 was $4,789.77 per month, or $57, 477.24 per year. The agency does not pay the benefits directly to people covered by failed plans, but provides financial assistance to the plans themselves to enable them to continue providing benefits.
Employers pay a fee to the PBGC for each employee.
As more and more baby-boomers retire and begin drawing pension benefits, the PBGC comes under increasing financial strain.
The agency noted that for many years, the single-employer program was more likely to be seriously underfunded than the multi-employer plans: "That situation is now reversing."
"Some multi-employer plans are deteriorating and PBGC's multi-employer program is more likely than not to run out of money within the next eight years," the agency said.
The agency said many participants in the troubled multi-employer plans are employed by small companies in the building and construction industries. Also many workers in retail food, garment manufacturing, entertainment, mining and truck and maritime industries could feel the consequences.

Jonathan signs Pension Reform Act- Isiaka Wakili (Daily Trust )

From left: Ag. Director- General National Pension Commission, Ms Chinelo Anohu-Amazu; Vice- President Namadi Sambo; President Goodluck Jonathan; Minister of Justice, Mohammed Adoke and Peoples Democratic Party National Chairman, Alhaji Adamu Muazu, during the 2014 Pension Reform Bill signing into law by the president in Abuja yesterday

President Goodluck Jonathan, yesterday, signed the Pension Reform Bill 2014 into law, his spokesman, Reuben Abati, said.

Abati disclosed this via his Twitter handle yesterday.
The Senate had on April 8 unanimously passed the Pension Reform Bill which prescribed severe penalties including a 10-year jail term for defaulters.
The Act also imposed a fine of N10 million on any pension fund administrator who failed to meet the obligations of the contributors, while each of the directors of the firm will pay N5 million each as fine.
A document obtained from the National Pension Commission listed the major highlights of the Pension Reform Act 2014 to include: upward review of the penalties and sanctions, power to institute criminal proceedings against employers for persistent refusal to remit pension contributions, corrective actions on failing licensed operators and restructuring the system of administration of pensions under the defined benefits scheme.
The Pension Reform Act 2014 also made provisions that will enable the creation of additional permissible investment instruments to accommodate initiatives for national development, such as investment in the real sector, including infrastructure and real estate development.
The Act expanded the coverage of the Contributory Pension Scheme (CPS) in the private sector organisations with three employees and above, in line with the drive towards informal sector participation as well as upward review of rate of pension contribution.
The Act reviewed upwards, the minimum rate of Pension Contribution from 15% to 18% of monthly emolument, where 8% will be contributed by employee and 10% by the employer.

Culled from Daily Trust

Insurer Warns Some Pooled Pensions Are Beyond Recovery- Mary Williams Walsh) (New York Times)

Mary F. Calvert for The New York TimesJoshua Gotbaum, director of the Pension Benefit Guaranty Corporation. It seems unlikely the weakest plans will be bailed out.

More than a million people risk losing their federally insured pensions in just a few years despite recent stock market gains and a strengthening economy, a new government study said on Monday.

The people at risk have earned pensions in multiemployer plans, in which many companies band together with a union to provide benefits under collective bargaining. Such pensions were long considered exceptionally safe, but the Pension Benefit Guaranty Corporation reported in its study that some plans are now in their death throes and cannot recover.

Bailing out those plans seems highly unlikely. But if they are simply left to die, the collapse of the federal insurance program is all but inevitable, the report said, leaving retirees in failed plans with nothing. It added that the program “is more likely than not to run out of money within the next eight years” as plan after plan collapses.

The multiemployer pension sector, which covers 10 million Americans, represents a mixed bag of financial strength and weakness. The aging of the work force, the decline of unions, deregulation and two big stock crashes have all taken a grievous toll. Ten percent of the people covered are in severely underfunded plans, the study said.

The federal insurer is not making any recommendations about what to do at the moment, said Joshua Gotbaum, its director. “This is a legally required actuarial report whose purpose is solely to project the range of outcomes for plans and the P.B.G.C.”

The agency does such a projection every year, but this year’s version was unusually late and unusually dire.

Congress has already held several hearings on multiemployer plans, and for months the unions and companies that jointly sponsor them have been meeting with Congressional staff members to come up with responses. One working proposal calls for retirees in multiemployer plans to give up part of their core benefits to save money. That idea is extremely controversial because federal law has sheltered retirees from such cuts for decades. Proponents say it is the only way to keep some plans going.

Even if the new report spurs them, no legislative initiative is expected until after November’s elections.

The report’s dire prognosis was limited to the multiemployer pension insurance program. The federal insurer has a separate program for the pensions offered by single companies, and the report said it was not at risk. In fact, its finances have improved over the last year, the report said.

The multiemployer insurance program works differently from the single-employer one, and the report expressed concern that the people at greatest risk were unaware of how deeply their pensions could be cut if the situation deteriorated. The maximum insurance benefit is less than $13,000 a year, and that is only for people who have at least 30 years of service. In some plans, notably the Teamsters’ troubled Central States plan, many workers and retirees have already earned pensions well above the insurance maximum.

