Factors which Justify Contribution Increases to The Bahamas National Insurance Board (NIB) Fund

Increased Contributions to the National Insurance Board Plan for Employers and Employees are Scheduled to take effect July 2024, and are Proposed to Increase every two years thereafter until the Fund reaches a Sustainable Position...

NASSAU, The Bahamas – Contributors to the National Insurance Board Plan will have one year to prepare for a contribution rate increase that is scheduled for July 2024.

The rate increase will mark just the second increase -- the first was by 1 per cent in 2010 which coincided with the implementation of the permanent phase of the unemployment benefit -- in almost 50 years of the Fund’s existence.

The increase will be shared equally between employers and employees.  For example, if the rate increases by 1.5%, the employers' portion rises from 5.9% to 6.65%, and the employees' portion increases from 3.9% to 4.65%.

In the first year, paying the minimum weekly wage of $260, will increase the employers' portion from $15.34 to $17.29.  Employees' contribution payments on the minimum weekly wage will increase from $10.14 to $12.09.  For both the employer and employee, this represents a difference of $1.95 per week.

For monthly salaries on the minimum wage of $1,127.67, employers and employees will pay a difference of $8.45 per month.

“Madame Speaker, this is less than the cost of a meal at any of our fast food restaurants.  This is a small price to pay to secure our pensions for the future,” Minister of State in the Office of the Prime Minister with responsibility for National Insurance, the Hon. Myles K. LaRoda noted.

Employers' weekly payment on a ceiling of $740.00 will increase from $43.66 to $49.21.  Employees' contribution payments on the ceiling of $740.00 will increase from $28.86 to $34.41.  For both the employer and employee, this represents a difference of $5.55 per week.  For monthly salaries on the ceiling of $3,207.00, employers and employees will pay a difference of $24.05.

Addressing Parliament during his Contribution to the 2023/24 Budget Debate, State-Minister LaRoda said the increase was due to a number of factors.

“For some time now, there has been discussion in the public about the state of NIB.  Much of this discussion emanated from the 11th Actuarial Review conducted by the International Labor Organisation (IL O) in December 2018.  I tabled the report in these Honourable Chambers last year.

“The Report predicts that the NIB fund will be depleted by 2028 based on its current benefits package and contribution rate and considering the projected population demographics.  Key among these are: A lower fertility rate than in past decades refers to the number of children each woman has.  This rate was about two children historically and is projected to be 1.7 children for most of the period under review, and an increase in life expectancy; our people are simply living longer, and this trend continues over the projection period that the report covers (60 years).  On average, pensioners are expected to live four years longer than at present.

“What does this translate into?  Today we have approximately four contributors for each pensioner.  By 2078, it is projected that we will have 1.4 contributors for each pensioner, a sharp decline.  Looking at it another way, while persons over 65 made up approximately 8% of the population in 2020, by the end of the review period (2078), retirees are projected to make up 26% of the population.”

State-Minister LaRoda said compared with Caribbean Social Security programmes, NIB has one of the lowest rates, but offers the same, or more benefits, of those programmes with the exception of Barbados.

NIB offers a total of eleven Benefits as income replacement for those who are unable to work or have work-related injuries; provides assistance to individuals who do not have sufficient contributions to qualify for a benefit; and an unemployment benefit – a branch of national insurance now being considered for inclusion in other Caribbean countries.

Additional offerings include: Pension payments of over $26 million each month to over 44,000 pensioners; Injury Benefit to workers injured on the first day on the job who may have never paid into National Insurance; Bahamian mothers have access to Maternity Benefits for each live birth—a crucial support system for both the mother and child.

“Most countries do not provide an unemployment benefit, but their contribution rate exceeds that of NIB Bahamas,” Mr. LaRoda continued.  “Across the region, the contribution rate averages 12% (NIB is under 10), and several countries already have approved contribution rate increases in place over the next few years.”

Mr. LaRoda said of even greater significance is the sharp increase in benefit payments to NIB's contributors and dependents.  These benefits had mushroomed from $8 million in 1981, when the programme was in its infancy stage, to $354 million in 2022 as a mature scheme.

“Can you imagine the degradation and the displacement of our people that would have occurred if this $354 million were not put into our economy last year?  The Scheme serves and continues to serve its purpose as a social safety net for Bahamians from all walks of life.”

State-Minister LaRoda said over the last ten years, the average number of pensioners being paid every month has increased by over 35%.

“This,” he said, “is driving the increase in benefit expenses, coupled with the fact that each year the average benefit per recipient increases as first-time pensioners are being paid higher benefits than in prior years.  As you know, NIB adjusts the insurable wage ceiling every two years, and this translates to higher benefits for those who pay at the higher ceiling.”

State-Minister LaRoda said in the past, NIB's income exceeded its expenses resulting in the build-up of its reserves - peaking at $1.75 billion in 2016.  In 2016, the benefits expenses exceeded contribution income by $14 million; in that year, NIB reported an overall deficit of $15.8 million.  Every year since, benefits have exceeded contributions, and the difference between the two continues to grow. In 2022 the NIB's reserves stood at $1.4 billion.

The deficits recorded by NIB continue into 2023.  The budgeted deficit for this year is $97.6 million, driven mainly by benefits exceeding contributions by $86 million.

“This trend can only be sustained for a short time,” Mr. LaRoda told Parliament.

State-Minister LaRoda said the ILO Report recommended an immediate, sustained, and systematic increase in the contribution rate to secure the fund in the short term.

