Of State Governments and CPS Compliance

Pension Reform Act 2014 made provision for  state governments to migrate to the  Contributory Pension Scheme from non funded Defined Benefit Pension Scheme  but  many state governments prefer to remain with the old scheme. Ebere Nwoji in this report x-rays the compliance  status of various state governments to the CPS.

Among  the rules and regulations, guidelines and laws governing the implementation of the Contributory Pension scheme, section 3 (1) of the Pension Reform Act 2014 on  state governments’  compliance and implementation of the Contributory Pension Scheme has remained a hard nut to crack by both National Pension Commission(PenCom) and pension Fund operators.

Hard nut indeed because efforts by both PenCom and Pension Fund operators to get various state governments  key into the scheme since 2014 failed to yield desired  results.

This spells the need for PenCom and  pension fund operating firms to intensify efforts in engaging the in coming state governors and House of Representatives on the need to ensure total compliance  with the CPS scheme.

Pension stakeholders  lamented that it was quite unfortunate that nine years after the enactment of the 2014 Pension Reform Act which mandated state governments to key into the CPS scheme by migrating their workers from the non funded Defined Benefit Pension scheme to funded CPS, many state governments prefer to remain in the old scheme.

To the extent that among the 36 states of the federation and FCT not up to five States have fully complied with the CPS Act . Analysts have attributed this to lack of will power by the various state governments to comply with the CPS.

Section 3(1) of the PRA 2014 states, “There is established for any employment in the Federal Republic of Nigeria, a Contributory Pension Scheme for payment of retirement benefits of employees to whom the Scheme applies under this Act. The Scheme shall apply to all employees in the Public Service of the Federation, the Federal Capital Territory, States, Local Governments and the Private Sector….” Accordingly, this means that every employee covered under this Act has a right to a Pension.

But in the view of analysts, employee will have right to receive retirement benefit  if his employer has complied with the aspect of the law on opening of Retirement Savings Account and contributions of savings to it as stated by the law.

This, they said, is what the non complying state governments are denying their workers.

The result of this is that whereas the current reforms in the pension system have  seen federal government workers and those of private sector  retiring with hope of better tomorrow, workers and pensioners who worked with state governments are still in the dungeon of unhappy retirement and old age poverty because of inability to access their retirement benefits as and when due.

Indeed some state governments have not been paying their workers regular salaries  let alone paying retirement benefits to their retirees. What this means is that these state government workers will at retirement be left at the mercy of their governors and how much budget he decides to apportion to pension payments. But has the states fully keyed into the CPS?

Status of compliance

Checks by THISDAY on status of compliance of various states to CPS revealed  that many states are as dormant as they have been in the past two to three years in their efforts to key into the CPS scheme. 

Some have not even enacted their CPS laws while some  enacted the law without contributing anything to their workers’ RSA. For instance  some states in the North Eastern part of the country, according to PenCom have not done much. A state like Adamawa as at March 31st 2022 up to the last report on its activities as at December 2022 did not record any improvement in its efforts to fully key into the contributory pension scheme. The state had in 2013 enacted its CPS law and drafted the Adamawa State Contributory Pension Scheme through its CPS bill 2020, which seeks to establish a scheme similar to Contributory Defined Benefits Scheme (CDBS) .

According to PenCom, the 2013 law did  not provide for the appointment of PFAs, which is the key actor in the CPS while the 2020 bill drafted by the state to amend the CBDS proposed the custody of pension funds by a board of trustees instead of PFCs. Also the state is yet to establish a pension bureau and is yet to commence remittances of pension contributions for the employees and yet to conduct actuarial valuation to determine the employees’ Accrued Pension Rights.

PenCom said the state is also yet to open Retirement Benefits Bond Redemption fund account and is yet to commence funding of Accrued Pension Rights and yet to institute a group life Insurance policy for its workers.

Analysts said with this, the state is still far from adequate pension planning for its retiring workers.

Bauchi state as at the same period March 31st, 2022 up to December 2022 though has drafted a bill on Contributory Defined Benefits Scheme (CDBS) in 2015, constituted committee to guide the process of implementing the CPS, and other reforms needed  in pension administration in the state. It only drafted a bill in 2022 but is yet to enact law on the CPS to guide implementation of the scheme and yet to establish a pension bureau. The state is also yet to register the employee with PFAs. It is equally yet to commence remittance of pension contributions for the employees and has not conducted an Actuarial Valuation to determine the employees’ Accrued Pension Rights. Also the state is yet to open a Retirement Benefits Bond Redemption Fund Account for its workers and is yet to commence funding of Accrued Pension Rights and is yet to institute a Group Life Insurance Policy. The same status is maintained by other states in the north east such as Gombe, which enacted its own law in 2006 which was repealed and replaced with Pension Reform law 2014 it later repealed the law and enacted the Gombe State Contributory Defined Benefit Scheme (CDBS) law 2019.

