Articles: What to Know about Bill No.43 – The Social Security (Amendment) Act of 2013
Public hearings were held in Majuro and Ebeye on September 20 and 26, 2013, respectively, to discuss Bill No. 43, also known as the Social Security Amendment Act, 2013. This bill is aimed to amend 18 sections of the Social Security Act of 1990 to provide for changes that will lead to further financial stability of the retirement fund by increasing contributions, decreasing benefits and removing loopholes that trigger benefits to uncontrollably increase.
VIEW: “What to Know about Bill No.43 – The Social Security (Amendment) Act of 2013” (includes graphs and highlights in .docx)
From FYs 2008 through 2013, total benefits and operating expenses exceeded contributions by more than $14 million forcing MISSA to withdraw a total of $13.3 million from the fund to cover for the shortfall. Another $42.36 million deficit is projected in the next five years if this trend continues and no changes to the SS law are enacted. By 2022, accumulated deficit will reach $81.2 million and consequently, nothing will be left from the Fund.
Another flaw in the system is the following:
As of October 31, 2011, out of 3,771 beneficiaries, there are 3,008 (or 80%) old age and medical retirees and surviving families who have already received at least 3x and up to more than 5X of what they have put up into the system.
The following sections of the Social Security Act of 1990 are amended effective October 1, 2013:
103 - Interpretation (i.e. adopted child, adoptive parent, covered earnings, currently/fully insured normal/early/deferred retirement, self-employed worker)
119 - Powers of the Administration
122 - Payments out of the Fund
129 - Worker’s contributions
130 - Employer’s contributions
134 - Basic benefit formula
136 - Old Age Insurance Benefits
139 - The surviving child’s insurance benefits
141 - The lump sum benefits
142 - Payment to non-citizens overseas
144 - The earnings test
148 - False statements and reports
149 - Failure to report
150 - Secrecy
151 - Examination and copying of records
152 - Mismanagement of Fund
153 - Penalties and interest; attorney and collection fees; and court costs
156 - Susceptibility of benefits, contributions, and funds to legal process or assignment
Note: For easy interpretation and understanding of the public, certain words and phrases were simplified and reworded and may differ from what were exactly written in the original bill submitted to the Nitijela. Changes to the current law are underlined and italicized.
Section 103 - Interpretation
(d) “Adopted/adoptive” – means an adopted child or adoptive parent pursuant to law, and not pursuant to custom.
(h) “Child” - a person’s natural adopted or step child; provided the worker’s parental rights have not been terminated by law, and not by custom.
(k) “Covered earnings” – maximum taxable earnings per quarter is increased from $5,000 to $7,500 but only $5,000 will be the basis in computing benefits.
(m) “Currently insured” – beneficiary must have earned at least 6 out of the last 40 quarters prior to Oct. 1, 2013; and at least 20 of 32 quarters thereafter.
(o) “Deferred retirement” – beneficiary must have met the requirements for normal retirement; age required is increased from 60 years and 1 month to 65 years and 1 month.
(q) “Early retirement” – age required is increased from 55 to 60 years and beneficiary must be service insured.
Service insured means the beneficiary must have no less than 80 quarters of coverage.
(r) “Earnings’ – any salary, wage, bonus, tip, allowance or fee, but not including:
payments made by the employer as a result of an accident or sickness of the worker (other than sick leave);
reimbursement of medical or hospitalization expenses;
payments made to or on behalf of the worker or his beneficiary from a trust or annuity;
reasonable stipends paid to volunteers of religious organizations, NGOs; and schools;
reasonable sitting fees for board members and elected officials;
earnings exempted by virtue of any international agreement to which the RMI is a party;
reasonable per diem and travel allowances to the extent that they do not exceed any comparable Government rates;
rental housing allowance paid to an employee, not exceeding $3,750 per quarter provided it does not exceed three times the wages;
any payment in the form of scholarship, fellowship or stipend made to any employee while he is a full-time, bona fide student at an educational institution;
earnings received by a minister of the gospel, or clergyman from a religious group or organization;
earnings received by an employee for services performed or rendered in the capacity of a domestic or household employee for a private individual or family;
reasonable session allowances for elected officials; and
payments made in cash, or any form other than cash, for casual labor not exceeding one week in any month of a quarter if the work is not performed in the course of the employer’s trade or business.
