New Social Insurance and Pensions L

Last month finally witnessed the publishing of the new Social Insurance and Pensions Law No. 148 of 2019 (the “Law”)[1] in the Official Gazette. The 153-page Law provides a comprehensive and unified legislation for the different kinds of social insurance and pensions in Egypt, tasking one authority – the National Organization for Social Insurance[2] – with the management, collection, and disbursement of social insurance-related dues in lieu of the multiple administrative bodies that were previously in charge of this. To that effect, the Law elaborates on the National Organization for Social Insurance’s board’s composition and mandate, its chairperson’s roles, and its newly established committees in much greater detail than was in previous legislation. In addition, the Law replaces the two existing funds related to social insurance with an integrated one while establishing for the latter a separate fund specific to investing its money. The Law addresses four categories of concerned entities – namely employees, employers, Egyptians working abroad, and irregular labor – and details the requirements and procedures related to pensions and different insured risks (namely old age, disability, and death; work injuries; sickness; and unemployment) which are mandatory for all these categories (except for Egyptians working abroad, for whom the insurance is optional). The Law specifies a half-year period for the Prime Minister to issue its Executive Regulations (i.e., before February 2020), during which time the executive regulations and decisions related to prior social insurance laws are to remain operative as long as they conform to the new Law’s provisions. The Law goes into effect on the first day of next year (i.e., 1 January 2020), except for Articles (111-114) – which concern the annual EGP 160.5 billion dues that the Treasury owes to the National Organization for Social Insurance (to be annually increased at a 5.7% compound rate) for 50 years – which went into effect on 20 August 2019. Finally, it is worth noting that the Law does not directly specify which previous legislation it repeals, simply stipulating that any provision in contradiction with its provisions are annulled; this is inaccurate drafting, particularly for a law of such significance, wherein a clear and definite specification of repealed legislation would have been better.

Background

Despite its problems and shortcomings, the social insurance and pensions scheme in Egypt remains one of the oldest and most comprehensive in Africa. Although the general trend in literature has been to date modern social protection systems in Egypt to the 1950s, particularly with former president Gamal Abdel Nasser’s accession to power, the history of social protection and welfare in modern Egypt could be traced further back by a century, with two of the earliest cited pension laws being passed in August 1844 and in December 1854. Since then, successive laws through the nineteenth and twentieth centuries have amended the social protection system to include different categories under its coverage beyond the initial exclusivity of civil servants and to develop a funding-sharing mechanism whereby pensions and insurance are financed by different parties rather than only by the state as was initially the case.[3] Prior to the issuance of last month’s Law, the social insurance and pensions system in Egypt has been fragmented. There was no single comprehensive scheme covering all categories of the insured; instead, a maze of laws and their executive regulations has governed social protection in Egypt. The relevant ones prior to the new Law are as follows:[4]

• The Social Insurance Law No. 79 of 1975 (“Law 79/1975”)[5]

This covered all employees in the government and public and private sectors with regards to old age, disability, and death; work injuries; sickness; and unemployment. It was mandatory.

• The Social Insurance Law for Employers No. 108 of 1976

This was also mandatory and covered private-sector employers and the self-employed mainly with regards to old age, disability, and death.

• The Social Insurance Law for Egyptian Workers Abroad No. 50 of 1978

This covered Egyptians working abroad mainly with regards to old age, disability, and death.

• The Comprehensive Social Insurance Scheme Law No. 112 of 1980

This was also mandatory and covered irregular labor (those who were not subject to the other laws on social insurance and pensions) with regards to old age, disability, and death. It is worth noting that Law 79/1975 has been the backbone of the social insurance system in Egypt since its enactment in 1975, with a brief interruption from 2010-2013 when Law No. 135 of 2010, which was issued towards the end of former president Hosni Mubarak’s rule, replaced it before being repealed itself following 30 June 2013, bringing back the four previously listed laws into effect.

