Government has sent businesses copies of a draft bill that when passed by Parliament will introduce a mandated private sector pension scheme for Bermudian employees.

But the proposed bill has already run into criticism from the Chamber of Commerce, which fears smaller businesses could suffer.

Such a scheme has been in the works for a few years, but only got off the ground with a 1995 discussion paper on mandating private pension schemes.

Finance Minister Grant Gibbons said the draft bill was under review for any revisions due to comments solicited from the companies and organisations. He plans on submitting the proposed bill during the current session of the House.

The Chamber of Commerce, for one, has submitted an extensive list of concerns it had about the bill and has called for major revisions.

"We are in the process of going through the draft bill and are adapting and using a lot of these recommendations to modify the bill that will eventually appear in the House,'' he said. "But the framework will remain the same.'' With the introduction of mandated pension plans Government is attempting to ensure employees will reach a target of 60 to 70 percent of their final salary in benefits when they retire.

Currently many are only covered by the Contributory Pension Fund, set up and administered by Government and to which all employers and employees currently contribute. Employers are currently not required to set up private plans, although many of the larger ones have. Some employers have stated that private pensions schemes will be an additional financial burden and could hurt smaller businesses.

In its present form the proposed legislation will require all companies to set up a private pension plan for their employees. The bill would also set up a national commission to oversee the operations of those pension plans.

Employers and employees will be required to contribute to the private pension plans at rates adding to 10 percent of salary. However the actual rate of contribution will be phased in over a period of five years.

Gibbons: Exclusion of foreign workers from pensions bill could be changed Significantly employers would not be required to set up plans for casual workers or foreign employees on a work permit. Part time workers would be covered. Dr. Gibbons said it would be up to the pensions commission to decide the definition of a casual worker and a part time worker.

He also said the exclusion of expatriate workers could still be changed.

The Public Service Superannuation Fund, which covers many Government employees, will also be excluded from the plan under the current draft bill.

All employees under 18 will also be excluded although Dr. Gibbons said the age limit could be raised.

Plans could either be of a defined benefit or a defined contribution type of pension arrangement. A defined plan stipulates the amount of pension an employee will get at retirement based on the percentage of final salary accruing for each period of service.

A defined contribution plan does not specify the final amount, but is based on the amount accumulated from investments of the money put in the plan by the employee and employer.

The draft bill also requires a plan to have a vesting period of two years after which the employer's portion will be transferred to another company's pension plan if the employee changes jobs.

Bermuda Industrial Union Derrick Burgess said the union's main contention with the plan was the issue of portability and the two-year vesting period. He said the union wants immediate vesting so that all funds including those of the employers are transferred from plan to plan when employees change jobs.

Dr. Gibbons stressed all aspects of the bill as outlined above could be changed. He said many of the matters would be decided by the pensions commission when it was set up, including what to do with the Contributory Pension Fund.

For now employers and employees will contribute to both as the private plans are phased in with the total amounts adding up to 10 percent of salary, he said.

He said the commission would also have decide the date on which the legislation would apply. However the legislation will not be retroactive on pension plans in place up until that time.

He said it could take up to two years before the legislation comes into force.

Chamber of Commerce president Michael Smith said the organisation had "fundamental concerns about different aspects about the initial draft bill'' and had submitted a review to the Finance Ministry.

"The Chamber and a number of other interested parties have reviewed the draft bill and we understand that our concerns have been heard and that the next draft will address those concerns,'' he said yesterday.

"We were concerned about the time factor and the shock this would have especially on smaller businesses. However that concern has lessened. We understand that the implementation is going to take some time after the bill is passed as there are a number of regulations that have to be put in place.'' Mr. Smith called on employers and employees to keep track of the coming legislation.

"All businesses need to keep an eye on this bill and understand the implications of the costs of the contributions they are going to make,'' he said. "Employees need to be aware of the deductions from their pay that will be mandated.'' Asked if the exclusion of those on a work permit will encourage employers to hire more foreign workers he said the plan was meant to ensure the retirement income of Bermudians.

"The legislation only sets a minimum standard,'' he said. "Non-Bermudians will be pressuring companies to include them. These days people look at pension benefits when considering employment. Although non-Bermudians are excluded from the legislation we don't expect companies to exclude them.'' CONCERNED -- Chamber of Commerce president Michael Smith BUSINESS BUC