By Annelia Nixon

Tribune Business Reporter

anixon@tribunemedia.net

A Cabinet minister yesterday said increasing contribution rates by themselves will “not be sufficient” to safeguard the National Insurance Board (NIB) fund and ensure it has a sustainable future.

Alfred Sears KC, minister with responsibility for Immigration and NIB, told the 32nd meeting of the heads of CARICOM social security organisations that “the contribution rate alone is not sufficient” to sustain The Bahamas’ social security system despite the recent increase imposed on employers and employees from July 1, 2024, onwards.

“For only the second time since its establishment, we have had to raise the national insurance contribution rate,” Mr Sears said.” Such decisions are never easy or popular. Yet, as guardians of this institution, it is our statutory duty to prioritise the sustainability of the National Insurance Board.

“At the same time, we recognise that increasing the contribution rate alone is not sufficient. The sustainability depends on innovative, sustainable strategies that go beyond the traditional measures. Therefore, our theme promoting financial sustainability of social security systems is suitable as we gather this week and challenge each of us to confront the very real factors shaping our shared future.”

The increases that took effect on July 1, 2024, increased the employer and employee NIB contributions by 0.75 percentage points each. The employer contribution rose to 6.65 percent from 5.9 percent, while that for employees grew from 3.9 percent to 4.65 percent.

The contribution rates for self-employed and voluntarily insured persons jumped from 8.8 percent and 5 percent, respectively, to 10.3 percent and 6.5 percent as part of a strategy to ensure The Bahamas’ national social security system survives for the long-term to meet its benefit obligations to all citizens and legitimate persons who qualify for assistance.

Mr Sears listed NIB’s challenges as including “demographic shifts”, immigration and geographic challenges. “Our region is experiencing significant demographic shifts with aging populations and declining birth rates resulting in fewer people entering the workforce,” he said.

“Additionally, migration and immigration trends create both opportunities and challenges, calling for policies that encourage legal participation in the national insurance schemes. These dynamics are reshaping the very foundation of our social security frameworks, creating new pressures on our system.

“For The Bahamas, a unique geographic challenge also emerges. Our nation, an archipelago spread over thousands of square miles of ocean space, with citizens dispersed across islands and keys separated by vast stretches of ocean. This geographic spread amplifies the administrative and regulatory challenges, making technology-driven decisions much more critical as well as redefining the skill set of the National Insurance Board.”

Mr Sears added: “And we experienced how critical this was for the survival of our country in 2019. September 1-3, The Bahamas lost one-third of its GDP in the damages that occurred [from Hurricane Dorian]. The stability which obtains in great measure to the National Insurance Board.... over a period of a year-and-a-half, the National Insurance Board dispersed in unemployment benefits and unemployment government assistance approximately $240m. Without that intervention, I shudder to think how The Bahamas would have been able to manage through Hurricane Dorian and a global pandemic. We are grateful as a nation for the existence of the National Insurance Board.”

Phillip McKenzie KC, NIB’s chairman, listed sustainability as being among NIB’s greatest challenges. “The issue that we face is sustainability,” he said. “So we looking at short-term sustainability, three years down the road and, eventually, the long-term sustainability. So we don’t have any cash strap issue. We are able to meet our obligations and we have been meeting our obligations.”

He added that NIB has been taking action against employers who have not been paying NIB contributions, including court action, the use of technology and reaching out to companies trying to extend its coverage.

“We have been trying through any number number of mediums,” Mr McKenzie added. “The obvious ones are taking persons to court. But we’ve also been reaching out to employers trying to extend our coverage. We’ve introduced some technologies to help us to make it easier for employers to pay contributions.

“So we have a mobile app that allows people to make their contribution online. We’re encouraging more online payment and filing. And the online systems allow employees to check the status of their contribution. That’s another way of putting pressure on employees to be compliant.”

Heather Maynard, NIB’s acting director, added: “I can say that since the contribution rate increased, that all the employers are co-operating and we’re getting the contributions in. You know, we did an extensive public relations campaign, and I think that paid off.”