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Tuesday, February 12, 2019

Government faces hurdle to operate Social Security Fund

Kathmandu, February 12

The government has faced a major hurdle in operating the Social Security Fund (SSF), as the Employees Provident Fund (EPF) has said it will not transfer the savings of those employees who have not yet cleared the loans that they had obtained from EPF to the SSF.

The government recently appointed the SSF as the authorised body to disburse pension and retirement benefits to employees working in the formal sector, including the private sector. But employees have to make contributions on a regular basis to be eligible for pension or retirement benefit.

Employees are currently making such contribution on a monthly basis to the state owned EPF. Now, the government has decided to use the savings parked by employees at the EPF to provide pension or retirement benefits.

This means the EPF will have to transfer savings of employees to the SSF.

But some of the employees have received loans from the EPF for purposes like building houses on the back of their savings parked at the EPF.

“We won’t be able to transfer the savings unless these outstanding debts are cleared,” said Rajendra Kafle, chief officer at the EPF.

The EPF currently provides provident fund service to 600,000 clients, including government employees. Of these clients, 140,000 belong to the private sector. At present, the EPF will have to transfer savings of these 140,000 clients to the SSF, as the SSF is currently mandated to handle pension and retirement benefits of employees of the private sector.

Of these 140,000 clients, 34,000 have obtained loans, according to Kafle. “So, their savings cannot be transferred to the SSF unless they clear their debt,” he said.

According to Kafle, the EPF has to transfer Rs 25 billion to the SSF at present. After EPF transfers the amount the total fund at SSF will touch Rs 45.21 billion. At present, the SSF has Rs 20.21 billion in its account.

The SSF, however, has not decided on how to address this problem. “We will soon hold discussions with the EPF to settle this issue,” said SSF Executive Director Shyam Raj Adhikari.

The SSF needs to sort out this issue immediately because it will formally come into operation on May 22.

The SSF, which was established in 2011, failed to come into operation earlier due to lack of laws and regulations.

The Social Security Act was enforced in 2018. Based on this law, the government recently introduced Social Security Fund Operation Guideline.

The Ministry of Labour, Employment and Social Security has stated that the scheme will be compulsorily applied for formal sector workers and the government will soon launch the scheme for informal sector workers too. As per law, both employers and employees will have to mandatorily deposit their instalment for the scheme and it is applicable for all types of workers.

The guideline says four types of insurance schemes will be provided to employees. Of the total fund collected, SSF will allocate 3.22 per cent for medical treatment, health and maternity security and 4.52 per cent for accident and disability security. It will allot 0.87 per cent for dependent family security and 91.39 per cent for old age security.

It also says pension and retirement benefits will be provided to employees of the formal sector.

Employees will be eligible for pension if they make contributions regularly for a period of 15 years. Those who have made contributions for less than 15 years will be eligible for onetime retirement benefit.

The post Government faces hurdle to operate Social Security Fund appeared first on The Himalayan Times.



from Business – The Himalayan Times http://bit.ly/2N1YThu

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