NSSF gets special prosecutors to enforce new law

A team of special prosecutors has been formed to deal with offences relating to the new retirement benefits law that comes into force at the end of the month.

The 34 prosecutors, whose names were published in the official Kenya Gazette last Friday, will deal with employers and workers who commit offences under the new legal regime that has more than quadrupled monthly contributions to the National Social Security Fund (NSSF).

“These individuals previously worked as compliance officers with NSSF, but have now been granted powers to prosecute under the national prosecutorial laws and policy as provided for by Section 85(1) of the Criminal Procedure Code,” Director of Public Prosecutions (DPP) Keriako Tobiko said.

Top on the list of offences is failure by employers to remit to the NSSF any money deducted from the employees’ pay under the law as well as making retirement payments for temporary employees.

The team is the latest addition to the growing list of special prosecutors that the DPP has hired to deal with specific economic crimes. Similar teams have been recruited to deal with tax cases and to hunt down past beneficiaries of university student loans whose employers are not remitting the payments.

“So far, the special prosecutors cleared to work for various government agencies are doing a good job. We haven’t heard complaints from the public on service delivery, but should any arise the DPP has constitutional powers over them and will act appropriately,” Mr Tobiko said.

The new, but highly controversial, law that comes into force on May 31 seeks to turn NSSF into a pension scheme. It was to come into force late last year, but was suspended after stiff opposition from workers and employers.

READ: Double pension cut looms as new NSSF laws kick in

It comes with huge contributions and reporting obligations for the NSSF, which require stronger enforcement structures to ensure accountability and compliance.

“We have done an audit of the officers’ capabilities and are satisfied they are up to the task,” Mr Tobiko said.

Under the new NSSF Act, the minimum pensionable pay has been set at Sh6,000 with an Sh18,000 ceiling, translating to total deductions of Sh720 and Sh2,160, (combining employee and employer’s contributions) respectively.

The upper limit of pensionable pay is expected to rise gradually before peaking at four times the average national wage of Sh36,000 in the fifth year.

Contributions are currently capped at Sh400 and are shared equally between employers and their employees.

Under the new law, formal sector workers who have been making a flat monthly statutory contribution of Sh200 to the NSSF will beginning next month pay a minimum of Sh180 and a maximum of Sh1,080.

This is based on 12 per cent of pensionable income, with lower limits of Sh6,000 and an upper limit of Sh18,000. Up to Sh720 of this (a maximum of Sh360 each from the employer and employee) will be paid into a mandatory Tier I account.

Any deductions above this (a maximum of Sh720 each from the employer and employee) will be paid to the NSSF’s optional Tier II account, but may later be transferred to private schemes upon getting permission to opt out of the fund.

NSSF regulations stipulate that it will take at least two months to apply and get clearance to opt out, meaning all employers in that category have to set aside money they are prepared to hold out for two months.

READ: NSSF rules out early exit from pension plan by employers

Employers intending to opt out of the higher NSSF contributions must apply to the Retirement Benefits Authority (RBA) at least 60 days before the date they intend to stop contributing to the fund.

Economic Survey 2014 shows that the number of registered NSSF contributors increased marginally to 3.9 million in 2013. Annual benefits paid rose to Sh2.8 billion in 2013 compared to 2.7 billion the previous year.

The Central Organisation of Trade Unions (Cotu) Tuesday said it would move to court to block the implementation of the new pension law, pending satisfactory reforms in the management of NSSF.

“We shall not be hoodwinked by cosmetic actions and demand proper reforms before the NSSF can be allowed to handle such big money. We cannot allow them to have our cow and milk it in a bad way,” Cotu secretary-general Francis Atwoli said on the phone from Berlin.

Mr Atwoli insists that current governance structures at NSSF do not allow for prudent management of funds and appealed to the government to delay implementation of the new law to allow for reforms.

A special team of 13 prosecutors was last year seconded to the Higher Education Loans Board (Helb) with a special brief to go after employers who have failed to notify the board of employees who are not servicing their loans.

The Helb Act requires employers to notify the board within three months of employing a beneficiary of the scheme, which provides needy students with subsidised loans to pursue university education.

Upon receiving such a notice, Helb is required to confirm whether the employees benefited from the loans and advise the employer on the monthly deductions.

The fund’s loan recovery efforts have also been frustrated by employers who fail to deduct the dues from their workers’ salaries for onward transmission to Helb.

Some beneficiaries have over the years failed to repay money owed and cited high levels of unemployment as the main obstacle to prompt repayment of Helb loans.

NSSF managing trustee Richard Lagat, however, downplayed the gazettement of the prosecutors terming it ‘procedural”.

“We have always had a team of prosecutors at NSSF and its nothing new. The gazette only aligns them to the new Act so that they can discharge their duties firmly within the law,” he told the Business Daily.