RBA allows companies to suspend retirement benefits contribution

Cash-strapped companies can now apply for suspension or discontinuation of employer-retirement contributions to pension schemes until the coronavirus pandemic eases.

The Retirement Benefits Authority (RBA) said employers in hardest hit sectors such as travel and hospitality can notify it of measures taken to contain costs among them suspension, reduction of contribution rates or stoppage.

“Pensionable employees on unpaid leave 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 the maximum period defined in the scheme rules. The employer and/or Trustees are advised to notify the Authority of the same,” said RBA’s statement signed by chief executive Nzomo Mutuku.

RBA said employers should exercise their right to vary the contribution rates adding that they can also suspend employee-employer contributions temporarily upon seeking approval from employees directly or by representatives confirming the action.

RBA, however, said companies that have filed winding up notice will bear full costs of employee and employer pension obligations.

Where employers fail to submit contributions on time, the regulator said trustees will determine outstanding amounts and deferred notice payments as well as seek RBA approval of agreed remedial action plan.

The Sh1.3 trillion pensions industry is facing it toughest test with some schemes reporting defaults by employers, a scenario that could adversely affect ability to meet member expectation during the Covid-19 period.

Association of Retirement Benefit Schemes chairman Simon Nyakundi hailed the move saying it allows employers flexibility to wade through the financial crisis.