Amendment of NSSF Act 2019: The issues at hand for national debate

The object of the National Social Security Fund (Amendment) Bill, 2019 is to address the gaps that have been identified in the current law.

The policy behind the Bill is to expand social security coverage by making contributions to the National Social Security Fund (NSSF) mandatory for all workers in the formal sector and also allowing workers in the formal and informal sectors to make voluntary contributions to NSSF. In addition, the Bill seeks to enhance the spectrum of benefits available to workers and to improve management of the National Social Security Fund.

An Act to amend the National Social Security Fund Act, Cap. 222 also seeks to; establish a stakeholder board, empower the Fund to recover from a third party any sum owed to a defaulting contributing employer to cover any contribution, penalty or interest, provide for midterm access to voluntary contributions to provide for a five year tenure for the managing director and deputy managing director.

It also seeks to empower the Minister to prescribe a threshold of expenditure by the Fund prior to approval of the annual budget by statutory instrument, empower the Board to use in-house expertise and fund managers in the investments of scheme funds, including lending to Government, empower the board to introduce new benefit,  in consultation with the Minister,  provide for the payment of an annual levy by the Fund to the Uganda Retirement Benefits Regulatory Authority and for related matters.

Defects in the existing law:  The current law was enacted in 1985 and does not adequately address emerging challenges in the management of social security in Uganda. The proposal to amend the NSSF Act particularly arises from the need to streamline the management of the Fund to expand the scope of social security coverage and benefits. The Act in its current state does not make express provision for the representation of workers, employers and other stakeholders on the board of directors. The appointment of the Managing Director and Deputy Managing Director by the Minister without the role of the board undermines the ability of the board to supervise them.

The Act provides for taxation of contributions and scheme income which does not promote the culture of domestic long term savings that is critical for sustained economic transformation. In addition, whereas the filing of annual returns by employers is important for purposes of monitoring workers’ contributions, failure to do so is not an offence under the Act. Therefore, ensuring compliance in the absence of legal sanctions is difficult. Finally, the fines of ten thousand shillings in the Act can no longer serve the purpose for which they were imposed. There is need therefore to amend the law to address the above defects.

In addition, expenditure by the Fund is subject to approval of the annual budget by the Minister. However, the Act does not make provision for a window for limited expenditure prior to approval of the annual budget by the Minister.

Besides, despite the high cost of private fund managers, section 33 of the Uganda Retirement Benefits Regulatory Authority Act, 2011 requires that all funds of a retirement benefits scheme should be invested through a private fee charging fund manager yet some of the investments like the buying and selling of Government Securities-.can be done more cost effectively in-house by National Social Security Fund.

Taxation

The Act provides for taxation of contributions and scheme income which does not promote the culture of domestic long term savings that is critical for sustained economic transformation. However that hit retirement age of 60 years will not have their benefits taxed.

In addition, whereas the filing of annual returns by employers is important for purposes of monitoring workers’ contributions, failure to do so is not an offence under the Act.

Therefore, ensuring compliance in the absence of legal sanctions is difficult. Finally, the fines of ten thousand shillings in the Act can no longer serve the purpose for which they were imposed. There is need therefore to amend the law to address the above defects.