Taraba enacted its pension Reform Law law in 2009 and has remained dormant as far as CPS implementation is concerned. Yobe state only inaugurated  a committee on CPS in 2020,  drafted a bill on CPS and set up a committee to facilitate the adoption of the CPS since then it has remained dormant. Borno seems to be the worst as it drafted a bill on CPS in 2012, forwarded it to PenCom, which in turn communicated its observation to the stat but up till now has not seen any response regarding its adoption of CPS. These states equally do not have any plan on group life insurance for their workers.

North West States

For the North West, the Jigawa State and Local Government Contributory Pension Scheme Law was enacted in 2005. The law was amended in 2015 and 2020. The State has set up the Jigawa (State and Local Governments) Contributory  Pension Scheme Board. The CDBS does not require the registration of employees and opening of Retirement Savings Accounts (RSAs) with Pension Fund Administrators (PFAs). It has been remitting 17 percent employer & 8 employee  Pension Contributions under the  Contributory Defined Benefits Scheme.

It has conducted an Actuarial Valuation to determine the employees’ Accrued Pension 

Rights in December 2018. It but the institution of the Group Life Insurance Policy is not required under the CDBS. It has also opened Retirement Benefits Bond Redemption Fund Accounts (RBBRFA) with the  CBN.

Jigawa has been funding its Accrued Rights consistenly with 5 percent of the monthly wage bill.

It  instituted a Sinking Fund domiciled with the CBN in place of a Group Life  Insurance policy. But it has arrears of Accrued Pension Rights. Kaduna State has enacted the Kaduna State Pension Reform Law in 2007. The Law was amended in 2016 and 2020. The state government has established the Kaduna State Pension Bureau to oversee  the process of implementing the CPS in the State.  It registered employees with PFAs.

The state is currently deducting and remitting both employer and employee 

pension contributions consistently based on 8 percent employer and 7 percent employee 

contributions.

The state had conducted an actuarial valuation and determined the accrued  rights due to the employees that transited into the CPS. The Kano State Government enacted the Kano State Pension and Gratuity Law in 2006 to drive the  implementation of the Contributory Defined Benefits Scheme (CDBS). The state government assigned the administration and custody of pension  funds and assets to the Kano State Pension Fund Trustees. 

The state has commenced the deduction and remittance of both employer and employee pension contributions into the fund account opened by the trustee.  It is yet  to establish a State Pension Bureau.

The state employees are not registered with PFAs as CDBS does not require the 

registration of employees and opening of Retirement Savings Accounts (RSAs) with 

Pension Fund Administrations (PFAs). It is yet to transfer pension assests to a Licensed Pension Fund Custodian and it is yet to conduct an Actuarial Valuation to determine the quantum of its liability and funding gap.

The Katsina State drafted the Contributory Defined Benefits Scheme (CDBS) Bill in 

2021. The Bill has been passed by the State House of Assembly and awaiting 

accent by the Executive Governor.

Kebbi State Government enacted the Kebbi State Pension Reform Law in 2009. The Law was repealed and replaced with the Kebbi State Pension Reform Law, 2014.

Established the Kebbi State Contributory Pension Board to oversee the  implementation of the CPS in the State.  The State employees have registered with PFAs. The government has started remitting only 7.5 percent employee Pension Contributions. But it is yet  to conduct an Acturial Valuation to determine the employees’ Accrued Pension Rights. Yet to open a Retirement Benefits Bond Redemption Fund Account. Yet to commence funding of the Accrued Pension Rights. Employees covered under the CPS being retired into the DBS as a result of failure to 

remit employer contributions and accrued rights.

The Sokoto State enacted the Sokoto State Pension Reform Law in 2007. It is yet to establish a Pension Bureau. It is yet to register the employees with PFAs; to commence deduction and remittance of Pension Contributions; conduct an Actuarial Valuation to determine the employees’ Accrued Pension Rights and to open a Retirement Benefits Bond Redemption Fund Account. The state has also not commenced funding of the Accrued Pension Rights or institute a Group Life Insurance Policy.

