Aon Hewitt Legislative Reporting

Risk. Reinsurance. Human Resources.

Global Retirement Update This Update summarizes recent legislative developments and trends related to retirement and financial management and highlights recently passed and pending legislation that may require employers to take action to comply with new rules or review existing plans.

Countries Covered in This Update Americas: Argentina, Aruba, Brazil, Canada, Chile, and United States.

Asia Pacific: Armenia, Australia, India, and Philippines.

Europe: Channel Islands, Czech Republic, Denmark, European Union, Finland, Germany, Ireland, Malta, Norway, Russia, Switzerland, Turkey, and United Kingdom.

Middle East and Africa: South Africa.

Action May Be Required Americas

Aruba Employers should ensure that their plans are compliant with the recent amendments to the Civil Code, which entitle the survivor in a same-sex couple registered union to a spouse’s pension.

Chile Given the recent nationwide strikes, employers with significant workforces should continue to monitor developments in the AFP private pension system, and identify opportunities to provide support to employees that may be expected to receive lower than anticipated retirement incomes.

United States Plan sponsors should work with their actuaries, administrators, and communications experts to evaluate recent Internal Revenue Service mortality guidance. For 2017 plan years, the guidance retains the existing basis for calculating most lump sums and certain other payment forms. For 2018 plan years, the guidance indicates that the basis is likely to change to reflect recent mortality research.

In budgets/projections, plan sponsors should consider the potential impact of changes in the table. From a plan design perspective, the guidance gives many plan sponsors a final chance to offer lump sums under an older, less expensive mortality basis. In communicating benefits/estimates to participants, plan sponsors

September 2016

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should evaluate what disclosures may be warranted to ensure that communications are not misleading.

In addition, employers that sponsor plans that currently offer participants the option to split their benefit between a lump sum and annuity should review their benefit calculation rules. The review should determine whether any changes should be made based on final regulations recently published by the Internal Revenue Service.

Asia Pacific

India Employers that are hiring new employees with monthly wages up to INR 15,000 should connect with their payroll providers and regional provident fund office to ask about the process to apply for the new hire government subsidy.

In addition, the number of employees eligible for the Employees' State Insurance Corporation (ESIC) coverage may increase for some employers due to the upcoming increase in the monthly income threshold. Employers that are currently exempt from the ESIC (due to the minimum wage criteria not falling under the mandatory threshold) should review their payroll data for the appropriate action. Also, employers with contractual staff from a third-party provider should confirm that the provider is in compliance with the new ESIC rules.

Europe

Channel Islands

Employers should review their plans/policies to ensure that they are (or will be) in compliance with the age discrimination amendments made to the Discrimination Law.

Ireland As a result of continuing market volatility, particularly in bond markets, sponsors of Irish defined benefit plans should be aware of increasing pressure on funding levels for such plans.

For those defined benefit plans where Funding Proposals are in place, it is quite possible that these will be deemed to be “off-track” at the next annual review. In such a situation, plan sponsors and trustees will need to engage with the actuary and advisers to agree on the options available to them.

Switzerland Employers should note the BVG Commission’s proposed reduction in the guaranteed minimum interest rate on mandatory second-pillar pension contributions from 1.25% to 1.00% for 2017.

Turkey Employers should take action as a result the new auto enrollment law.

If an employer already offers a group pension plan, then they should (1) review the current plan and identify potential changes needed and/or potential redesign opportunities and (2) assess the appropriate implementation of their decisions.

If the employer does not already offer a group pension plan, then they should seek advice about (1) selecting a pension provider and (2) implementing the new requirements.

The new auto enrollment law assigns employers the ultimate responsibility for selecting pension providers, and employers may have to justify this choice to their employees; therefore, all employers should ensure that appropriate objective criteria are used to select providers and that these criteria are well documented.

United Kingdom

Trustees and sponsors should review the recent statement on market volatility following the EU referendum published by the Pension Regulator and discuss necessary actions with their advisers.

In addition, companies should work with trustees to ensure that their DC schemes are run in accordance with the new code and guides.

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Recent Developments Americas

Argentina Pension reparation update.

Social Security Regulator ANSES has circulated guidance on filing claims for retroactive pension benefits from the years that cost-of-living increases were suspended. While over 2.4 million pensioners will benefit, there is priority status for those who saw the largest discrepancy between their contributions and their benefits, those over age 80 and those in poor health. Qualifying pensioners will receive offers in September and will be able to respond electronically. A lawyer must sign off on the claim, particularly if the member was part of a lawsuit over the benefits. Lawsuits will continue to move through the courts for those pensioners who turn down the offer.

