THE perennial sloth of the court system is one of the major contributors to the National Insurance Scheme (NIS) having hundreds of millions of dollars still outstanding that are owed by defaulting employers.

Cabinet Secretary Dr Roger Luncheon disclosed this yesterday, when he announced that an actuarial review of the NIS was done for the period January 1, 1999 to December 31, 2001.

Dr Luncheon stated that the funds are very much needed since the aging of the population and the diminishing contributor/pensioner ratio has resulted in the NIS being put in a stymie to pay out benefits.

“Generally investment incomes have been troubling over the years. The only way to sustain the viability of the Scheme would be to reduce the benefits, but that is not an option,” he told reporters at his weekly press conference.

Dr Luncheon said the arrears accumulated by employers are posing some difficulties. He charged that some employers collect their employees’ contributions but do not submit them to the NIS.

And some employers do not collect their employees’ contributions at all.

He stated that the NIS has to rely on the slow court process, which has resulted in “hundreds of millions of dollars out there to be collected”.

He noted that when the NIS came into being in 1969 there were zero pensioners but now the ratio stands at four contributors to one pensioner.

Down the years, the ratio is expected to decline further to 1.5 contributors to one pensioner.

Dr Luncheon, who is also the Chairman of the NIS Board of Directors, recalled that an increase in insurable earnings from 12% to 13% became effective from April 1, last.

He said the insight behind this decision was corroborated by the actuarial review that said, for the NIS to meet the payments to pensioners, there must be either a higher contribution rate or a reduction of benefits.

Dr Luncheon acknowledged that the NIS had issued a loan of US$4M towards the construction of the new CARICOM headquarters.

Courts (Guyana) Ltd and Alaskan Group of Companies were also the recipients of loans worth $500 million each from the NIS.

The latter two loans have matured, according to the Cabinet Secretary.

He stated that the CARICOM headquarters was seen as a sound investment and the interest was being calculated at US rates.

Dr Luncheon explained that the statutes governing the NIS fund call for any investment being entered into must be an “extremely safe one”. He pointed out that the Consolidated Fund would indemnify any losses incurred by the NIS.

“The pensioners’ benefits, if not met by the Scheme would be the liability of the government,” he said.

Dr Luncheon said various frauds uncovered over the years, and more recently, are of concern since this indicates a continuity of fraudulent activity.

He stated, however, that the impact on the financial capacity of the NIS is minimal but the effect on the ‘thinking’ of the management is enormous.

The Cabinet Secretary said the statistics on migration is not available in the suitable form to determine whether this has some effect on the contributions to the NIS.

But he asserted that there are some difficulties in getting the self-employed to pay their contributions.

Dr Luncheon noted that the NIS has not undergone substantial reform since its establishment.

“The approaches which may have been relevant then may not apply in some cases now,” he said.

He said there have been requests to increase and lower the age of retirement but pointed out this would have significant implications to the NIS and must be studied carefully.

Representatives from government, private sector and organised labour will examine the actuarial report and their review will be made public.