The Zamfara State enacted the Zamfara Pension Reform Law (CPS) in 2006. Repealed the CPS 

Law and re-enacted a Law on the CDBS in 2019. The refund of remittances made under the CPS for employees of the State  has been concluded. But it is yet  to establish a Pension Bureau to oversee the process of implementing the CDBS in  the State.

Its  CDBS law does not require the registration of employees and opening of Retirement 

Savings Accounts (RSAs) with Pension Fund Administrators (PFAs).  It is yet  to commence deduction and remittance of pension contributions under the CDBS. And is yet to  conduct an Actuarial Valuation to determine the quantum of its liability and 

funding gap.

Situation in North Central

For the North Central States, their CPS compliance status is as follows; 

Benue State enacted the ‘Benue State Pension Reform Law’ in May 2019. 

The State is in the process of amending the 2019 law and drafted a new Pension 

Reform Bill in 2022. It has Established a Pension Bureau. The State has registered its employees with Pension Funds Administrators. Commenced dedution and remittance of both employer and employee pension  contributions into the Retirement Savings Accounts (RSAs) of the employees of  three (3) Tertiary Institutions and all the 23 local government  councils. However, the employer contributions for the local government employees stopped in October 2020. Remitting only 8 percent of employees’ Pension . It is yet  to commence remittance of 10 percent employer pension contributions for all other ministries.

The FCT is covered by the PRA 2014. It established two Pension Bureaux (FCT Pension Department & FCT Area Council  Staff Pension Board).

It registered the employees with PFAs. It is remitting 10 percent employer and 8 percent employee pension contributions (up to date  remittance of pension contributions for employees of the FCT Administration  (FCTA) and Local Education Authorities (LEAs), but has backlog of  some Area Councils).

The KOGI State Government enacted the Kogi State Pension Reform Law on 13 March 2018.

It established a Pension Bureau; started process of registering employees with PFAs.

It has Conducted an Actuarial Valuation to determine the employees’ Accrued Pension Rights in 2018. However, the state is in the process of revalidating the 2018 actuarial valuation. It is yet to commence remittance of Pension Contributions or open a Retirement Benefits Bond Redemption Fund Account.

In North Central, Kwara state presented a Bill on the CPS   to the State House of Assembly in 2016. It is yet  to enact a Law on the CPS to guide implementation of the scheme; it has not established a pension bureau. It is yet to register the employees with PFAs and has not commenced remittance of pension contributions for the employees. It is yet  to institute a Group Life Insurance Policy.

Nasarawa State enacted the Nasarawa State Pension Reform  Law in 2005. It repealed and re-enacted a new law in April 2009. The  state further amended its law in 2019and drafted a bill in 2021. Niger State presented a bill on the CPS to the State House of Assembly in 2016.

But is yet  to enact the Law on the CPS.  It is yet  to establish a pension bureau and has not  registered the employees with PFAs. It has also not commenced remittance of pension contributions for the employees. Plateau State drafted a Bill on CPS in 2021.The bill has passed the second reading at the state house of Assembly 

South East

For states in South East, according to PenCom, Abia state enacted law on CPS in 2017. But is yet to establish a pension bureau, yet to register the employees with PFA, yet to commence remittance of pension contributions yet to conduct an actuarial valuation to determine the employees’ Accrued Pension Rights.

Anambra state enacted its CPS Law in 2013, amended some sections in 2014, registered the employees with PFAs. Started remitting both the employer and employees’ contributions from inception to December 2017 but  stopped remittance from January 2018 to February 2022only to resume remittance from March 2022 up to date however PenCom report said the state failed to continue local government remittances since March 2017 .

Ebonyi State only enacted law on CPS in 2017 and has not done any other thing regarding migration to CPS and other forms of retirement planning for its workers as stipulated by law. The story is the same with Enugu State, which stopped at just enacting the CPS law in 2014. The case is the same with Imo state as the state only enacted the CPS law in 2008 and has failed to make further effort.

South West

For states in South West, Ekiti state as at June 2021 has enacted the Ekiti State Contributory Pension Law in 2010. Amended the pension law in 2017, This was also repealed and replaced with the state pension law of 2022. It has established the Ekiti State Pension Commission to drive the implementation of the law in the state.It also established a  pension bureau, registered its employees with PFAs, remitted 10 percent employer and 8 percent employee Pension Contributions up to September 2020 carried out an actuarial valuation, opened a Retirement Benefits Bond Redemption Fund Account with the ARM and Trust Fund  PFAsbut is yet to commence funding of Accrued Pension Rights and yet to institute Group Life Insurance for its workers.

