UN Pension Fund - UNPR Note - Limitation of liability for disability benefits, 2019

Note by United Nations Participants’ Representatives

to the Pension Board

Limitation of Liability for Disability benefits

 2019

Summary Paragraph General Assembly RES/73/274 highlighted the importance to ensure unfaltering accountability by the Board. Over the past several months Staff Pension Committees have been faced with disability cases where the official was on a “non-renewable” appointment of five years or less. Since disability benefits are based on a contributory service projected to the participant’s normal retirement age, the benefits derived in these cases is inconsistent with the temporary nature of the appointment and this loophole may often result in undue enrichment of those concerned Therefore it is our view that while the pension plan must provide the usual social security net as it does for all its participants, limitation of the liability for disability benefits in the cases of non-renewable appointments is the prudent action for the Board vis a vis our duty of care to the Fund. The Board may wish to endorse this proposal and request the General Assembly to amend Article 33 (c) of the Regulations to ensure that the disability benefit calculated would not exceed the amount payable if the official had completed their non-renewable term.

Introduction

1.     The United Nation Joint Staff Pension Fund was created to provide a social security net for International Civil Servants many of whom in view of their international status are not privy to their national social security schemes.

2.     The Fund provides that former participants depending on certain criteria become entitled to receive retirement, early retirement or deferred retirement benefits. Additionally disability benefits are provided when a participant is found to be incapacitated for further service in a member organization due to illness or injury which is likely to be permanent or of a long duration. The disability award provides a benefit that assumes an amount that the beneficiary would have received had they worked up the otherwise expected separation date at normal retirement age.

3.     While the standard benefit is calculated as a product of Final Average Remuneration, Contributory Service and the applicable Rate of Accumulation factor there are instances in the regulations where benefits are subject to certain thresholds that prescribe a minimum or maximum benefit which also incorporate an element of time.

Current application of minimum and maximum benefits

4.     Article 28 (e) defines the minimum annual rates in terms of amounts which would be payable at a certain “flat rate” value while the pension adjustment system also provides for a “special adjustment or small pensions”, that provides that a minimum amount is payable if a former participant has worked for more than 15 years.

5.     In order to limit the liability of the Fund Article 28 (d) defines certain minimums and ceilings for benefits of officials above D2 top step and those who are “ungraded”.

6.     Article 39 (a) limits entitlement to both disability and to other benefits, during leave without pay for military service including limits to the survivors’ benefits.

Proposed limitation of liability for disability benefits.

7.     Disability benefits are provided when a participant is found to be incapacitated for further. Since the disability benefit – otherwise subject to Article (41) is additional insurance especially in cases where due to the nature of the work of the organization, certain staff may be put at high risk in service to a member organization.

8.     A disability award also entitles the recipient to after service health insurance (ASHI)

9.     Therefore in applying any limitations on the disability benefit  the Board in exercising its fiduciary duty of care must ensure that:

a.     regulations protect the Fund against “anomalies”

b.     the award continues to serve as social security for beneficiaries  by providing a benefit similar to the one the participant would have become entitled to at the end of service.

c.     the award allows the beneficiary to avail of after service health insurance

10.  The formula for calculating disability benefits incorporates the concept of “prospective” contributory service.  This means that the contributory service is projected to the participant’s normal retirement age (NRA).

11.  Under certain scenarios where an appointment is “non-renewable” usually due to the nature and high level of the post, it has been observed that in the event of awards of disability benefits which applied prospective contributory service resulted in an anomaly.   Due to the non-renewable nature of such appointments, benefits upon separation would have resulted in a benefit of “normal” contributory service – usually 5 or 10 years which could be then also subject to the early retirement reduction depending on the age of the former participant.

12.  The attached annex demonstrates a few examples of the anomaly to be corrected.

13.  It is proposed that in cases of non-renewable appointments that prospective contributory service is limited to the time that of the agreed contract. This will ensure that the disabled beneficiary has an income and that the individual is covered for necessary health insurance while removing any actual or perceived undue enrichment.

14.  The Board may wish to endorse the amendment of Article 33 (c) as follows

“The benefit shall, if the age of the participant on entitlement is the normal retirement age or more, be payable at the standard or the minimum annual rate for a retirement benefit as the case may be; if the age of the participant is less than the normal retirement age, the benefit shall be payable at the rate of the retirement benefit which would have been payable had the participant remained in service until the normal retirement age and had the final average remuneration remained unchanged; except that in the case of officials holding a non-renewable appointment, the benefit would not exceed the benefit which would be payable had the non-renewable appointment be