Aruba Parliament approves civil unions.

Parliament has passed legislation amending the Civil Code to allow same-sex couples to register their unions and have most of the same legal benefits as married couples. Those specified include survivor's right to a spouse's pension and the power of consent for emergency medical decisions. Under a law requiring recognition of official documents within the Kingdom of the Netherlands, Aruban citizens already had the option of obtaining a marriage certificate in the Netherlands and having it legally recognized in Aruba.

Brazil Adoption of eSocial reporting system deferred.

The eSocial steering committee announced that deadlines for conversion to its new digital system for employee data reporting are being pushed back. For employers with revenue above R 78M in 2014, the start date of September 1, 2016 is deferred to January 1, 2018. The January 1, 2017 deadline for all others will now be July 1, 2018. The eSocial system will keep track of employee status as well as all payroll, tax, social security, union fee, and severance payments.

Executive pension scheme ruled taxable as salary.

An appeals court of Brazil's tax department set an interesting precedent with the finding that a pension plan for upper management was disguised salary subject to a 20% payroll tax. It based the decision on the benefits being linked to performance targets and the scheme being limited to a small group of top staff. The defense may appeal through the regular court system or request a clarification from the tax court.

Rulings on tax treatment of profit-sharing plans and hiring bonuses.

The Board of Tax Appeals (CARF) has delivered another decision narrowing what qualifies as a profit-sharing plan. In this case, CARF ruled that union endorsement, signed documentation before the assessment period and deployment of a mechanism to determine whether the plan's productivity goals were achieved, were all prerequisites for a PLR profit-sharing scheme to be exempt from social security taxes. CARF has also recently ruled that a guaranteed hiring bonus, when included as part of the compensation set out in an employment contract, is essentially salary so not exempt from social security contributions.

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Canada Ontario consultation on solvency relief.

On July 26, 2016, the Ministry of Finance (MOF) released a consultation paper Review of Ontario’s Solvency Funding Framework for Defined Benefit Pension Plans. This is in addition to the temporary solvency funding relief that was approved effective July 1, 2016.

The stated purpose of the solvency funding review is to develop “a balanced set of solvency funding reforms that would focus on plan sustainability, affordability, and benefit security, and take into account the interests of pension stakeholders—including sponsors, unions, members, and retirees.”

The focus of this consultation is the reform of funding rules for defined benefit (DB) plans. In 2015, the MOF released a consultation paper outlining a potential framework for target benefit multi-employer pension plans (TB MEPPs). It is anticipated that most specified Ontario multi-employer pension plans (SOMEPPs) would become TB MEPPs and their current temporary solvency funding exemption would become permanent. Multi-employer pension plans (MEPPs) that do not become TB MEPPs would be required to fund according to the general rules applicable to DB pension plans in Ontario. As a result of these linkages, the DB solvency funding review and the framework for TB MEPPs are being developed in parallel.

Comments can be submitted until September 30, 2016.

Source: Review of Ontario’s Solvency Funding Framework for Defined Benefit Pension Plans—A Consultation Paper

Chile President proposes new AFP model.

Amidst a growing sentiment for discarding the AFP private pension system, the President has presented a proposal for dramatic AFP reforms:

An employer contribution would be introduced and would rise to 5% over 10 years.

The employer contribution would be earmarked for a "solidarity pillar," rather than individual accounts in order to achieve more parity between current and future pensions.

The AFPs would give workers more choice in their investment decisions and they would have to reimburse workers their account fees for periods of losses.

A state-managed AFP fund and other market reforms would increase competitiveness.

AFPs would be managed more transparently and contributors would have a role in management.

Hidden fees would be curbed.

There would be a single mortality table for men and women.

These changes would be harmonized with other Chilean pension systems to avoid "distortions."

The plan will accrue details over the course of public and stakeholder consultations. There have been massive nationwide strikes in response to the proposal and a general strike is threatened for November 4 if no further concessions are made.

United States IRS Releases 2017 Static Mortality Tables for Defined Benefit Plans.

On September 2, 2016, the Internal Revenue Service (IRS) issued Notice 2016-50, which provides the prescribed mortality tables for 2017 for minimum pension funding and lump sum benefit calculation purposes. These tables continue the basis used for 2016 and prior years, adding one more year of projected longevity improvement. Thus, the IRS is not implementing any changes to the underlying methodology for 2017.

