The National Pension Commission has recently implemented strategies to ensure the effective management of additional benefits provided by employers for their employees. This development was made public through the introduction of a framework for the establishment of Additional Benefits Schemes (ABS) under the Contributory Pension Scheme.
As per the framework, the Pension Reform Act 2014 (Section 4 (4) (a)) permits employers to offer additional benefits to their retiring employees. However, the commission emphasized that only institutions licensed by the National Pension Commission, in accordance with Sections 54 and 56 of the PRA 2014, are authorized to handle and oversee pension funds and assets. It was also highlighted that Section 59 enforces minimum penalties for any breach of Sections 54 and 56 of the PRA 2014.
In line with this framework, employers have the option to establish ABS to facilitate the provision of supplementary benefits to employees upon their departure from the organization. The ABS within the CPS will be managed by licensed Pension Fund Administrators, with assets held by licensed Pension Fund Custodians, all in compliance with the regulations outlined in the PRA 2014 and subject to the approval of the commission.
The framework also stipulates certain requirements for employers seeking to establish an ABS for their employees. These prerequisites include demonstrating compliance with the provisions of the PRA 2014, such as timely remittance of pension contributions for employees, ensuring Group Life Insurance coverage for employees, and executing a portfolio management agreement with chosen PFAs.
Furthermore, employers have the option to appoint one or more PFAs to oversee their ABS. However, if multiple PFAs are appointed, a lead PFA must be designated, with the commission duly informed about this arrangement.