Cambodia: Details of compulsory contributory state pension plan released

Employer Action Code: Act

The government’s recent Decree 32 represents a significant step toward establishing the social security pension plan called for under legislation passed in late 2019, though further key points (e.g., the plan implementation date) are still to come. The National Social Security Fund (NSSF) will administer the pension plan, along with the previously implemented occupational risk insurance (2008), health care insurance (2016) and maternity benefit (2018) programs.

Key details

• All employers (no minimum size) must now register with the NSSF, if they have not done so already. All employees (including foreign nationals) will be covered by the pension plan and must be registered with the NSSF by their employers within three days of starting work. Employers must report workforce changes to the NSSF.
• Once the pension plan is implemented, employers and employees will contribute to the NSSF equal percentages of covered pay, with the total contribution percentage equal to 4% for the first five years, 8% for the next five years and increasing by 2.75 percentage points in each successive 10-year period. The government has not yet released the contribution start date or the definition of covered pay. Contributions would be paid monthly, though employers may request approval to pay them annually.
• The monthly retirement pension benefits to be paid by the NSSF will be based on the employee’s covered earnings and a benefit rate (further details still to come), payable at age 60 with 12 months of contributions. Disability and survivors’ pensions, as well as a funeral grant, will also be payable.
• The tax treatment of contributions and benefits is not entirely clear yet, though employee contributions will be made pre-tax.
• Employees and unemployed individuals may make additional voluntary contributions, subject to certain conditions.        

Employer implications

Employers should comply with the current NSSF registration and reporting requirements, and plan for the future required contributions. Decree 32 does not stipulate the start date for the pension component; that will be addressed by a separate order. Of the companies surveyed by Willis Towers Watson, few (under 20%) provide a retirement plan for their employees, though over 70% provide some type of risk benefit coverage (most commonly for death and disability benefits). While the anticipated new social security retirement, death and disability benefits may take some time to build up, companies may wish to begin reviewing their benefit offerings in light of the expected new programs.