March 24, 2017 10:52 AM, posted
NITIJELA PASSES MISSA REFORM BILL NO. 75
February 28, 2017, MISSA Bill No. 75 was passed by the Nitijela. The new law (P.L. 2017-30) will take effect starting March 6, 2017.
Bill 75 is an enhancement of Bill 47 previously passed by the Nitijela in September 2016 but its implementation was deferred until March 6, 2017 with the passage of Bill 54. It also includes certain provisions in Bill 43, a bill introduced in 2013 but was unsuccessful and that bill has since been eliminated.
The highlights of the MISSA bill follow:
Increase in Retirement Fund tax:
- The maximum taxable wage cap currently at $5,000 per quarter or $20,000 per annum was increased to $10,000 per quarter or $40,000 per annum. Any amount in excess of the wage cap will not be taxed.
- The Retirement Fund rate was increased by 1% (from 7% to 8%) for both employee and employer contributions. However, the current 3.5% contribution rate for Health Fund will remain the same.
- Upon submission of the first quarterly return for 2017, employers are advised to attach a detailed spreadsheet, preferably in Excel, showing a separate calculation of taxable wages covering the period prior to March 6, 2017 and another calculation, from March 6, 2017 and onward.
Decrease in benefits:
- As approved by the Nitijela on February 28, 2017, MISSA shall enforce the following benefit reduction, to be phased in over a period of three years.
- To lessen the impact of the benefit reduction, the RMI Government shall shoulder two-thirds or 66.67% of the cut in benefits in FY 2017 and one-third or 33.33% in FY 2018. In FY 2019 and succeeding fiscal years, the beneficiaries will bear 100% of the reduction.
For Example: A retiree receiving $350.00 a month, will only be deducted $5.85 or 1.67% every month in FY 2017, $11.70 or 3.33% in FY 2018, and $17.50 or 5% in FY 2019.
- A maximum benefit of $1,200 per month was set for those retiring on March 6, 2017 and onward while current beneficiaries will have a maximum benefit of $1,600 per month.
Other changes to the MISSA Law, effective March 6, 2017:
- There will be no more early and deferred retirement;
- Current retirees will still be covered by earnings test until age 62. For new retirees starting March 6, 2017 and onward, the earnings test will be applied up to age 65;
- The old age retirement benefit is redefined. A person shall be eligible to receive normal retirement old age benefits as follows:
At age 61 by March 6, 2017
At age 62 by January 1, 2019
At age 63 by January 1, 2021
At age 64 by January 1, 2023
At age 65 by January 1, 2025
- “Earnings” was redefined to read as follows:
“Earnings” or taxable wages, means compensation of any kind, including without limitation any salary, wage, bonus, tip, allowance or fee, paid by the employer to or on behalf of the worker in cash or in any other form, but not including:
(i) payments made by the employer as a result of an accident or sickness of the worker (other than sick leave);
(ii) reimbursement of medical or hospitalization expenses;
(iii) payments made to or on behalf of the worker or his beneficiary from a trust or annuity;
(iv) reasonable stipends paid to volunteers of religious organizations, NGOs; and schools;
(v) reasonable sitting fees for board members and elected officials;
(vi) earnings exempted by virtue of any international agreement to which the Republic of the Marshall Islands is a party;
(vii) reasonable per diem and travel allowances to the extent that they do not exceed any comparable Government rates;
(viii) rental housing allowance paid to an employee, not exceeding Two Thousand Two Hundred and Fifty ($2,250) per quarter provided it does not exceed three times the wages;
(ix) any payment in the form of scholarship, fellowship or stipend made to any employee while he is a full-time, bona fide student at an educational institution;
(x) earnings received by a minister of the gospel, or clergyman from a religious group or organization;
(xi) earnings received by an employee for services performed or rendered in the capacity if a domestic or household employee for a private individual or family;
(xii) reasonable session allowances for elected officials; and
(xiii) payments made in cash, or any form other than cash, for casual labor not exceeding one week in any month of a quarter if the work is not performed in the course of the employer’s trade or business. For purposes of this Chapter, earnings shall be computed to the nearest cent;
(xiv) any payment to account of sickness or accident disability, or any payment of medical or hospitalization expenses, made by the employer, provided however, that normal wages or salaries paid to an employee for a period of time during which he is excused from work because of sickness shall not be excluded from wages and salaries under this paragraph; and
(xv) any payment made to or in behalf of an employee or to his beneficiary from a trust or annuity including distributions from qualified pension or deferred compensation plan trusts and annuities that are funded in whole or part by taxable wages.