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Article from TODAY, 2nd October 2003
Portable, but is it workable?
Tax incentives for firms that opt for portable medical benefits may not bring desired results
by Joy Frances
joy@newstoday.com.sg
PORTABLE medical benefits for employees will finally take shape next year, with the Government announcing tax incentives for employers who adopt either of the two schemes yesterday.
But while going portable is not compulsory, employers who do not opt for either scheme will, in effect, be penalised.
The schemes allow employees to keep their medical benefits when switching employers or when they are jobless, so long as premiums are paid.
At the moment, employers get a two per cent tax deduction off the total payroll for staff medical benefits.
From next April, and January 2005 for firms with financial year starting in January, only employers who have adopted either the Portable Medical Benefits Scheme (PMBS) or the Transferable Medical Insurance Scheme (TMIS) will enjoy this two per cent deduction.
Those who do not go portable will only get a one per cent deduction.
Some observers are wondering why the Government does not make it compulsory.
Mr Paul Heng, managing director of career management firm, NeXT Career Consulting, said: “I am not so comfortable with the ‘disincentive’ approach — it reminds me of the ‘you are in unless you opt out’ schemes.”
NTUC director Yeo Guat Kwang agreed that this would be a problem, but said: “Looking at the economic situation now … the employers would see it as an additional cost in a way. So, it’s not a good time to force it through.”
Companies on either scheme must cover new employees and varying portions of existing staff: Firms on the PMBS must cover at least 20 per cent of existing staff, while those on the TMIS must cover at least 50 per cent.
Observers say this is cumbersome administratively, but Mr Yeo said: “This requirement is just to ensure the scheme is really in place. It’s only a matter of time before you reach 100 per cent.”
Another problem is that the “portability” disappears if an employee switches to a company that is not on either of the schemes.
“This could be one of the biggest stumbling blocks,” said Mr Heng. “So, unless there is a critical mass of employers who go for these changes, it may become yet another monthly variable component type initiative.”
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