Lagos state enacted a Law on CPS in 2007, amended some sections of the Principal Law in 2021 established the Lagos State Pension Commission (LASPEC) in 2009  registered employees with PFAs. Is remitting 10 percent of employer 8 percent of employee Pension Contributions, conducted an Actuarial Valuation and is funding the employees’ Accrued Pension Rights but has some arrears of Accrued Rights. It recently opened Retirement Benefits Bond Redemption Fund Account with two PFAs for the state and local governments with valid Group Life Insurance Policy. Ogun State enacted a law on the CPS in 2008 amended the Law in 2013 to extend its transition period to 2025, established two pension bureaux for state and local government, registered employees with PFAs.

Ondo state enacted a law on the CPS in 2014. It established a Pension Bureau, registered its employees with PFAs. The state is remitting 10 percent of employer and 8 percent employee pension contributions up to January 2021. Has valid Group Life Insurance Policy but has no Actuarial Valuation for employees’ accrued pension rights. Osun state enacted a law on the CPS in 2008. It established two Pension Bureaux state local governments, registered its employees with PFAs. Remitting 7.5 percent employer and 7.5 percent employee Pension Contributions up to December 2020 for the State employees.  However, there is backlog of pension contributions from May 2019 to July 2020. It  has conducted an Actuarial Valuation and has valid Group Life Insurance Policy plan for its workers.

South South

In South South, the Akwa Ibom state government only drafted its Pension Reform Bill in 2019 presented same to the state House of Assembly but is yet to be passed into law.

Bayelsa State enacted its Pension Reform Law in July 2009 set  up an administrative structure to drive the CPS in the state and local government service but dissolved same in 2021 setting up a 10 man technical committee to see to the CPS implementation,repealed its old law and enacted a new law which it has signed in December 2022. Cross River has its Contributory Pension Bill 2021 undergoing legislative process. Aside this, it has made no other effort.

Delta enacted its CPS law in 2008 amended it in 2011 established two pension bureaux, remitted 10 percent employer and 7.5 percent employee pension contributions up to January 2022 conducted Actuarial valuation and opened Retirement Benefit Bond Redemption Fund Account.

Edo State enacted its CPS law in 2010 commenced implementation in 2017. The state government established pension bureau, registered employees  with PFAs remmitted 10 percent employer and 8 percent employee contributions, conducted Actuarial Valuation and put in place valid Group Life Insurance plan for its workers.

Rivers State enacted its law in 2009, amended it in 2012, repealed and re-enacted it in 2019 and amended again in 2022. It established pension board,commenced remittance of 7.5 percent employer and 7.5 percent employee contributions against 10 percent, 8 percent remittance stipulated by the PRA2014.

It  suspended remittance in 2019 commenced deductions and remittance of only employee pension contributions it is currently refunding the contributions made under the repealed law and has opened Retirement Benefits Bond Redemption Fund Accoubt with PFA in line with the state pension law.

Task Before PenCom, Operators 

The submissions above show the enormous work waiting for PenCom and PFA operators towards  the new governors elect as well as members of various state house of reps. PenCom has more work to do in this regard with states in the north as each state government aside Kaduna and FCT is more interested in CDBS instead of CPS.The CBDS gives less recognition to opening of RSA account for workers and institution of Group Life insurance for the workers which are very key to CPS implementation.

PenCom should gird itself using the power vested on its as the regulator of pension sector to sweep every worker and employee in Nigeria under the CPS. A situation where various agencies and arms of government like law makers who are agitating to opt out of the CPS illegally to establish their own pension board and various state government ignoring the central PRA to establish a different pension law of their state choice will  if allowed by PenCom in few years to come scatter the CPS which today stands as the last hope for Nigerian workers.

Industry observers said PenCom and PFA operators should use every instrument at their disposal including lobbing, publicity campaigns to stop the incoming lawmakers from towing the line of the outgoing ones in opting for a separate pension board for the legislative arm and its workers.They should also lobby or use the law to get the incoming governors fully key into the CPS and ensure that their various state pension laws do not go contrary to stipulations of the PRA 2014.

The National Insurance Commission should come in here and collaborate with PenCom in enforcing the PRA 2014 on compulsory Group Life Insurance for State government workers.

The workers themselves should wake up and take their destiny in their hands by agitating to migrate to CPS  from the Defined Benefit Scheme which is not funded and which will leave them at the mercy of any governor in control of power at their year of retirement. PenCom can do this in the proposed amendment of the 2014 act by making CPS participation compulsory for state governments. The present situation where it is optional creates room for some state governments and their agents to play with pension planning of their retiring workers.