(v) “Fully insured” means the beneficiary must have no less than 12 quarters of coverage prior to Oct. 1, 2003 and 20 quarters thereafter; provided that the maximum no. of quarters of coverage required shall be 38 prior to Oct. 1, 2013 and 40 thereafter.
(ee) “Normal retirement”- beneficiary must be fully insured and attain the age of 60 years prior to October 1, 2013, and 65 years thereafter.
(ff) “Parent” – a person’s natural, adoptive (no longer legally adoptive) or step parent; provided that parental rights have not been terminated by law and not by custom.
(kk) “Self-employed worker” – a person who engages in trade or business, and is deemed to have earned the amount of earnings he actually converted to his own use or 75% of his gross revenue for that quarter, whichever is higher. (In the current law, self-employed worker is defined as a person deemed to have earned twice the amount of earnings paid to the highest paid worker reported by him within the quarter, or if there is no other worker, he shall be deemed to have earned within a quarter 75% of his gross revenue for the quarter.)
Section 119–Powers of the Administration
The Administration may prepare a quarterly report, using the Administration’s report form or a spreadsheet format, for any employer who fails to file the prescribed report within thirty 30 days after the Administration has notified him of his failure to file and may levy and assess on the employer the appropriate amount of contributions due; such assessment shall be presumed correct until it is proven incorrect by the employer; and such assessments may be amended by the Administration to correct any error.
Section 122 – Payments out of the Fund
(3) Administrative expenses shall not exceed 10% of contributions per fiscal year (reduced from 20%)
Section 129 – Worker’s contributions
(1), (d) Increased from 7% to 9%
Section 130 – Employer’s contributions
(d) Increased from 7% to 9%
Section 134 – Basic benefit formula
Pension element is decreased from 2% to 1.56% of indexed covered earnings (ICE).
Social element is decreased from 14.5% to 11.31% of the first $11,000 of cumulative covered earnings (CCE), plus 0.55% (currently 0.7%) of CCE in excess of$11,000 but not in excess of $44,000.
Note: The effect of this change will be a 22% decrease in benefits across the board.
Pension Element means 2% of ICE whereby lower-paid and higher-paid workers receive the same proportionate benefit.
Social Element means that portion of the basic benefit formula described in Subsection 134(2) of this Chapter, whereby lower-paid workers receive a proportionately larger benefit than higher-paid workers.
ICE means the sum of all covered earnings for a worker or self-employed worker increased by cost of living adjustments subsequent to the date of said earnings.
CCE means the sum of all the covered earnings of a worker or self-employed worker.
Section 136 – Old age insurance benefits
“Early retirement” – age required is increased from 55 years to 60 years and beneficiary must be service insured.
Normal retirement - age required is increased from 60 years to 65 years and beneficiary must be fully insured.
Deferred retirement - beneficiary must have met the requirements for normal retirement; age required is increased from 60 years and 1 month to 65 years and 1 month.
(2) (a) The monthly amount of the early retirement, old age insurance benefit shall be the basic benefit reduced by ½ percent for each complete month that the date of early retirement precedes the date the worker or the self-employed worker attains the age of 60 years prior to October 1, 2013, and 65 years thereafter but not less than the minimum benefit.
(2) (d) The monthly amount of the deferred retirement, old age insurance benefit shall be the basic benefit increased by ½ percent for each complete month that the date of deferred retirement follows the date the worker or the self-employed worker attains the age of 60 years prior to October 1, 2013 and 65 years thereafter but not less than the minimum benefit.
Section 139 – Surviving child’s insurance benefits
(4) No change to the current law except in the interpretation of adopted child and adoptive parent.
Section 141 – The lump sum benefits
The lump sum benefit is computed as equal to 80% of the worker’s life to date contributions (Currently, it is 4% of the worker or the self-employed cumulative covered earnings.)