The New Law

1. The Scope of the Law in terms of Concerned Entities

To begin with, the Law specifies four main categories of concerned entities falling under its purview (which were previously addressed in separate legal frameworks as noted above), while also identifying examples of who would fall under each category. To a great extent, the Law simply reiterates what has been stipulated in previous legislation in this regard, with very minor additions or amendments made. The following table shows the main categories and some of their sub-categories as listed in Article (2) of the Law; entries accompanied with an asterisk designate additions or amendments to previous regulation.

2. Types of Social Insurance Covered in the Law

The Law repeats the main risks that the system of social insurance covers for these four different categories as was present in previous legislation. To that effect, in its Article (3), the Law specifies four types of social insurance that fall under its purview:

1. insurance against old age, disability, and death (for all categories);

2. insurance against work injuries (for employees as well as workers in the private sector who are less than 18 years of age; graduates; students undertaking summer work projects; and those who work after the age of retirement and do not fall under the insurance against old age, disability, and death);

3. sickness social insurance (for employees, employers, and irregular labor); and

4. unemployment insurance (only for some employees, namely public- and private-sector employees and public business sector employees, with the exclusion of seasonal, casual, and temporary workers).

In this sense, one of the main differences between the new Law and the previous legislation seems to be in the expansion of social insurance for employers and irregular labor with regards to social insurance coverage against sickness. In any case, the Law delineates the details related to each of these types of insurance in addition to pensions and compensations. Among other things, it lists how each type of insurance is to be financed (in terms of sources (e.g., monthly subscriptions, returns of investment on the insurance funds, money allocated from the Treasury, gifts, donations, and so forth) and percentages to be covered by employers and/or employees); prerequisites for enjoying the insurance (including subscription periods, age range, and other bureaucratic and legal requirements); calculation of compensation/insurance and the process of its disbursement (including the required paperwork/documents and application timeframes); the timeframes for enjoying the benefits or being compensated; cases of suspension of benefits; and cases for simultaneously allowing multiple pensions. It also specifies the relevant authorities and governmental agencies involved in each type of insurance, such as the General Authority for Health Insurance. Finally, the Law stipulates that insurance under its purview is mandatory, except for Egyptians working abroad whose insurance is optional but could be made mandatory when they are working in countries that do not insure Egyptian workers (in which case a Prime Ministerial decree is to be issued with this).

3. The National Organization for Social Insurance (“NOSI”)

The new Law delves into the composition and role of NOSI in the system of social insurance and pensions in Egypt. NOSI’s structure was slightly amended such that its chairperson is no longer the Minister of Social Solidarity, but any expert in matters of pensions and social insurance who will fill the position full-time. The Law also adds a cap to NOSI’s board membership at 4 years, with the possibility of renewing the membership only once for NOSI’s chairperson, his/her deputies, the representatives of pensioners, and the experts. Additionally, the Law stipulates the formation of several NOSI committees, including a Review Committee, a Governance Committee, and most importantly a Committee of Experts. The latter is to comprise a maximum of nine actuarial, financial, and insurance experts (nominated by NOSI’s board), among whom is a representative of the Ministry of Finance (nominated by the Minister of Finance). The Committee of Experts is formed through a Prime Ministerial decree and its tasks include undertaking actuarial reviews of the social insurance systems, giving expert advice on actuarial- and insurance-related topics to NOSI’s board, preparing studies and research, and giving opinion on social insurance-related draft laws. Dispute committees at NOSI are also provided for under the new framework. They are to deal with all matters provided for in the Law, including the different types of insurance and pensions. These committees are to be referred to prior to resorting to courts and lawsuits can only be filed after 30 days from the date of applying to NOSI for the said committees to take up the contested matter for an amicable dispute settlement. Falling under the auspices of the Minister of Social Solidarity, NOSI’s independence is highlighted in the Law. It is financially, technically, and administratively independent and is to have an independent budget. NOSI’s transactions are also not subject to laws regarding supervision over insurance. Furthermore, amounts due to NOSI as per the Law has priority over the debtor’s money (be it movables or real estate) and NOSI can exercise administrative sequestration in collecting these dues. Finally, it is worth noting that NOSI must submit quarterly and yearly financial statements to the President, the Cabinet, and the House of Representatives.

