CENTRAL PROVIDENT FUND (AMENDMENT) BILL

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CENTRAL PROVIDENT FUND (AMENDMENT) BILL: Order for Second Reading read.

The Acting Minister for Manpower (Dr Ng Eng Hen): Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The amendments to the CPF Act in this Bill will require members who meet the CPF Minimum Sum to top up their Medisave Minimum Sum balances before withdrawing their CPF. This change was announced by the Prime Minister in August this year. The Bill also seeks to facilitate the implementation of Portable Medical Benefits Scheme and to give effect to other changes to better serve CPF members.

Topping up of the Medisave Minimum Sum

Sir, the Medisave Minimum Sum (MMS) is to ensure that CPF members have enough money set aside to meet healthcare expenses in their older years. This MMS amount is currently set at $25,000. However, we have not required CPF members to top it up to that prescribed amount before withdrawal of their CPF monies at age 55. This is so even if that member has balances above the CPF Minimum Sum in his Ordinary and Special Accounts which he can withdraw at age 55.

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From 1st January 2004, we will require CPF members who meet the CPF Minimum Sum to top-up their Medisave Minimum Sum to the required amount. The required amount is set at $2,500 from 1st January 2004 and then increased further by $2,500 (in today's dollars) per year to reach $25,000 (in today's dollars) in 2013.

Clause 5 of the Bill amends section 15(6) to require members to set aside or top up in the Medisave Account

a sum of up to $2,500 or such other amount as the Minister may specify, at the time when they make CPF withdrawals from 1st January 2004. This includes first withdrawals by CPF members at or after age 55 and all subsequent withdrawals.

Sir, let me now focus on the other amendments introduced by this Bill.

Additional Medisave contributions above the voluntary contribution limit

On 1st October this year, my Ministry announced details of the Portable Medical Benefits Scheme (PMBS).

Under this Scheme, an employer may make additional contributions, in lieu of the existing inpatient benefits, to an employee's Medisave Account for him to buy medical insurance to cover his inpatient needs. However, section 13B of the CPF Act limits CPF contributions made by a Singapore citizen or permanent resident, including voluntary contributions paid by his employer, to the mandatory contribution amount, or $28,800 in any year, whichever is the higher. This is to prevent excessive CPF contributions for the purpose of avoiding tax.

To facilitate the implementation of the Portable Medical Benefits Scheme, clause 4 amends section 13B(3) to exclude any additional Medisave contribution made by an employer to an employee from the

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computation of the limit of $28,800, but capped at $1,500 per year.

Facilitating the transfer of Ordinary and

Special Account savings to the Medisave Account

Sir, CPF members who are mentally handicapped or critically ill may have a greater need to use their Medisave savings. Such members would have a less compelling reason to save for their retirement adequacy in their Ordinary and Special Accounts. However, the current Act does not allow the transfer of savings from Ordinary and Special Accounts to the Medisave Account.

Clause 6 inserts a new section 18C to allow members to apply to the CPF Board to transfer the balances that they have in their Ordinary and Special Accounts into their Medisave Accounts, subject to the prevailing Medisave Contribution Ceiling (currently at $30,000). It also confers on the CPF Board the power to impose terms and conditions governing the transfer to facilitate administration.

Automatic renewal of Dependant's Protection Scheme (DPS) covers

The Dependant's Protection Scheme, or DPS, is an opt-out insurance scheme to provide financial help to families of CPF members who have died prematurely or suffered permanent incapacity.

Currently, section 48 stipulates that when a DPS-insured member has no CPF contributions for three years, his DPS cover will not be automatically renewed unless he makes a further CPF contribution or notifies the CPF Board in writing to continue his cover. The Board also sends the member a form to confirm whether he wishes to continue with his cover. If the member does not respond, his cover is not renewed. As a result, there have been cases of needy CPF members not being able to receive the

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DPS payments due to policies that have lapsed due to ignorance or inertia.

To provide better protection for CPF members, clause 9 repeals section 48 to provide for automatic renewal of the insurance cover under the DPS for all CPF members with sufficient balance in their Ordinary Account, even if they do not have active CPF contributions. Members may opt out of the scheme anytime by notifying the Board in writing.

Termination of Company Welfarism Through

Employers' Contributions (CoWEC) Scheme

Clause 9 also repeals sections 70 and 71 to reflect the termination of the CoWEC scheme. This scheme was terminated as it has lost its attractiveness and relevance.

The CoWEC scheme was introduced in 1984 with the objective of providing for welfare benefits for employees. The scheme started with eight pilot companies and expanded to a total of 48 companies by 1986. However, the small size of funds in the CoWEC scheme made it difficult for them to manage the funds in a cost-effective manner. Moreover, with the liberalisation of the use of CPF funds for investment over the years, employees want more discretion in managing their own CPF monies rather than allow their employers to invest on their behalf. In 1999, CPF contributions were cut by 10% and there were no more contributions to the CoWEC after that. In April 2002, the last company on the scheme terminated its CoWEC scheme and transferred the funds to its employees' CPF accounts.

Other amendments

This Bill also introduces other amendments to enhance the

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administration and operation by the CPF Board. These include:

(a) Clause 2 to replace all references to the previous wage floor of $200 with the current figure of $500, made pursuant to the raising of the salary floor for employee's CPF contributions from $200 to $500 in October 2002;

(b) Clause 7 to amend section 24 to clarify that benefits derived from insurance policies and investment-linked insurance policies, purchased under the CPF Investment Scheme, cannot be attached, sequestered, levied upon for or in respect of any debt or claim;

(c) Clause 8 to amend section 27 to allow the CPF Board to approve applications by undischarged bankrupts for CPF withdrawals, based on conditions approved by the Minister for Manpower; and

(d) Clause 10 to amend section 77(1) by deleting paragraph (m) to reflect the phasing out of the Delgro Shares Scheme in 2004.