Section 142 – Payment to non-citizens
(3) Any beneficiary who is not a citizen or national of the Republic, the Federated States of Micronesia, the Republic of Palau, or the United States, may elect to claim the lump sum benefit. (Currently, a non-citizen is paid no more than 6 months of benefits while the beneficiary has been outside of the Republic.)
Section 144 – The earnings test
If a beneficiary is, at the same time, in covered employment, he shall have his quarterly benefit reduced by one $1.00 for every $3.00 earned during that quarter in excess of $1,000 (currently $1,500) until such beneficiary attains 62 years of age prior to Oct. 1, 2013, and 67 years of age thereafter.
Section 148 – False statements & reports
Any person who attempts to defraud the Administration is guilty of a misdemeanor and shall be liable to a fine not exceeding $1,000 and imprisonment not exceeding one year or any higher amount equal to double the pecuniary gain derived from the offense by the person, or equal to double the pecuniary loss suffered by the Administration from the offense. (Current law considers the violation as “offense” and fine is not more than $2,000 or imprisonment of not more than one year, or both.)
Any corporation, unincorporated association, or limited liability company who knowingly makes a false statement or declaration, or falsifies any report to or record of the Administration in an attempt to defraud the Administration, is guilty of a misdemeanor and shall upon conviction be liable to a fine not exceeding $10,000.00, or any higher amount equal to three times the pecuniary gain derived from the offense by the offender, or equal to three times the pecuniary loss suffered by the Administration from the offense. (This provision is not provided for in the current law.)
Section 149 – Failure to report
(2) Any employer or self-employed worker who fails to report and pay the social security taxes due, including penalties and interest, is in addition, guilty of a misdemeanor and shall be liable to a fine not exceeding $5,000.00 and/or imprisonment not exceeding one year, or any higher amount equal to double the pecuniary gain derived from the offense by the person, or equal to double the pecuniary loss suffered by the Administration from the offense. (Current law considers the violation as “offense” and fine is not more than $5,000.)
(3) For purposes of this Section, the terms “employer” and “self-employed worker” include any director, member, officer, employee, executive committee member, or agent of an employer or self-employed worker who as such is responsible for seeing that quarterly reports are filed or contributions are paid.
Section 150 – Secrecy
If a member of the Board or any employee of the Administration, provides information concerning a worker, self-employed worker, employer, or person receiving benefits under this Chapter that has come to his knowledge by virtue of his office or employment to anyone other than the worker, self-employed worker, employer, or beneficiary, he is guilty of a misdemeanor, unless such information is provided:
(a) for the purposes and functions of this Chapter;
(b) as required by an order of a court;
(c) as authorized by the Board; or
(d) pursuant to Section 160 of this Chapter.
A person guilty of an offense under this Section shall upon conviction be liable to a fine not exceeding $1,000.00 and imprisonment not exceeding one year. (In the current law, fine is not more than $2,000 or imprisonment of not more than one year, or both.)
Section 151 – Examination & copying of records
Any person who fails to allow MISSA to examine and copy required records shall be guilty of misdemeanor and shall be liable to a fine not exceeding $1,000 and imprisonment not exceeding one year. (Current law considers this violation as “offense” and fine is not more than $5,000 or imprisonment of not more than one year, or both.)
Section 152 – Mismanagement of Funds
Any person who has a fiduciary relationship with the Fund and who is found to have mismanaged the Fund, whether by malfeasance or misfeasance, shall be guilty of a felony of the second degree and shall upon conviction be liable to a fine not exceeding $100,000.00 and imprisonment not exceeding ten years. (Current law considers this violation as “offense” and provides for an imprisonment of not more than 15 years or a fine of not more than $100,000, or both.)
Section 153 – Penalties & interest; atty. & collection fees; and court costs
This is a correction of a typographical error. (The word date was inadvertently written as late.)
Section 156 – Susceptibility of benefits, contributions, and funds to legal process or assignment
The Administration may off-set up to 80% of a benefit against any debt owed by the wage earner or beneficiary to the Administration.
(Under the current law, a beneficiary may assign his benefits in a manner prescribed by the Administrator.)
- Submitted to Yokwe Online by Avelino R. Gimao Jr., CFO and Deputy Administrator, Marshall Islands Social Security Administration