“This call for an increase in the rate was also anticipated from earlier actuarial reports.  It also identifies other options that can be considered for the long-term design of the plan.  At this time, it is considered to increase the Contribution Rate every two years for some time.  A staggered implementation aims to allow businesses and workers adequate time to adjust their budgets accordingly while still ensuring the system's sustainability in the future,” State-Minister LaRoda added.

Source

Let’s get real on redeeming the National Insurance Board (NIB) fund, Minister Myles LaRoda

Let’s get real with National Insurance, Minister Myles LaRoda 

By Dennis Dames

Minister of State in the Office of the Prime Minister with responsibility for the National Insurance Board (NIB), Myles LaRoda, has been talking a lot lately about increasing contributions of employers and employees in order to stabilize the NIB fund.

That is an impractical proposition by itself in my view as the NIB fund is already in a very critical state, and employers and employees are presently paying a combined 9.8 percent!

How much higher does any sensible government thinks that that rate can realistically and practically increase without serious financial ramifications for the employer and employee?

The minister stated that the government is in no position to assist NIB financially.  What nonsense!

NIB’s problem has always been poor governance and a lack of prudent vision from its inception, in my humble opinion.

Too much political interference and sweetheart jobs over the decades have contributed significantly to the deplorable state of the NIB fund today.

Add the issue of inept management, over-staffing and political crony jobs, and we get an even grimmer picture of the depressing and ongoing disgraceful state of the rapid erosion of the NIB fund.

The government must find a way to become a partner in the rescue of the NIB fund, Minister LaRoda.  Let’s start with reducing the government’s travel budget, for example.

We live in the 21st Century and technological age where we can show some international leadership, and encourage and persuade our respective global counterparts to have more conferences online.  We can use the savings from the elimination of unnecessary state, political and sweetheart travelling to enhance the NIB investment fund.

Let’s stop acting brand new and talking fool like we just realize that more and more of us are living longer, and are thus putting a strain on the NIB fund by collecting our well deserved monthly pension checks.

Let’s get real on redeeming the NIB fund, Minister LaRoda.

Now is the time for the government of The Bahamas to show real political and executive leadership in the salvation of the NIB fund by letting the people know what the government’s financial contribution is going to be until the NIB fund is put in to a healthy position once and for all - for the future posterity.

We want the truth, the whole truth and nothing but the truth concerning the disposition of the people’s money at the National Insurance Board (NIB)

Come Clean on NIB

The Bahama Journal Editorial

That matter concerning who did what, who decided who should get what and that matter which concerns money in the care of the National Insurance Board is one that should be decided now.

The Hon. Shane Gibson is himself clear enough in his mind as to what should be done.  Like us he seems to be on the side of those Bahamians who know that whatever is to be done should be executed now rather than later.  As one news report suggests: – “…National Insurance Minister Shane Gibson said he is already satisfied [in his mind] “what course of action we should take” based on the findings of the audit into the National Insurance Board.

Decisions made by NIB board members “based on the information (they) had when they were first appointed, seem to be justified…it went way beyond where we thought it would go and so we don’t want to make any rushed judgment or decision; we want to think about it carefully.

But I can guarantee you one thing, at the end of the day – it will be made public and it’s just a matter of when…”  Just a matter of when is not good enough.  Whatever is to be done should be done now.  We need to know all that the Minister and whomever else already knows the whodunit questions and the corresponding answers.

In his statement of the obvious, Minister Gibson says that, “…As soon as we make a decision based on the recommendations of the AG’s Office, then one of two things will happen:- “He will either return to work or he won’t return to work.”  We all must wait to hear, see and understand what the Attorney-General’s Office has to say on the matter concerning the stewardship of the people’s money.

The time is now for demanding that the Hon. Shane Gibson show and tell the Bahamian people all that he knows concerning whatever it is that has come to light in the aftermath of that forensic audit into the affairs of the National Insurance Board ordered and/or sanctioned by his colleagues in the Cabinet.  And let it be known that we shall have none of that good old fudge that some among us are prepared to feast on when there is information in hand that might hurt this or that favored character of ours’.

The chips – as they say – should be allowed to fly where ever they may.  Very many other right-thinking Bahamians want to know about what really did go down at National Insurance to cause all the furor and innuendo that now engulf a number of current and former employees of that star-crossed government owned entity.

Not only do we want to know what happened, we want to know if anyone is going to be charged with any wrong-doing.  And most of all, we take this opportunity to let this administration know that the Bahamian people want them to come clean and let the chips fall where they may.  And lest there be some other mistake concerning the extent of the people’s justified anger about what they have heard concerning the National Insurance issue, these people are also angry because things are tough for them.  They are therefore in no mood to turn a blind eye on this scandal.

The hurt for many continues, so too does the gravy train hum for some others who are mired in games now being played out in other sectors of this or that state-owned entity.  Enough remains enough!  In addition, as we look in on scandal’s NIB face, we are reminded of the fact that this nation now reels not only at the hammer blows inflicted by a world-economy over which it has little to no real control, but that the so-called man in the street now cowers in the cold shadow of poverty on the hoof.

An ever expectant people now demand transparency, accountability and responsibility from all who lead and all who would lead.  But above all else, the Bahamian people demand action, results and transparency from those elected to serve them.  In addition, they are now demanding the same from all those nameless, faceless bureaucrats who work with, for and under the command of politicians.  We too need to know whether the National Insurance Fund has been pillaged and somehow or the other been diverted from their proper use.

Put simply:-We want the truth, the whole truth and nothing but the truth concerning the disposition of the people’s money.

April 17, 2013

Jones Bahamas