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Summary of the National
Pension Scheme (occupational Pensions) Act, 1998"
Effective Date
The effective date of the Act is 1st Jan., 2000. All Employers must comply with
the Act from 1st January, 2000. Employers with an existing pension plan will have
one year to register their Plan. Employers who do not have an existing pension
plan will have six months to register their Plan.
Type of Pension Plan
The pension plan effected by the employer may be either a defined benefit or a
defined contribution plan.
Eligibility for Membership
Every employee who has attained age 23 and worked a minimum of 720 hours per
calendar year must be covered. A person employed by more than one employer must
be covered under each plan if he meets the criteria for coverage. Coverage is
mandatory for Bermudians and spouses of Bermudians. Coverage is optional for non-Bermudian
contract workers.
Definitions of "employee" and "employer"
"Employee" means a Bermudian or spouse of a Bermudian who is employed
in Bermuda by an employer.
"Employer" means
a person in Bermuda who employs employees, and includes a self-employed person.
Contributions
Minimum contribution rates are based on "pensionable earnings" per
year. Although the employer may elect to pay all of the required contribution,
the following table gives a likely breakdown.
| Date |
%
from 'ER |
%
from 'EE |
| Jan
2000 |
1 |
1 |
| Jan
2001 |
2 |
2 |
| Jan
2002 |
3 |
3 |
| Jan
2003 |
4 |
4 |
| Jan
2004 |
5 |
5 |
These contributions are
in addition to the contributions made to the current Contributory Pension Fund.
Pensionable Earnings
"Pensionable earnings" means -in the case of an employee, any of
the following payments expressed in monetary terms and paid (directly or indirectly)
to the employee by the employer up to a MAXIMUM of $200,000 per year -
(i) any wages, salary
or leave pay;
(ii) any fee or commission;
(iii) any bonus, including payments from a profit-sharing scheme, which
exceeds ten per cent of the employee's basic salary or wage for the period in
question;
but does
not include overtime payments in respect of hours worked in excess of 35 hours
in any week, severance payments, retirement or long-service recognition payments
or health insurance payments.
Vesting and Locking-in
Benefits are required
to become vested in the employee no later than the completion of two years of
membership in the plan. However, if an employee is a member of a pension plan
which is in existence at 31st December, 1999, the member shall be fully vested
on the date determined in accordance with the provisions of the plan, or by 1st
January, 2002 whichever is earlier.
Benefits earned after the
effective date of the Act are locked-in and cannot be received as a cash refund.
The Act does not prohibit
the refund of any contributions and interest made to a pension plan prior to the
Act's effective date.
Retirement Date and Benefits
The normal retirement date occurs at age 65, although early retirement is allowed
as soon as age 55 years. Retirement can be deferred beyond age 65 and the member
may elect to continue making contributions and accrue benefits up to his actual
retirement date.
The plan must provide for
the accrual of pension benefits in a gradual and uniform manner and cannot be
variable at the discretion of the employer.
Pensions are payable for
the member's lifetime.
Plan Amendments
A plan cannot make
an amendment which seeks to reduce accrued benefits.
All plan amendments must be registered with the Commission within 90 days of the
effective date of the amendment. The Commission has the power to refuse to register
an amendment that does not comply with the Act.
DISCLAIMER:
The information contained in this Pension Summary is for general informational
purposes only. It should not be used as a substitute for consulting "The
National Pension Scheme (Occupational Pensions) Act, 1999, and as Amended.
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