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The 2017 IRS mortality tables will also apply for purposes of determining PBGC variable rate premiums for 2017 premium payment years, and plan funded status for ERISA Section 4010 reporting.

Notice 2016-50 indicates that the IRS expects to issue proposed regulations revising its mortality assumptions and methodology beginning in 2018. The IRS is also expected to issue proposed guidance on reflecting plan-specific mortality experience for smaller plans, as permitted by the Bipartisan Budget Act of 2015. However, the Notice does not give any anticipated timing for this proposed guidance.

IRS Notice 2016-50 is available here.

IRS Publishes Final Regulations for Partial Annuity Distribution Options Under Defined Benefit Pension Plans.

On September 8, 2016, the Internal Revenue Service (IRS) released final regulations providing guidance relating to the minimum present value requirements applicable to certain defined benefit pension plans. These regulations are intended to simplify payment of partial lump sums to more easily allow participants to receive part of their benefit as a lump sum and part as an annuity. The final regulations became effective on September 9, 2016, and apply to distributions with annuity starting dates in plan years beginning on or after January 1, 2017. Additionally, these regulations can be applied to any earlier period.

The IRS final regulations are available here.

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Asia Pacific

Armenia Labor books to be discontinued.

The Ministry of Labor and Social Affairs announced that labor books will be discontinued from January 1, 2017. Labor books chronicling an employee's work history are a relic of the Soviet era. The information will now be transferred to an electronic database with greater efficiencies for the state pension system among the anticipated results. The transition to fully automated records is expected to take two years.

Australia Consultation on draft superannuation review.

The Productivity Commission has opened a public consultation on the draft report Superannuation Competitiveness and Efficiency, the first of three stages in a superannuation review. The draft compiles criteria for determining the competitiveness and efficiency of the superannuation system. Those include:

Performance measures such as rate of return;

Administrative costs;

Meeting members' needs;

Prevalence and management of lost accounts and nonpayment of contributions;

An environment conducive to health competition;

Any elements of systemic risk; and

Fairness and efficiency of tax regimes.

Contributions were welcome through September 9, 2016 and the final report should be submitted to the government in November 2016. The second stage, due in mid-2017, will offer scenarios for reviewing competitiveness and stage three will be the review itself.

ASIC reviewing super performance data, confirming new fee disclosure requirements.

The Australian Securities and Investments Commission (ASIC) is conducting a review of the performance data that superannuation funds release to their members. Its findings will determine whether regulatory guidance will be necessary to ensure that members have clear and consistent data for comparing the investment gains and losses of superannuation funds.

A recent review of superannuation fee disclosure found that regulatory guidance was necessary. New disclosure requirements for a wide range of superannuation fees will come into force in February 2017. ASIC noted this month that it has rejected the sector's request to push back the deadline for compliance.

Public consultation on draft super reforms.

The Treasury has held a brief public consultation on exposure draft legislation for the first tranche of the administration's superannuation reform. This batch features several of the less contentious measures:

It offers a legal definition of the role of superannuation, providing retirement income to supplement the age pension. This would help keep it from evolving into a more diversified wealth accumulation vehicle.

Self-employed workers and contractors would get a tax deduction on super contributions to compensate for the lack of a salary sacrifice option.

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A Low-Income Superannuation Tax Offset (LISTO) would keep the tax on super contributions no higher than that on take-home pay for those earning less than $37,000 pa.

The consultation closed on September 16. Consultations on additional super reform legislation are due in the coming weeks.

India Recent pension developments.

There have been some interesting pension developments in recent weeks:

The Pension Fund Regulatory and Development Authority (PFRDA) held a brief consultation on the Exposure Draft, PFRDA (Exits and Withdrawals under NPS)(first amendment) Regulations, 2016. It would allow National Pension System (NPS) subscribers who choose to remain in the system past age 60 to continue as late as age 70 provided they give written notice at least 15 days before reaching age 60. There is also a provision on deferring annuity purchase by up to three years.

The PFRDA has set out to encourage more NPS participation by cutting the minimum annual contribution rate for Tier 1 from INR 6,000 to INR 1,000, waiving both minimum account balance and minimum contributions for Tier 2 and, for a limited time, allowing participants to revive accounts that were frozen for not maintaining minimum contribution and balance levels.

