House passes measure granting employees pension portability

THE HOUSE of Representatives sitting in plenary approved a bill proposing to make pensions portable as workers change employers and to introduce investment options for pension account holders.

In plenary session late Wednesday, legislators approved House Bill 9343 or the proposed Capital Market Development Act. The measure was elevated by Committee on Banks and Financial Intermediaries Chairman and Quirino Rep. Junie E. Cua to the floor on May 17.

“House Bill 9343 is approved on second reading,” Valenzuela Rep. Weslie T. Gatchalian, sitting as deputy speaker, said.

The proposed law seeks to broaden the capital markets by addressing deficiencies in the current pension system. The bill hopes to make pensions “fully-funded, portable, more actuarially fair, and stable.”

Workers will be required to have an Employee Pension and Retirement Income (EPRI) Account which they will maintain regardless of job changes. Both the employer and employee are required to contribute to the EPRI account, with employers initially contributing 4% and employees earning above minimum wage 1%. Those at minimum wage or lower pay nothing.

Micro enterprises only contribute to EPRI accounts if the employees have at least three years’ service or if a new hire has an EPRI account.

Account holders will have the option to invest in accredited investment products. In the event no investment choice is indicated, regulators will designate a default investment product or products. An investment manager may be appointed by the EPRI account owner to guide the worker in making investment decisions.

The measure also calls for the establishment of the Capital Market Development Council to steer the reform of the pension system and promote investor confidence and financial literacy.

Economic managers have expressed support for the bill, describing as limited the current law governing pensions, the Retirement Pay Law. — Gillian M. Cortez