4. Funds related to the Social Insurance System

Under the previous legislation, particularly Law 79/1975, there were two separate funds for the different kinds of social insurance: one was for workers in the state’s administrative units and in public authorities (i.e., a government social fund for civil servants) while the other was for concerned entities in public institutions, economic units, and the private and cooperative sectors (including employees in the public and private sectors, employers, Egyptians working abroad, and irregular labor). These were replaced in the new Law with one combined fund for all the different kinds of social insurance falling under the Law’s purview (the “Fund”). This integrated Fund will have different accounts within it allocated for the different kinds of social insurance and the financial positions of the different accounts in the Fund are to be reviewed once every three years (instead of the previous five-year period stipulated in Law 79/1975) by the Committee of Experts through an actuarial report presented to the House of Representatives. The Fund’s money is private and it is to be financed through subscriptions, the Treasury dues, service fees, fines, donations, gifts, and returns on investment on the Fund’s money, among other resources. In addition to this, the Law sets up another fund for the management and investment of the previously mentioned Fund’s money. This fund is to invest the money of social insurance in a manner that develops its resources and diversifies its portfolio. A board of trustees is to be formed via a Prime Ministerial decree to manage this fund.

5. Financing Social Insurance and Pensions

The Law sets the subscription for insurance against old age, disability, and death at an overall 21% (of the salary/wage, the subscription income, or the minimum subscription fee, depending on the case) for all categories. This represents a unified change from the previously stipulated varying rates of 25% for employees (Law 79/1975), 15% for employers (Law No. 108 of 1976), 22.5% for Egyptians working abroad (Law No. 50 of 1978), and 7% for irregular labor (Law No. 112 of 1980). The 21% subscription rate is broken down as follows: for employees, the employer’s share is 12% of the insured person’s salary/wage while the insured person’s share is 9% of their salary/wage; for employers and Egyptians working abroad, the rate is 21% of the monthly subscription income that is chosen by the insured person from the list that will accompany the Executive Regulations; finally, for irregular labor, the insured person’s share is 9% of the minimum subscription fee with 12% of the same fee being made by the Treasury. It is worth noting that the new subscription rate is to increase every seven years (from the Law’s going into effect) by 1% (to be equally shared between the employer and insured employee), with a cap of 26% set on the total subscription rate. With regards to work injuries, the Law specifies its monthly subscription to range from 0.5% to 1% of the subscription fee to be made by the employer. Exemptions from the monthly subscriptions are made with regards to unpaid workers in the private sector who are less than 18 years of age; unpaid graduates; and unpaid students undertaking summer work projects. This differs from the previous Law 79/1975, wherein the monthly subscriptions made by employers ranged from 1-3% of the insured person’s salary/wage. As for sickness, the Law specifies monthly subscriptions ranging from an overall 4% to 4.25% of the insured person’s salary/wage for employees (in contrast to the range of 4% to 5% of the wage/salary under Law 79/1975) and at 4% of the monthly subscription income or fee for employers and irregular labor. Finally, with regards to unemployment social insurance, its monthly subscription is set, by virtue of the new Law, at 1% of the employee’s salary/wage to be made by the employer, which is a decrease from the previous 2% stipulated in Law 79/1975.

6. Entitlement to Pensions

As for pensions, the Law sets a range between 65% and 80% of the minimum subscription fee on the date of pension entitlement. In addition, pensions will increase by a maximum of 15% on the first of July of every year. The legal definition of ‘old age’ was also elaborated on in the new Law. ‘Old age’ is equivalent to 60 years for employees and Egyptians working abroad or 65 years for employers and irregular labor. However, the Prime Minister is to issue a decree to gradually unify ‘old age’ for all categories to become 65 years as of 1 July 2040. With regards to the disbursement of pensions, compensations, and other dues stipulated in the Law, disbursement application deadlines are five years from the date on which the cause of entitlement arose; after this period, only pensions could be disbursed. NOSI is to undertake the disbursement within four weeks from the submission date of a complete disbursement application; late disbursement could entail additional fees to be paid to the concerned party for each month beyond this deadline. With regards to the disbursement of pensions in specific, all agencies to which NOSI refers pensions – including but not limited to Nasser Social Bank, all commercial banks, and the Egyptian National Post Organization – must undertake the disbursement of these pensions in the process and during the timeframes that will be listed in the yet-to-be-issued Executive Regulations of the Law. NOSI can also provide technological services to pensioners and beneficiaries either directly or through contracted banks or other specialized companies, as will be specified in the Executive Regulations. It is worth noting that pensioners and beneficiaries must pay a disbursement fee of 0.2% of the due amounts (but which does not exceed EGP 20). The fee proceeds are to be transferred to a special account for NOSI’s employees, with a percentage of such proceeds going to the disbursement agencies as will be detailed in the Executive Regulations.

