Counties are on the spot over failure to remit to the National Social Security Fund (NSSF) statutory deductions from staff amounting to Sh4.6 billion.
The State agency is now considering suing non-compliant governors.
It has emerged that most county governments have not developed a payment plan to clear the outstanding pension dues.
Appearing before the Senate County Public Investments and Special Funds Committee, NSSF Managing Trustee and Chief Executive Officer David Koross said the pension debts date back to the defunct local authorities.
He told the committee chaired by Vihiga Senator Godfrey Osotsi that devolved units have failed to remit Sh2.7 billion since the advent of devolution in 2013.
He said the only way to enforce compliance is through prosecution of governors of counties which are not remitting their statutory deductions. “We have done prosecutions with some employers but not counties. However, this is an option we can also consider,” said Mr Koross.
He told the committee they are also mulling asking the Controller of Budget to deny non-compliant devolved units their requisitions until they budget for the pension debts.
“In the past, the defunct local authorities had to demonstrate compliance with statutory remittances to access the Local Authorities Trust Fund. This is one of our proposals to the Controller of Budget to have counties budget for the outstanding debts to have their requisitions approved,” said the managing trustee.
“The counties are given money annually but no one is enforcing whether they are making budgetary provisions for the debts.”
Mr Koross said only five counties are compliant — Turkana, Vihiga, Murang’a, Kajiado and Kisumu — after a successful asset swap.
He said they have been making efforts to recover the outstanding pension liabilities through engagements with the county governments, sensitisation forums as well as issuing demand notices to counties.
Senator Osotsi supported the agency, calling on Controller of Budget Margaret Nyakang’o not to approve requests from non-compliant devolved units.
“We will make this part of our recommendations to the Controller of Budget in our report so that we can help you recover your money,” he said.
Further, Mr Osotsi said they will support legislation to make it compulsory for employers to be remitting NSSF contributions and that there must be measures to deter defaulters.
“The Senate is going to support the National Social Security Fund to be able to get all the pension liabilities owed to by county governments and other defaulters,” said Mr Osotsi.
Appearing before the committee, Kenya Revenue Authority Deputy Commissioner Esther Wahome said once an employer has failed to remit contributions to the NSSF, the agency may, with the approval of the Retirement Benefits Authority (RBA), appoint the taxman as an agent to collect the unremitted contributions, interests and penalties.
She said NSSF should in writing request RBA for approval and demonstrate that they have taken all reasonable effort to recover unremitted contribution from a defaulting employer without success.
“We have held engagements with RBA and agreed that collection of unremitted pension contributions is viable through agreement with the trustees of the pension schemes,” said Ms Wahome.
However, she pointed out that the legal provisions still had shortcomings that could not enable collection in the manner envisaged and there is need to further enhance the provisions of the Retirement Benefits Act and to amend the KRA Act.
“County pension schemes can engage the Retirement Benefits Authority to fast-track legislative amendments proposed by KRA to facilitate collection of unremitted pension contributions on behalf of the pension schemes,” said Ms Wahome.
