Enforcing Remittances of Workers' Pension Contributions

Following the failure by some Nigerian  employers to remit their employees' contributions to their Retirement  Savings Accounts, the   National Pension Commission is considering measures to compel  defaulting employers to do so through audits, writes Ebere Nwoji

Recent reports in the media that the National Pension Commission, ( PenCom) would soon commence auditing books of over 200,000 employers in the country to fish out those who fail  to remit the mandatory 18 percent pension contributions of workers to their Retirement Savings Account( RSA)  is a cheering news to Nigerian workers and retirees.

Also, similar reports that the Commission has recovered over N10 billion unremitted pension contributions in principal and interest penalty has rekindled workers hope in the scheme.

Indeed, the development is an inspiring one to the workers and a boost to public confidence in the Contributory Pension Scheme (CPS) considering the fact that many employers, who keyed into the scheme especially private sector employers  are often reluctant to remit  not only their own part  of contribution to their workers' RSA Account as stipulated by law but also fail to remit the eight percent part of their  workers' salary, which they deduct every month.

Currently, there are indications that most employers are owing arrears of un remitted contributions of their workers to their RSA account as a result, many workers are expressing fears that the CPS may after all not solve problem of unpaid pension arrears.

This category of workers have been expecting PenCom and Pension Fund Managers to compel their employers to remit their money to their RSA.

This cuts across public and private sector employers as there are indications that federal government is currently owing pension sub sector over N100 billion  being its liability to the sub-sector for past service  under the old pension scheme and non remittances into its workers' retirement savings accounts under the on going CPS. 

Both the immediate past president of the Pension Fund Operators Association of Nigeria (PenOp), Misbahu Yola, and Chairman, Premium Pensions Limited , Aliyu Dikko , who confirmed this to journalists said unless the new administration settles down and offsets the above liability, it is  capable  of eroding the confidence built by the government in the scheme.

Yola, said the above figure, if settled, would boost the performance of the CPS and grow the economy in general especially for investment purposes.

Section 3, sub section (1) of the Pension Reform Act (PRA) 2014 states that Nigerian employers with up to three employees in their business  should arrange for pension  package for the employees  under the CPS for payment of retirement benefits to the employees. The law requires that employees should choose a pension fund manager of their choice and open a Retirement Savings Account (RSA)  where his  or her employer should on monthly basis pay in 18 percent of his salary contributed by the employer and the worker at the rate of 10 percent for  the employer  and eight percent for the worker.

Section 4 subsection (1) of the Act states that the contribution for any employee shall be a minimum of 10 per cent by the employer and a minimum of eight per cent by the employee.

Section 11 subsection (1) states that every employee shall maintain a Retirement Savings Account (RSA) in his name with any PFA of his choice.

Subsection (3) states that the employer shall deduct at source the monthly contribution of the employee; and not later than seven working days from the day the employee is paid his salary; remit an amount comprising the employee’s contribution and the employer’s contribution to the Pension Fund Custodian specified by the PFA of the employee.

Despite these laws, Nigerian employers deduct their employees' part of the contribution and fail to remit it.

Cases of workers who retire under the CPS and fail to access their retirement benefits abound. This is because for such workers, their employers have not been remitting their contributions and they failed to monitor the status of their contributions.

Few years back, PenCom tried to compel such employers to do the needful by setting up recovery Agents (RAs) that will ensure  that such companies comply in remitting  their employees' contributions to their RSA .

PenCom had engaged 173 Accounting and Legal practitioners as recovery agents (RAs) for the exercise.

From their findings three years back, about 15,427 employers  as at that time failed to remit pension contributions to their employees’ Retirement  Savings Account(RSAs)for various periods between January 2010 and December 2011. Subsequently, the defaulting employers were distributed among the RAs to recover the outstanding contributions.

By September 2013, RAs established outstanding pension contributions and interest penalties, which amounted to N13.33 billion against 335 private sector employers then.

  PenCom granted approval for the RAs to serve demand notices to the affected employers, which resulted in the recovery of N335.84 million and an interest penalty of N31.04 million as at end of September 2013.

Sources close to the commission, said that the commission, had planned to issue  notice of intention to prosecute the employers that failed to remit the outstanding pension contributions and interest penalty.

Since then, nothing much was heard about the RAs and their activities while workers have continued to complain about non remittance of their contributions and those of their employers to their RSA.

For now, it is not certain whether the commission has issued the letter before its present bid to audit books of employers.

Speaking on the commission's audit exercise, PenCom's Head, Compliance and Enforcement, Alhaji Umar said the commission decided to set up the pension audit system to complement its ongoing processes of ensuring compliance by employers in the country.
According to him, the processes include engaging employers through warning letters, imposing two per cent monetary penalty on unremitted contributions, naming and shaming of erring employers and seeking litigation against them.

Meanwhile, some workers from both public and private sectors who spoke to THISDAY on the proposed audit said if effectively carried out would better the lot of the workers.

One of the workers, who did not want his name in print said his employer whom he described as worst culprit in the offence of non-remittance  of employees' contributions often threaten the workers with termination of their appointment whenever the mount pressure on him for  remittance of their contributions.

He said in most cases, those in charge of workers' pensions in various organisations, for the same fear of sack fail to do their work.

He said this category of employers have been having their way in their wicked act because both PenCom and the PFAs allow them to do that.

He said if the commission would be serious in the proposed Audi exercise, employers of labour will sit up and follow the due process of law in handling their workers' pensions.

Culled from Thisday