Amid concerns about the financial stability of the existing National Social Security Fund, Lebanon moves forward with legislation to establish landmark pension reforms.

Employer Action Code: Monitor

After decades of attempts, Lebanon's Parliament has approved legislation to establish a comprehensive social security retirement pension for workers in the private sector and to reorganize the National Social Security Fund (NSSF). The new program will replace the lump sum end-of-service benefit from the NSSF with lifetime pensions payable to eligible members upon retirement, disability or death. The law was developed with the technical assistance of the International Labour Organization (ILO) and in consultation with business and worker representatives.

Key details

  • All private-sector employees will be required to participate prospectively in the new pension system once it is implemented; this will replace coverage under the existing social security end-of service lump sum benefit program. The one exception will be individuals age 49 and above who, at implementation, may opt to join the new system or continue to be covered under the end-of-service benefit program.
  • In the new system, each participant will have a notional individual account, credited with contributions and interest. At payout — upon retirement, disability or death after at least 15 years of participation — the accumulated account balance will be converted to a monthly lifetime pension benefit, subject to a minimum benefit equal to the greater of the following:
    • A percentage of the official monthly minimum wage (designated/approved at the retirement date), where the percentage is determined as 55% plus 1.75 percentage points for each year of contribution above 15 years, up to a maximum of 80%
    • 1.33% of the participant's average monthly earnings (revalued based on the change in national average earnings) during the participant's years of contributions, times the number of years of contributions (up to 30 years)
  • Both employers and employees will contribute toward the individual accounts and to a solidarity component at rates yet to be determined, though the legislation outlines two possible approaches:
    • Fixed contribution rates, totaling 16.5% of covered pay (capped at four times national average pay), of which 12.5% would be credited to the employee's notional account and the remainder to a solidarity fund (the employer and employee components aren't specified precisely, but ranges of 10% to 13.5% for the employer contribution rate and 3% to 6.5% for the employee rate are noted)
    • Increasing contribution rates, totaling 13.5% of covered pay from 2025 to 2029, then 16.5% from 2030 to 2034, and 17.0% thereafter
  • Accrued end-of-service benefit entitlements under the current system would be transferred to the new notional accounts.

Employer implications

Other key details of the new system (e.g., contributions, interest credited to the accounts, transfer of accrued end-of-service benefits) are yet to be communicated. There are indications that system implementation is expected in about two years, depending on the time needed to finalize and issue details in future government decrees. A key driver of the renewed push to establish the new pension system is concerns regarding the financial status of the guarantee fund within the NSSF due to the effects of the economic crisis in Lebanon, which started with the government's default in March 2020, followed by the collapse of the Lebanese pound by over 98%. The government has been negotiating with the IMF on a financial package to help stabilize the economy since 2020, but they have been unable to reach an agreement.

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