Member of Parliament S.Chinzorig initiated a draft bill on repayment of pension contributions of herders and the self-employed, and another bill to amend the Law on Pensions and Benefits Provided by the Social Insurance Fund. MP S.Chinzorig gave an interview to clarify details of the two bills.


You submitted a draft bill on repayment of pension contributions by herders and self-employed people. What’s the main purpose of this bill?

Studies show that there are 100,000 workers nationwide, 47.5 percent of whom are herders and self-employed laborers. It has been estimated that there are a total of some 300,000 herders and 240,000 self-insured people. However, their social insurance contribution (SIC) is very poor. In herders’ case, only nine percent pay SIC while merely 15 percent of the self-employed pay SIC, according to research. This means that 85 to 90 percent of herders and the self-employed will be at a disadvantage when they grow older due to poor social security. I initiated a draft bill to allow one-time SIC repayment for these people so that we can boost their social security. It’s up to the person to decide how many years’ worth of SIC to repay. In any case, the bill opens opportunities for people who didn’t or couldn’t pay SIC in the past to repay that amount.

How would herders and self-employed people’s outstanding SIC be calculated and paid?

Herders who haven’t paid SIC for five or 10 years will repay in relation to the minimum annual wage of that period. For instance, let’s say a herder hasn’t paid SIC for 10 years. He or she will have to have his 10 years’ worth of SIC calculated with the minimum wage amount of the past 10 years. If they didn’t pay SIC for five years, they’ll have to repay in relation to the minimum wage amount of five years ago.

 If the bill is approved, people of which age range can repay SIC?

The bill states that there are herders and self-employed persons between the ages of 15 and 60. Fifteen-year-olds are able to work under the supervision of parents or guardian according to the Labor Law. Sixty is the maximum age limit for SIC payers because people get their pension determined at the age of 60.

 How can people who are interested in paying outstanding SIC but are unable to pay with a large sum pay their SIC?

At present, over 540,000 people can have their SIC rewritten by repaying the unpaid amount. If these people were to fully repay their SIC, an estimate of more than 300 billion MNT will be centralized to the social insurance fund. However, it’s up to each person to decide how many years’ worth of SIC to repay. From my calculation, a herder who hasn’t paid SIC for five years will have to pay around 400,000 MNT. It’s understandable that some of them wouldn’t be able to pay this amount at once considering the current economic situation in Mongolia, so I gave the government the authority to manage this matter through regulation. This means that the government can decide whether a pending social insurance payer has to repay the full amount within half a year or a year. Once the bill and relevant regulation have been approved, individuals can establish agreements with their affiliate social insurance department and pay SIC accordingly.

 The draft bill is being discussed by Parliament. If it is passed, when will the bill take effect?

As the law initiator, I proposed putting it into effect on January 1, 2017. It’s required for MPs to consult cabinet members before submitting a draft bill. Cabinet members supported this bill. However, they suggested enforcing the bill in 2018 in consideration of a requirement to find an additional income source for the social insurance fund as the 2017 state budget has been approved and the challenges we’ll have to face to implement the bill since the economy is in a bad shape. The working group that worked on this bill discussed this at the parliamentary standing committee meeting and decided to respect cabinet members’ opinion.

 Besides the draft bill on repayment of pension contributions, you initiated another bill to amend the Law on Pensions and Benefits Provided by the Social Insurance Fund. What changes have you made to this law?

This draft bill is also under discussion at the moment. I’m hoping that it will be approved soon. We’re trying to resolve comprehensive challenges faced by two groups of people through amendments.

Firstly, the bill aims to realistically value labor of mothers who gave birth and raised many children with the objective to have mothers insured. This way, mothers with many children will be able to get a decent pension when they retire. We will add 1.5 years’ worth of SIC to the social security of mothers for every child they raise.

For example, if a woman worked for 20 years and had four children, six years will be added to the number of years they worked and paid SIC. The more years you have paid SIC, the more pension you will receive when you retire. As I said before, 1.5 years will be added for each child a woman raises so three years will be added if they have two children, 4.5 years if they have three children, six years if they have four children and so on.


 

…Social insurance legislations must be revised. The pension and benefit amount needs to be increased to a level where people can continue to make ends meet…


 

Secondly, we’re trying to make it so that women’s SIC doesn’t cut off when they take a three-year break from work to looking after their newborn child. In particular, employers will have to pay SIC for their female staff who take a break from work to look after their children until the child reaches the age of three. As for self-insured mothers, the social insurance fund will cover their contribution until their child turns three. The bill enables unemployed women who don’t pay social insurance at all to have the state cover 50 percent of their SIC and the remaining 50 percent on their own.

Thirdly, pregnancy and maternity benefits are provided to women who pay SIC. The current law provides full income benefit to insured pregnant women and those on maternal leave. Self-insured mothers receive 75 percent of their income in welfare.  The newly proposed amendment will allow both insured and self-insured pregnant women and those on maternal leave to receive 100 percent of the income benefit.

The second group is herders. Two issues have been included in the bill to enhance social security of herders. One of them is the fact that herders work day and night outside and in the countryside without breaks or holidays. People working in urban settlements work only eight hours a day. Herders spend most of their time outside whether it’s scorching hot, pouring or freezing cold. The average life expectancy of herders is relatively lower than people who live in settlements. In relation to this, an amendment to lower the retirement age of herders by five years has been added to the bill. The current Social Insurance Fund Law allows male herders to retire at the age of 60, and at 55 for female herders. The draft bill reduces it to 55 for men and 50 for women. The second additional regulation for herders is to account a year of herding as 1.5 years of herding to improve herders’ social security.

 Lately, there have been many scandals related to social insurance such as pension scams where a state inspector embezzled pension through the accounts of the deceased. Improvements are necessary for the social insurance sector. How can the accessibility of this sector be increased?

Social insurance legislations must be revised. The pension and benefit amount needs to be increased to a level where people can continue to make ends meet. Like so there are many problems we must resolve. Seniors always ask us to help them reduce the pension gap – people who did the same work for the same amount of time are getting different pension depending on the year they retired. In other words, teachers who retired in the 1990s and teachers retiring now are getting different amount of pension. The gap is due to high wage increase in the past few years caused by high inflation rate. It’s necessary to ensure that people who did the same work for the same amount of time to receive the same amount of pension when they retire.

Secondly, the notional defined contribution pension scheme was established for everyone born after January 1, 1960. A law specifying that pensions will be provided from notional defined contribution became effective in 2015. Yet, people who follow this pension scheme are getting less pension than those receiving pension from the social insurance fund.  Retirees can have their pension amount determined at 45 percent of their annual income at minimum or 80 percent at maximum through the social insurance fund. On the other hand, people registered under the pension scheme receive pension based on the amount their employers or themselves paid. There’s a requirement to develop legislations and renew pension determining methods so that everyone can get a fair amount of pension for the work they did. These issues will be resolved step by step.

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