7. Reporting and Disclosure Requirements

Private-sector employers must provide NOSI with a list of employees, their salaries/wages, and subscriptions. All employers must also submit to NOSI a list of employees at the end of their service due to reaching the age of pension entitlement (at least three months prior to end of service). In addition, all governmental authorities (including the Egyptian Tax Authority and the General Administration of Passports, Immigration, and Nationality), civil status organizations, banks, unions, and associations must submit to NOSI all the information it requests in relation to the implementation of the Law’s provisions. Failure to provide NOSI with the aforementioned lists or to submit requested social insurance files will lead to a fine ranging from EGP 20,000 to EGP 50,000. A similar fine is charged for providing wrong information, failing to report the required information/data, or intentionally not paying the amounts due to NOSI via the provision of wrong data or the hiding of data. Moreover, authorized NOSI officers have the right to undertake necessary investigations, during normal working hours, and access all necessary records (including financial documents) related to the implementation of the Law. This includes investigations in all workplaces, including in free zones and other special zones. Preventing these officers from entering the workplace or accessing necessary documentation, providing them with inaccurate information, or failing to provide them with the required information as stipulated in the Law or its related decisions and regulations will lead to a fine ranging from EGP 30,000 to EGP 100,000.

8. Tax and Fee Exemptions

The Law also delves into the tax treatments related to social insurance and pensions. As per Article (124) of the new Law, subscriptions are exempted from all kinds of taxes and fees, whether current or future. Paperwork related to the implementation of the new Law, including different forms, certificates, and contracts, are exempted from the stamp duty. NOSI’s funds and investment transactions are also exempted from all kinds of current and future taxes (including VAT) and notarization fees. NOSI can also import all materials necessary for its work without taxes and other related fees.

9. Additional Penalties

In addition to the penalties related to reporting and disclosure requirements listed above, here are other measures stipulated in the Law: The amounts of the fines listed in the Law are to be reviewed every ten years from the date of the Law’s going into effect.   [1] Law No. 148/2019 on Social Insurance and Pensions, Official Gazette, Issue No. 33 (bis) (a), 19 August 2019. [2] This has been alternatively named the National Authority for Social Insurance and the National Social Insurance Authority. However, given that the official website of the authority has it translated as “National Organization for Social Insurance,” this choice was adopted for this piece. [3] Ministry of Social Solidarity, “A Brief on Social Insurance and its Stages of Development,” available through this link (in Arabic). Hunter, F. R. (1999). Egypt Under the Khedives, 1805-1879: From Household Government to Modern Bureaucracy. Cairo: The American University in Cairo Press. Shlala, E. H. (2018). The Late Ottoman Empire and Egypt: Hybridity, Law and Gender. Oxon: Routledge. [4] Ameta, D., and El Shafie, H., (2015), Social Protection and Safety Nets in Egypt, available through the Institute of Development Studies via this link. Gillion, C., Turner, J., Bailey, C., and Latulippe, D., (2000), Social Security Pensions: Development and Reform, Geneva: International Labour Organization, available through this link. Robalino, D. A., (2005), Pensions in the Middle East and North Africa: Time for Change, available through the World Bank via this link. Sieverding, M., and Selwaness, I., (2012), Social Protection in Egypt: A Policy Overview. Gender and Work in the Mena Region Working Paper Series, Issue No. 23, available through the Population Council’s website via this link. [5] Law No. 79/1975 on Social Insurance, Official Gazette, Issue No. 35 (cont.), 28 August 1975.