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Covid-19 pandemic: RBA allows employers, employees to stop contributions

Covid-19 pandemic: RBA allows employers, employees to stop contributions

Kenya Pension industry Regulator has allowed employers to defer or stop contributions due to harsh economic times occasioned by the Covid-19 pandemic.

In a communique to the pension industry stakeholders, Retirement Benefits Authority CEO Nzomo Mutuku gave a raft of measures that would affect both employers and employees.

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Where an employer has a request to discontinue contributions as per the provisions of the scheme rules – The employer can exercise their right to cease/discontinue with the employer portion of the contributions, subject to issuing a notice to the Trustees as defined in the scheme rules. However, in light of the current circumstances, Trustees may exercise their power to compound liabilities, and allow the employer to pay the amount accruing during the notice period at a later date. Such amounts that remain unremitted shall be recoverable in accordance with the provisions of the Act. In the alternative, the employer may seek consensus of the members either directly or through their representatives to waive the notice period. In that case, the Authority will consider the said notice and contributions accruing for that period as waived.

Where employees are on unpaid leaveThe employees who are members of the scheme will be considered as being temporarily absent from work; and the contributions of both employer and employee shall be suspended for the period they remain unpaid or for a period as may be defined in the scheme rules- RBA CEO, Nzomo Mutuku.

See the full statement below:

Further to our communications of March 25, 2020 and March 31, 2020, the Retirement Benefits Authority wishes to bring to the attention of the retirement benefits industry the following updates in light of the ongoing COVID-19 pandemic:

1. On request of the Authority, the Cabinet Secretary National Treasury and Planning gazetted a waiver of penalties accruing from late submission of audited financial statements that were due on March 31, 2020 for a period of sixty (60) days. The Gazette Notice was published on March 30, 2020 as Legal Notice no. 44 of 2020.

2.The Authority has allowed schemes with financial year end of December 31, 2019 that have not finalized their audited financial statements to pay retirement benefits levy due on April 30, 2020 based on the last audited accounts as at 31st December 2018. Any resultant underpayments shall be paid once the accounts are finalized and such underpayment will not attract penalties. Overpayment will be refunded or credited against future levy.

3.Taking cognizance that many employers, particularly those from sectors most impacted by the crisis such as travel and hospitality, are unable to remit contributions over this period, employers and/or schemes are required to write to the Authority for guidance on a case by case basis advised by the following:

  • Where employees are still working and earning full or reduced salary –

    The employer is required to deduct and remit both employee and employer contributions based on the full pay or proportionately on the reduced pay as the case may be.

  • Where employees are on unpaid leave:  The employees who are members of the scheme will be considered as being temporarily absent from work; and the contributions of both employer and employee shall be suspended for the period they remain unpaid or for a period as may be defined in the scheme rules.
  • Where the employer’s request is to vary the contribution rates:

    The employer can exercise their right to vary the contribution rates subject to issuing a notice period as defined in the scheme rules. The employer’s liability accrues at the prevailing rate during the notice period.

  • Where an employer has a request to discontinue contributions as per the provisions of the scheme rules:

    The employer can exercise their right to cease/discontinue with the employer portion of the contributions, subject to issuing a notice to the Trustees as defined in the scheme rules. However, in light of the current circumstances, Trustees may exercise their power to compound liabilities, and allow the employer to pay the amount accruing during the notice period at a later date. Such amounts that remain unremitted shall be recoverable in accordance with the provisions of the Act. In the alternative, the employer may seek consensus of the members either directly or through their representatives to waive the notice period. In that case, the Authority will consider the said notice and contributions accruing for that period as waived.

  • Where an employer has a request to suspend contributions:

    The employer is advised to seek consensus of the members either directly or through their representatives (evidence to be adduced) to suspend both employer and employee contributions to the scheme for a specified When the said period lapses, the employer shall automatically start to accrue liability to contribute to the scheme. Any intention and/or consensus to suspend contributions can only be applied prospectively.

Trustee Development Training Program Kenya (TDPK) trainings postponed until further notice due to Covid-19 pandemic

4.Trustee Development Training Program Kenya (TDPK) trainings have been postponed until further notice and the Authority has agreed to defer the requirements for trustees to be trained within a period of six months. The six months period will count from the date of appointment of Trustees but excluding the period of postponement.

5. Schemes that will face challenges in implementation of the Good Governance Guidelines by June 30, 2020 (large schemes) and June 30, 2021 (small schemes) will be allowed to defer compliance so long as they explain the challenges as provided under section 7 of the guideline. For schemes with a fund value exceeding KShs.5 billion, explanations and engagement with the Authority should be done by 30th June 2020.  Other schemes are expected to ensure they take necessary action during Financial Year 2020-2021.

6. Trustees may postpone Scheme Annual General Meetings and reschedule their own meetings. However, they are expected in the first instance to explore the use of technology to hold meetings through video conferencing and other alternative methods.

Trustees term in office to be extended due to Covid-19 pandemic

7. Schemes that have a trustee whose term is due to lapse soon, and where it will not be possible to organize for elections or nominations, should write to the Authority to request extension of the term of service of the trustee.

8. On other matters, individual schemes are encouraged to notify the Authority where they face challenges for guidance on a case-by-case basis.

9. The Authority is closely monitoring the developments occasioned by Covid-19 pandemic, measures taken by government to contain its spread and the impact on the industry and will continue to update the industry as appropriate.

10. Stakeholders are again urged to avoid physically visiting the Authority’s offices and exploit the alternative available platforms provided by the Authority including:

Stay Safe.

 NZOMO MUTUKU, MBS

CHIEF EXECUTIVE OFFICER

April 22, 2020

 

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