An Employment Generation Program feature that launched on August 9 offers government subsidy of the 8.33% employer contribution to the Employees Pension Scheme for new hires earning up to INR15,000 (US $223) per month. The subsidy will last for three years, provided there has not been a net loss of employees since March 31, 2016.

PFRDA to offer bolder investment option.

The Pension Fund Regulatory and Development Authority (PFRDA) has designed two new investment schemes that should be available to subscribers within the month. A higher yield/higher risk "aggressive" option raises the 50% cap on securities investments for private-sector workers to 75% and a more conservative option will limit securities to 25%. In both cases, a "lifestyle" strategy will reach the maximum securities investment level at age 35, then gradually lower the limit for securities investment as members age.

Consultation on small enterprise automatic enrollment.

The Pension Fund Regulatory and Development Authority (PFRDA) has opened a public consultation on a proposal to require employers to automatically enroll workers under the Atal Pension Yojna (APY). While APY was introduced last year for the informal sector, a huge segment of the working population with little pension coverage, the consultation states that "Enterprises which could be sole proprietorship, partnership etc., with less than 19 employees will be required to automatically enroll all their full-time employees." Under this plan:

The requirement would apply for workers age 18-40, but there is a proposal to raise the ceiling to age 50.

Employers would not be compelled to contribute, but they would receive tax deductions for contributions.

Employees could opt out after a year and claim a refund. Re-enrollment, with the chance to opt out again, would occur every three years.

The PFRDA is considering bundling health and life insurance with APY membership to draw more long-term participants.

ESIC coverage threshold to rise, EPFO may follow.

The monthly income threshold for coverage under the Employees' State Insurance Corporation (ESIC) health insurance scheme is set to rise from Rs 15,000 to Rs 21,000 on October 1, 2016—the first increase since 2010. Expansion of the ESIC scheme will give another five million workers and their families access to a network of private health facilities at an affordable rate. ESI members pay 1.75% of salary while employers contribute 4.75%. This move coincides with a health reform agenda improving the scope and quality of care in ESIC facilities.

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Incidentally, coverage of this higher threshold has been consistently shared with reports that the monthly wage threshold for participation in the Employees' Provident Fund is also due to rise from Rs 15,000 to as high as Rs 25,000. So far there is no official confirmation that this is under consideration.

Philippines Benefit hike advances in Congress.

Sixteen bills on raising the monthly pension for all Social Security System (SSS) members by P 2,000 were rushed through a House Committee earlier this month and quick passage is expected in both houses of Congress. Similar legislation (CPU June 2015) was approved in Congress last year only to be vetoed by the outgoing President. The P 2,000 per month is a huge increase in a system where the minimum monthly benefit is P 1,200. SSS has warned legislators that its funding will deplete in 2025 unless additional funding accompanies this benefit hike.

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Europe

Channel Islands New age discrimination law takes effect in Jersey.

From September 1, 2016, the Discrimination Law is amended to cover age discrimination. Employers will have an additional two years to revise any policies setting an automatic retirement age. It has been standard for the pensionable age of 65 to be set as a default retirement age, but now employers will have to justify any involuntary retirement attempt. Enforcement of this provision is two years away but from day 1, the Employment and Discrimination Tribunal is empowered to award up to BPS 10,000 in a range of other cases where age-related discrimination or harassment has been determined.

Czech Republic Cabinet approves maximum retirement age.

The Labour Ministry announced that the Cabinet has agreed on a measure that would set age 65 as the retirement age ceiling. The limit would apply for people born after 1965 and would go unchanged until 2037 at which point it will be adjusted for longevity with the formula set to project a quarter of one's life on average in retirement. This bill will now be considered in Parliament. The ministry is drafting legislation that would identify those professions that should have a retirement age below 65.

Denmark Pension reform agenda published.

The Prime Minister's Denmark 2025; Master Plan for a Stronger Denmark features some contentious pension reform proposals:

Workers not already saving 6% of income in a pension scheme would be required to contribute 2% to a retirement savings plan.

People within five years of state pension age would be eligible for a special scheme allowing up to DKK 50,000 (EUR 6,700) in annual contributions. Contributions would not be tax-exempt, but the benefits would be and the resulting annuity would not be offset by social benefits.

There would be tax incentives for people earning between DKK 300,000-535,000 and contributing at least 8% into a deductible pension plan.

The pension age increase would accelerate, climbing from 67 years to 67.5 in 2025 and reaching 68 in 2030. The early retirement age would rise from 63 years to 63.5 in 2021.

The minority government is expected to have a difficult time getting this package through Parliament without modifications.