Conclusion

In conclusion, Mr Deputy Speaker Sir, the amendments proposed in the Bill will require CPF members to top-up their Medisave Minimum Sum to the required amounts at or after age 55 if they meet the CPF Minimum Sum. It will facilitate the implementation of the Portable Medical Benefits Scheme and the transfer to savings from the Ordinary and Special Accounts to the Medisave Account, and other amendments in line with the overall objectives of the CPF system.

Sir, I beg to move.

Question proposed.

Mr Yeo Guat Kwang (Aljunied): Mr Deputy Speaker, Sir, I welcome the

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amendment to section 7. Currently, only those earning below $200 do not contribute CPF. The lowest income earners cannot save enough for retirement through the CPF system. What they are more concerned is more disposable income for their daily family expenses. The proposed amendment will give the lowest income workers higher take-home pay and reduce their hardship. I hope, with this change, it will also encourage those not working to enter the workforce or do part-time work.

Sir, the Income Tax (Amendment) Bill has just been passed today in this House to facilitate and incentivise private sector employers and employees to switch to the Portable Medical Benefits Scheme (PMBS) and the Transferable Medical Insurance Scheme. The tax incentives firmly reaffirm the importance of making medical benefits portable, something that the NTUC, as a labour movement, has been advocating for several years. The amendment to section 13B is another step to facilitate implementation of a Portable Medical Benefits Scheme.

In the United States, employers are cutting back on non-wage labour costs such as employers' medical benefits, and we cannot rule out such a possibility in Singapore. Just because an employer has provided a certain level of benefits for the past umpteen years does not mean that it will continue or it can do so forever.

Union leaders are on the ground with workers day in and day out. We understand, perhaps even before others do, the problem of the current employer-based medical benefits system. As union leaders, we want to see a seamless and affordable portable medical benefits system that is appropriate to the needs and covers workers throughout their working life and, if possible, beyond retirement.

The current system is employer-based. A worker enjoys full medical

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benefits, outpatient and hospitalisation, as part of his job benefits. Some companies even extend outpatient benefits to his dependants. But what happens if a worker is retrenched? This is a scenario that we expect to see happen more frequently in the new work environment. A worker will end up without any medical coverage when he is retrenched.

So, if we retain the current system, workers have better hope that they do not stay in between jobs for too long. Otherwise, they could be in for a tough time if they fall ill in between jobs. Furthermore, such a system will continue to penalise older workers who run a greater risk of falling sick compared to the younger workers.

Sir, we need to agree on a system that will allow a worker to have medical benefits during his term of employment and to build up any unused benefits which can be carried over from year to year, from employer to employer. We do not want to see Singaporeans unable to cope with their healthcare needs in future. We do not want our older workers to be disadvantaged if employers are reluctant to hire them because of their higher healthcare expenses.

It is time for employers to seriously consider implementing the Portable Medical Benefits Scheme. It is a matter of restructuring the medical expenses for greater sustainability. With the Portable Medical Benefits Scheme, the employers can rest their worries about not being able to cover new employees who have changed jobs. It is time for employers to change.

We understand that while the reasons for implementing portable benefits may seem very logical and compelling, the actual conversion may not be so straightforward. I hope the tripartite social partners in Singapore can move at a

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greater pace in making medical benefits portable.

At one of the workshop sessions of the recent NTUC National Delegates' Conference, the union leaders acknowledged that moving ahead, we need to make medical benefits portable. The union leaders felt that it should be part of the national agenda rather than leaving it to the employers and unions. The workshop strongly urged that a timeframe be set and expect the Government to expedite the review of the MediShield.

The 3M framework would have to be further strenghtened to ensure that Singaporeans could afford healthcare, going forward. Many union leaders are concerned that the coverage provided by MediShield is inadequate, and it should be enhanced. We need to also address the issue of duplicate coverage from employer-based medical benefits and MediShield for most of the working population. And many employees who continue to remain insured under MediShield, even though they would not claim, are, in fact, paying the premiums for an option to guarantee access to MediShield as a medical insurance coverage post-retirement, that is, up to 80 years old.

Sir, it would be ideal if employer-based medical benefits provided can be fully integrated with the 3M framework. We need a nation-wide and seamless group medical insurance scheme for the PMBS. The greater risk pooling under such a scheme would also reduce the need to over-save for Singaporeans in their Medisave accounts. We have to also adopt the concept of pre-funding to prevent the elderly being left uninsured due to their inability to afford the premiums, like the case in some of the developed countries.

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Sir, I support the Bill.

Dr Ng Eng Hen: Sir, let me thank the Member for his support of this Bill. I acknowledge that NTUC has been in the forefront of pushing for portable medical benefits. This has resulted today in two legislative amendments, both in terms of the tax as well as facilitation under the CPF Act.

I agree that disruptive employment will occur more often and that workers will be caught up in between jobs, and this is the first of many more that we can do to try and protect them. We will, together with our tripartite partners, continue to facilitate, promote and monitor the effectiveness and application of the PMBS and the Transferable Medical Insurance Scheme. The Member has made the point that there needs to be a rationalisation of these portable medical schemes with the 3M framework. We will continue to study this together with MOH and, together with our tripartite partners, to increase the coverage and protection of Singaporeans.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Dr Ng Eng Hen].

Bill considered in Committee; reported without amendment; read a Third time and passed.