After being held up by legal challenges since 2014, the Court of Appeals recently ruled that the National Social Security Fund Act of 2013 was properly enacted and must be implemented immediately. The Act reforms how employer and employee contributions to the National Social Security Fund (NSSF) are determined, resulting in substantial contribution increases. It also permits employers to contract out of a portion of the public system by directing contributions to a private employer plan instead. There’s no change to how benefits payable from the NSSF provident fund are determined. The Act aims to enhance individual retirement benefit adequacy and increase the pool of retirement assets available for investment.
The new monthly contributions of up to KES 1,080 from each the employer and employee are a dramatic increase over the previous maximum of KES 200. Employers should act to comply with the changes and consider whether it’s appropriate to contract out of Tier 2.