Disability Pension Challenges for Denmark.

Aon produced a presentation summarizing the new disability pension challenges that is available here.

European Union EC proposes pension fund exemption from draft collateral rules.

The European Commission has proposed that a draft regulatory technical standard (RTS) be amended to exempt pension funds from a requirement that investors diversify assets for posting as collateral for OTC derivatives not cleared by a central counterparty. The RTS jointly submitted by the European Banking Authority (EBA), European Insurance and Occupational

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Pension Authority (EIOPA), and European Securities and Markets Authority (ESMA) proposed the diversification as a way to mitigate risk but it would increase risk—and administrative costs—for pension funds.

Finland Social security contribution shift proposed.

The draft 2017 Budget features a net decrease in employer social security contributions offset by a rise in employee contributions:

Employer pension contributions would decline by an average of 1.2% from 2017-2020 while employee contribution would rise by the same amount over the same period.

A refinancing of employee health insurance would see the employer contributions fall from an average of 2.12% to an average of 0.54% from 2017-2020 while the employee contribution would not change.

Unemployment insurance contributions, now 2.85% for employers and 1.15% for employees, would converge at 2% each by 2018.

The government has reached a consensus on this draft and will release a final budget proposal on September 19.

Germany Pension harmonization plan.

The Chancellor recently endorsed the Labor Minister's draft legislation on equalizing pension benefits for East and West Germany. The benefit gap, which has steadily narrowed in recent years, is laid out in the coalition agreement to close by 2020. The Chancellor noted that accomplishing this will require technical discussions between the relevant ministries and while closing the gap is certainly desirable, a balance needs to be maintained for the younger generation. With respect to the overall retirement replacement level, the Chancellor said that the roles of state, occupational, and private pension need to be continually monitored while keeping an eye on the ratio between the working population and retirees. She added that further pension reform discussions are not on the government’s agenda during the current legislative period which ends in fall 2017.

Ireland Paper on phasing out the Universal Social Charge.

The Finance Department's Tax Strategy Group has published Pay Related Social Insurance—Budget 2017 Issues, which envisions a restructuring of personal taxation that would reduce or phase out the Universal Social Charge (USC) in as little as three years. This could be offset by eliminating the Pay-as-You-Earn (PAYE) tax credit for high earners and/or shifting part of the charge to PRSI (Pay Related Social Insurance). Legislation drawn from this strategy paper should come up for a vote in Parliament in October. The paper also explores options for expanding social insurance entitlements for the self-employed.

Earnings threshold for minimum pension may rise.

The Department of Social Protection has submitted a proposal for inclusion in the next budget on raising the minimum earnings threshold necessary to receive a full contributory pension. The minimum would nearly double from EUR 38 to EUR 70. This would partially remedy an anomaly that saw part-time workers earning EUR 38 per week entitled to a weekly pension of EUR 233. The EUR 38 figure has been unchanged since it was first set in 1994.

Pension minimum funding obligations.

The full Aon intouch technical update can be seen here.

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Malta Maltese tax status of QROPs clarified.

A recent amendment to income tax legislation has confirmed the favorable tax regime for distributions from a Malta-registered QROPS (Qualifying Recognized Overseas Pension Scheme). The Retirement Pensions Act which went into effect on January 1, 2016 could be misconstrued as reducing the 30% PCLS (pension commencement lump sum) available upon retirement to 25%. While the 30% PCLS is now firmly established, there are unresolved issues about how the post-Brexit status of EU QROPS could affect lump-sum payments.

Norway Draft regulations on Solvency II.

The Norwegian Financial Supervisory Authority (FSA) has issued draft regulations to introduce Solvency II for Norway pension funds. These are subject to a final government consultation and expected to come into effect on January 1, 2018.

Norway will then be the first country in the EEA to effectively introduce Solvency II for pensions; and have the same rules for pension funds and insurers. If pension funds do not meet the new capital requirements; sponsors will either need to pay more or ask the pension fund to reduce benefits. As a result, transferring Norwegian pension funds to a cross-border plan domiciled elsewhere in the EEA could be an attractive option, leading to benefits for both the employer and employees/pensioners.

Russia Pension indexation paused, contribution freeze extended.