Congress never gave the program a lot of resources, paradoxically, because in the past the plans were considered so healthy that they did not need as much insurance protection. Employers pay much smaller premiums and the insurance coverage is much more limited than for single-employer pensions. And the P.B.G.C. itself has no power to step in and rescue a dying plan, the way it can if a single-employer plan is at risk of failing. It can only sit on the sidelines and get its meager checkbook ready.

The strength of multiemployer pensions grew out of the fact that they pooled the resources of many companies. If one company in the pool went bankrupt, the others were required to pick up the cost of the resulting “orphaned” retirees. In the past, new unionized companies would join the pools over the years, keeping them strong.

Those factors began to change as the work force aged, unions dwindled and whole sectors of the economy were deregulated. And then came the dot-com crash of 2000, which pummeled many pension investment pools.

In 2006, Congress passed a law intended to strengthen company pensions, and the new study looked, for the first time, at how employers were responding to it. Adding this behavioral information required a major change in the pension organization’s methodology, which Mr. Gotbaum said was among the main reasons the report came out months late.

The 2006 law required severely troubled multiemployer plans to set up rehabilitation programs and file the details with the government. In general, companies were supposed to put more money into their shared investment pools, workers were supposed to build their benefits more slowly, and retirees were supposed to give up the parts of their pensions that were not considered core benefits.

But when the researchers began started tracking employer behavior, they found that a significant number of multiemployer plans were so hard hit that their trustees decided not to use all the medicine prescribed in 2006. They did not think it would do any good and might even make things worse.

Mr. Gotbaum said the agency realized this over the last year or two, because more and more plan officials had been notifying the government that they were not in compliance with their own rehabilitation plans.

“They told us, ‘It’s not that we’re not willing to do it,’ ” he said. Rather, the plan trustees told the government that they had run into limits in how far they could push their companies and workers without destroying their whole pension plans.

Much of the problem was demographic. The most troubled plans often had more retirees than active workers. Trustees of those plans realized that they were pushing the workers to tighten their own belts in order to let the retirees keep receiving bigger benefits than the workers thought they would ever get themselves. If they kept pushing, the workers or the sponsoring companies would drop out of the pool, setting up a slow but steady death spiral.

“There is a concern that if the severely distressed plans fail, that this might lead to efforts to abandon healthy plans, too,” Mr. Gotbaum said.

Both federal insurance programs were designed to be self-supporting, and while the pension agency has operated for years at a deficit, it has not needed to turn to the taxpayers for assistance. Giving it the means to rescue failing multiemployer pension plans now would almost certainly require an act of Congress to put more money into the agency’s coffers.

Given the political climate in Washington, Congress would not likely support such a bill without first seeing that workers, retirees and unionized companies had already made serious sacrifices.

Culled from New York Times

Liberal Democrats promise to raise basic state pension by at least £790

As part of a pledge to be included in the Lib Dem manifesto, the party would promise to legislate to ensure pensions rise each year either by earnings, inflation or 2.5 per cent – whichever is greater.
At the same time, the party is considering reducing the rate of tax relief that can be claimed on private pension contributions to just 25 per cent – a move that would hit higher-rate earners but bring in £2bn in extra tax revenue.
Currently, employees can claim tax relief on contributions at the rate at which they pay tax – discriminating against low earners.
However, it would also reduce the need for further public spending cuts after 2015.
Senior Lib Dems are to meet in the next few weeks to thrash out details of key manifesto pledges.
That meeting is also expected to discuss plans to change the party's position on Europe and sign up to a binding in/out referendum on membership of the EU.
On pensions, the Lib Dems will pledge to introduce a "triple lock guarantee" into the basic state pension. This would ensure an increase of at least £790 a year by the end of the next Parliament. The state pension would be worth at least £131 a week by 2020, up from £97.65 four years ago. Pensioners who receive the full state pension would get at least £6,800 in 2020.
This is the minimum increase that would be delivered. Based on current assumptions, the actual increase is likely to be even higher, at £139.95 a week
Announcing the move, the pensions minister, Steve Webb, said the idea was "central" to the party's vision of a fair society: "For decades, successive governments allowed the state pension to decline after Mrs Thatcher broke the 'earnings link' in 1980."
Senior Lib Dems recognise they will need a "convincing" explanation of how they would reduce the structural deficit without resorting to significant cuts to benefits. They are expected to back the introduction of a mansion tax – that would raise around £2bn – and the move on pension contributions would increase this to £4bn.

Culled from the Independent

Dreaming of retiring abroad? You’ll need a plan

Are drinks by the ocean your vision of a peaceful retirement? How about hikes in clean mountain air? Many of us have an idea of where we’d like to spend our golden years, but little idea of how to get there — or the logistics around money and choosing the right locale.

BBC Capital spoke with Stephanie Sherman, a New Jersey-based financial planner for Prudential Financial Planning Securities, who gave us surprising ideas for making your retirement years golden, no matter where you’d like to be.
Among them, ‘practice’ for your life abroad by taking extended vacations in the countries you are considering and join organisations there. Can’t decide on a single place? Sherman has ideas for that, too.
To learn click on BBC Capital

Culled from BBC Capital