BEIRUT: Sixty-eight-year-old Viviane Nehme worked as an office manager in an import-export company for 40 years before retiring in 2010. Upon her retirement at the age of 64, she received an end-of-service indemnity from the National Social Security Fund, which supposedly would help her cover all her subsequent expenses. Nehme, who suffers from heart disease, uses the money to pay for her daily expenses as well as her doctors and medications because the NSSF does not provide health coverage for citizens after their retirement.
“I use the money collected from NSSF to cover all of my needs and I cannot rely on my son to cover any of my expenses because he is still unemployed,” she said. “I hope my son finds a good job soon so he can include me in his company’s health scheme, otherwise I will be broke soon because I have been using this money for four years now.”
Nehme, like many other Lebanese, is covered by the NSSF plan for the private sector, which includes an end-of-service indemnity but provides no further social security benefits beyond retirement.
Lebanese pension plans are largely dependent on the type of employment. For example, whereas state employees and those in the military service are covered by pension plans and health insurance, those covered by NSSF – the majority of whom are employed by the private sector – ironically lose such benefits upon retirement, when they are most needed.
The proportion of older adults in Lebanon is currently the highest in the region.
Recent projections by the United Nations suggest that the segment of the population that is over 65 will constitute around 12.5 percent of the whole by the year 2025, similar to contemporary Europe.
Yet Lebanon does not have a uniform old-age/retirement pension plan. There is a widespread poverty among the elderly and over half of them are economically deprived, as they face shortages in health services, water, electricity and housing.
This dire situation has prompted the General Labor Confederation in coordination with Lebanese economic bodies and the NSSF to discuss the importance of providing retirees with health insurance.
In this context, NSSF board of directors member Rafic Salameh drafted a scheme aimed at giving retirees full health coverage and the study was submitted to Parliament last month through MP Atef Majdalani and five other lawmakers.
“The draft law has been there for years but it was not approved by Parliament for several reasons, including the cost of the project, lack of agreement on the membership payments and the guarantees that must be provided by the government for this purpose,” said Ghassan Ghosn, head of the GLC.
Under the current scheme for health coverage, the NSSF requires employers to contribute to the health fund an amount equal to 7 percent of workers’ salaries with a monthly ceiling of LL1,500,000 ($1,000) while requiring employees to contribute with 2 percent of their salaries, also with a LL1,500,000 monthly ceiling.
With the percentages currently paid to the NSSF, employees can only secure health services for the duration of their employment.
In his study, Salameh proposed increasing the amount paid by employers and employees by 1.5 percent each in order to secure the funds needed to provide workers with health coverage after their retirement.
“When the employee starts by paying this additional percentage – with [an] equal [contribution] from employers – starting from the date of his employment, he would then be able to benefit from a big amount of money upon his retirement,” he said.
However, he explained that the retiree would not get paid a lump sum upon retirement. If the retiree needed to be hospitalized he would only pay 10 percent of the cost and the NSSF would cover the rest, he said.
“Likewise, the retiree would buy his medications and the NSSF would pay him 80 percent of the cost within a six-month period,” he said.
According to calculations made by Salameh, his scheme would generate around LL210 billion per year. “If we consider that 3,000 people retire every year, they would cost us around LL6 billion to LL10 billion and we would have around LL200 billion left in the fund,” he said.
Salameh explains that the money collected would drop every year with the increase in the number of retirees. “But still, this scheme would last for around 50 years,” he added.
But he said the retiree could use this scheme only if he had been contributing to it for at least 20 years.
Such a scheme would also help dilute, at least in part, the impact of a massive deficit suffered by the NSSF as a result of the devaluation of the Lebanese pound during the Civil War.
While the pound was trading on the eve of the war at around LL2.3 to the dollar, by 1987 it had depreciated to LL250 and by 1990 to LL1,500.
However, the NSSF was collecting membership fees in Lebanese pounds, and as wages spiked due to the devaluation of the currency, it fell into a deficit as employees’ indemnityis calculated based on their last salaries times the number of years employed.
Most of those retiring over the next two decades would have seen a significant portion of their NSSF contributions wiped out in the late 1980s.
Salameh has also proposed the issuance of a health card for people such as taxi drivers and newspapers sellers who have never been covered by the NSSF and who work on their own. “These people can pay $100 per month to get a health card, which would enable them to access hospital services by paying only 10 percent of the cost.”
While a consensus was reached by the different concerned parties on the need to come up with a scheme for retirees’ health coverage, some have voiced doubts about the study provided by Salameh.
“I wouldn’t really be against the suggestion provided by Salameh but I have a more strategic solution which entails the formation of a national health coverage system that would include all Lebanese without exception by increasing the tax on built properties to 20 percent,” economist Kamal Hamdan said.
Hamdan believes Salameh’s study provides a solution only to those who were previously insured by the NSSF but does cover people who work independently. “Instead of proposing a separate health card for those independent workers, I would prefer a system whereby all Lebanese would be covered by funds generated from taxes without placing an additional burden on employees,” he said. “The money would instead be generated from the wealthy.”
For Mounir Rached, vice president of the Lebanese Economic Association, all proposed plans must be studied carefully.
“We should be careful because if we place an additional burden on the employer, then the cost of production in Lebanon would become too high,” he warned. “This may also tempt employers to start cheating with the salaries in addition to employing non-Lebanese to avoid paying for their pension schemes.”
“This way we would be solving one problem but [at the same time] we would be creating another.”
While Ghosn continued to advance efforts on this issue by meeting with representatives from the different economic bodies in Lebanon in addition to expressing his willingness to reach a good solution, he was concerned about the numbers provided by Salameh in his study.
“We have reached an agreement with representatives from different economic entities on the need to come up with a scheme that would be feasible to everyone, but we have not yet discussed any figures,” he said.
Ghosn also sees as unfair Salameh’s suggestion of imposing on the employee the same additional percentage of 1.5 percent that would be required of the employer.
Commenting on Ghosn’s remarks, Salameh said the figures could be studied further in a way that would be feasible to all.
“But if we calculate the amount that would be paid by each employee based on an average salary of $1,000, we will discover that $15 per person is not too much considering that such an amount would be securing a worker’s future,” he said.
He also insisted that both employees and employers must contribute in this scheme. “Otherwise, the employer would have to bear the burden and this would be unfair.”
Salameh added that economic bodies may also consider that this proposal would constitute an additional burden on them “but a contribution by the employer as well is necessary for a proper performance of the proposed scheme.”