Citing budget constraints, the government has suspended the inflation peg for the insured state pension and extended the diversion of contributions from the retirement income scheme. The Prime Minister announced that rather than adjusting the insured pension to reflect a spike in inflation, the government will make a one-time payment of R 5,000 (US $77) to all pensioners. Meanwhile, officials have confirmed that the 6% of the 22% employee pension contribution that is earmarked for the second-pillar retirement savings scheme will once again be diverted to the underfunded first-pillar scheme. The second-pillar contribution was first suspended in 2014 and this practice is now forecast to continue through the 2019 Budget.

Switzerland Proposed cut for guaranteed interest rate.

Occupational pension regulator BVG Commission has proposed reducing the guaranteed minimum interest rate on mandatory second-pillar pension contributions from 1.25% to 1% for 2017. While this is a new low for the guarantee, the commission explained that it mirrored a drop, in some cases into negative territory, for key interest rates. The BVG recommendation is nonbinding, but the federal government has consistently adopted it.

Turkey Parliament approves private pension auto enrollment.

Law No. 6740, due soon in the Official Gazette, will introduce a compulsory personal pension insurance scheme set to take effect on January 1, 2017:

The employer must select a pension company approved by the Treasury and automatically enroll workers under age 45 through a contract with the pension provider.

The Council of Ministers has not yet set a threshold for the minimum staff size of establishments affected by the new law.

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Participants may withdraw from the scheme within their first two months. Any contributions taken before the withdrawal would be returned within 10 days.

The individual contribution is 3% of average monthly salary and employees may direct their employer to deduct a higher amount. The Council of Ministers is empowered to adjust the contribution level unilaterally to within 1-6% of salary.

The government will match 25% of the employee's contribution and will add a one-time incentive of TRY 1,000 for those who do not opt out.

When participants change employers, the assets may be transferred to the contract offered by the new employer or the workers may continue to contribute under the existing contract.

A participant may retire at age 56 with 10 years of contributions to the scheme and be entitled to an additional 5% subsidy from the government. Part of the portion contributed by the government may be forfeited if the participant leaves the scheme after fewer than 10 years and all will be forfeited if they leave the plan after less than three years.

Aon produced a presentation on auto enrollment in Turkey that is available here.

United Kingdom Pensions Regulator statement on EU referendum.

The Regulator has published a guidance statement on market volatility following the EU referendum. Areas covered include (for DB) covenant, investment and funding; and (for DC) investments and member communication. Possible actions highlighted include: more sensitivity analysis; reviewing contingency plans; considering different funding solutions (e.g., using contingent assets); more regular monitoring.

The full report is available here.

Work and Pensions Committee inquiry into pensions law.

The Chair of the Parliamentary Work and Pensions Committee has announced a major inquiry into pensions law. This will follow the current inquiry into pensions regulation and the PPF (including BHS), and the consultation on potential legislative changes relating to the British Steel Pension Scheme. The Committee will consider DB schemes in their entirety, stating that this "will be a major inquiry considering radical solutions to one of the great problems of this age."

The full report is available here.

Financial Advice Market Review (FAMR).

FAMR was a joint review between HM Treasury and the FCA, which reported in March 2016 and recommended a package of measures to improve access to advice and guidance. The FCA has now announced the establishment of its working group that will take forward three of the recommendations: developing a guide on the top 10 ways to support employees’ financial health; considering new terms to describe "guidance" and "advice;" increasing consumer engagement.

The full report is available here.

New DC Code of Practice now in force.

The Pensions Regulator's revised Code of Practice for DC schemes (CPU May 2016) came into force on July 28. It sets out the standards that trustees are expected to meet when complying with the law. It is accompanied by six guides to help trustees implement the new code. Each corresponds to a key section in the code: the trustee board; scheme management skills; administration; investment governance; value for members; and communicating and reporting.

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Middle East and Africa

South Africa SARS ruling on contributions to a foreign pension.

The South Africa Revenue Service (SARS) has delivered a Binding Private Ruling, BPR 247 on the tax status of employer contributions to foreign pension funds and social security systems. A company incorporated in South Africa employed a worker from a foreign company for a fixed period under an inter-company work permit arrangement. The South African company was obliged under this arrangement to continue the worker’s home country social security contributions and required under the worker's employment contract to continue pension contributions. SARS concluded that the worker will not be subject to income tax for the pension fund and social security contributions and that there will be no withholding obligation for the South African company.

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© 2016 Aon plc This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The comments in this summary are based upon Aon Hewitt’s preliminary analysis of publicly available information. The content of this document is made available on an “as is” basis, without warranty of any kind. Aon Hewitt disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Aon Hewitt reserves all rights to the content of this document.