NIS expenditure on benefits rising faster than income from contributions

-Chartered accountant says de-policitise the scheme

Total contributions to the NIS rose 117% between 1999 and 2009 while the increase in the payment of benefits for the same period was 224% and annual contributions are not sufficient to cover current expenditure, according to NIS General Manager (ag) Doreen Nelson.

In the light of misgivings about the future of NIS chartered accountant Christopher Ram has called for the scheme to be “de-politicised” and for it to be treated with the “greatest amount of care.”

In her speech to celebrate the 40th anniversary of the scheme, the General Manager said that the “…rate of growth of expenditure on benefits is surpassing that of receipt of income and annual contributions are not sufficient to cover current expenditure.”

She said this fact had already been noted in the Seventh Actuarial Review of the scheme for the years 2002-2004.

However, Ram, who writes the ‘Business Page’ in the Sunday Stabroek, in an invited comment told this newspaper that misgivings about the future of the scheme had been expressed since the Sixth Actuarial Study of the NIS for the years 1999 to 2001, when “urgent remedial action” had been called for.

“Close to two years ago the NIS sent recommendations to cabinet for policy decisions on a number of critical issues. Why the Chairman of the NIS [Dr Roger Luncheon] who is also Cabinet Secretary cannot get his colleagues to address those recommendations is a mystery,” Ram told Stabroek News.

He suggested, however, that in fact the explanation might be quite simple and that was that everyone may have forgotten about the matter. Ram added that it would have been desirable if those recommendations could have been addressed “promptly” so that the Seventh Actuarial Review could have been “approached with less uncertainty and with fewer unresolved issues to consider.”

On the flip side, Ram is of the opinion that the existing management of the scheme is doing a fair job under difficult circumstances.

“They can do no more than they are allowed to by the board which I regret to say is doing a very poor job,” he noted.

However, he said it did not excuse the management from not going after those employers and self-employers including leading public figures who did not register their staff.

“While in many cases the employers do this with the agreement of the employees, this is in breach of the law and more importantly deprives the employees of the opportunity to benefit from the social security system in time of need,” he said.

‘Contributions and


According to Nelson the contribution rate of 13% of insurable earnings which was introduced in 2004 remains unchanged and is still catering for the coverage of the payment of all benefits and the management of those benefits.

Giving some income and expenditure figures over the last decade, Nelson said that a brief examination showed that for the year 1999 the total contributions collected from the employed and self-employed amounted to approximately $4.1B while in 2008 that figure rose to $8.8B and was expected to reach $8.9B at the end of 2009.  The increase from 1999 to 2008 was approximately 115% and to 2009, approximately 117%.

Benefits paid out in 1999 totalled $2.9B but that figure rose in 2008 to $7.6B in 2008 and was expected to reach $8.1B in 2009. The increase from 1999 to 2008 was approximately 204% and to 2009, approximately 224%.

Should the current trend continue then the scheme would be paying out more than it collects.

Ram warned that the unwillingness by the government to address such critical issues as the recommendations and its attempt to have “the scheme invest in thirty-year securities largely with fixed rates of interest could aggravate an already weak situation.”

He questioned what would happen if the recent significant decline in population continues and the project does not generate sufficient cash to pay dividends and interest.

“A national social security scheme ought to be treated with the greatest amount of care and de-politicised,” he emphasized, pointing out that for the past fourteen years its board has been chaired by Dr Luncheon “one of the most political members of this government.”

He said that NIS funds were “used to finance the Caricom Headquarters” and then the Berbice bridge and asked what next it would have to invest in.

“The private sector appears to treat the NIS with benign neglect while the fractured labour movement has largely ignored it,” Ram charged.

In his ‘Business Page’ earlier this year Ram had recalled that the government forced the NIS to lend it US$4M for the part-financing of the construction of the Caricom Secretariat. He had said that the loan was repayable over 25 years at a rate of 4% interest in the first 15 years and 5% in the next ten years.

“Those rates are well below the rates of inflation, but does the government care how the cow is milked?” Ram had asked

NIS had been the subject of public debate in recent times following the disclosure that it had invested some $6B in the now failed CLICO (Guyana), and even though President Bharrat Jagdeo has given the reassurance that “NIS has not lost a cent because… they will be paid back,” there are still many sceptics.

The CLICO investment came under intense scrutiny after the financial woes of the insurance company were publicized.  On February 25, then Commissioner of Insurance Maria van Beek had moved to the high court to have CLICO Guyana placed under judicial management. This was done following an order issued by the Supreme Court in Nassau to send CLICO (Bahamas) into liquidation on February, 24.  Investigations regarding Guyana’s $6.9B (US$34M) investment revealed that although this sum was liquid on paper, it had been tied up in real estate investments that CLICO (Bahamas) had in Florida via subsidiaries.

In a press conference on March 23 Dr Luncheon said that the scheme had pursued investments in the insurance company because they were lucrative.

The chairman at that press conference also refuted suggestions that the collapse of the scheme was imminent. He said that the most up-to-date information with regard to the financial operations of the scheme clearly suggested otherwise.

The NIS is also one of the six investors in the US$40M Berbice Bridge to which it contributed $1.5B. And based on its 2007 annual report, the NIS also has $2.4B in Hand-in-Hand Trust Corporation which  was exposed to the Stanford Group implosion to the tune of over $800M

Meanwhile, Nelson in her report revealed that the computerisation programme for the scheme has now been completed with the last office at Mabaruma being placed on-line.

This announcement may mean nothing to many as just two days after her speech Dr Luncheon admitted to the press that NIS still had a mountain of data at all its offices which still had to be inputted into the electronic data system. The fact that this has not been done years after the scheme switched to recording data electronically, means that NIS record-keeping is not up to date and as such years of contributions for persons have been found missing.

Ram has suggested that management sort out the problems of the contribution records which again are depriving employees of the contributions which they have made.

Additionally, he said, management needed to treat more respectfully and professionally complaints by members of the scheme and the public.

It is true that some people blame the scheme unfairly, but even those complaints should be handled with greater understanding.

Nelson has said too that the electronic intervention has already shown a reduction in administrative costs and the faster processing of claims and appeals that cited inaccurate contribution records.

“Compliance efforts have been increased to ensure that delinquent employers and self-employed persons meet their obligations to the scheme,” Nelson added.

She pointed out that the social and economic impact of the social security system had been significant on the lives of all Guyanese. As a result, management understood the seriousness of the scheme’s mandate and the need for continuous monitoring of the operations to ensure that there were “timely interventions and critical reforms for it to remain relevant in this technological age and meaningful to all workers and their families way into the future.

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