Employer Action Code: Monitor
Note: The following contains updates to a previous version, reflecting Q&As released by the National Social Security Fund (NSSF) and the International Labour Organization (ILO).
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 NSSF. The new program will replace the lump sum end-of-service benefit (EOSB) 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 ILO and in consultation with business and worker representatives.
- 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 EOSB 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 EOSB program.
- In the new system, each participant will have a notional individual account, credited with contributions of 12.25% of their earnings and with annual interest equal to the yearly increase in average earnings of all members of the system. Earnings will be capped at four times the average earnings of all system members. At payout — upon retirement, disability or death after at least 15 years of participation — the accumulated account balance will be converted to a monthly indexed lifetime pension benefit, subject to a minimum initial benefit equal to the greater of the following:
- A percentage of the official monthly minimum wage 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)
- Pensions may commence as early as age 60 with 15 years of contributions (including any past coverage under the EOSB program), but the pension amount will be reduced by 0.5% for each month that age at commencement precedes 64. If fewer than 15 years of contributions, a lump sum generally will be paid.
- The ultimate combined employer and employee payroll contribution is expected to be 17% to 18% of earnings (capped at four times average earnings of system members), to be phased in during several years after implementation of the new system. The combined rate and the allocation between employer and employee are to be finalized and communicated in a future implementation decree.
- Accrued EOSB entitlements under the current system would be transferred to the new notional accounts (except for individuals age 49 and above at implementation who opt to remain in the EOSB program).
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.