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Post Reply: MCAs to Face Mandatory NSSF Tier II Contributions After Senate Rejects Exemption

<blockquote><div class="quotetitle">Quote from <a class="profile-link highlight-moderator" href="https://lawguide.co.ke/understanding-law/legal-forum/profile/lawyer/">Lawyer</a> on August 6, 2025, 5:59 am</div><div id="pl-7382"  class="panel-layout" ><div id="pg-7382-0"  class="panel-grid panel-no-style" ><div id="pgc-7382-0-0"  class="panel-grid-cell"  data-weight="1" ><div id="panel-7382-0-0-0" class="so-panel widget widget_sow-editor panel-first-child panel-last-child" data-index="0" data-style="{&quot;background_image_attachment&quot;:false,&quot;background_display&quot;:&quot;tile&quot;,&quot;background_image_size&quot;:&quot;full&quot;,&quot;background_image_opacity&quot;:&quot;100&quot;,&quot;border_thickness&quot;:&quot;1px&quot;}" ><div
			
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	<p dir="ltr" data-pm-slice="1 1 []">Members of County Assemblies (MCAs) across Kenya will now be required to contribute to the National Social Security Fund (NSSF) Tier II pension scheme following a significant decision by the Senate. The upper house rejected a proposed amendment that would have exempted MCAs from these mandatory contributions, marking a pivotal moment in the ongoing debate over pension obligations for public officials. This decision aligns with the broader implementation of the NSSF Act of 2013, which has been reshaping Kenya’s pension landscape by increasing retirement savings for workers.</p>
<p dir="ltr">The Senate’s decision came during deliberations on the County Governments (Revenue Raising Process) Bill, 2024, which included a clause to exempt MCAs from the Tier II contributions. The rejection of this clause means that MCAs, like other formal sector employees, must now contribute 6% of their pensionable earnings to the NSSF, with their employers—in this case, county governments—matching the contribution. For MCAs earning above the lower earnings limit of KSh 8,000, this translates to a combined monthly contribution of up to KSh 4,320, based on the upper earnings limit of KSh 72,000 for 2025.</p>
<p dir="ltr">The NSSF Act of 2013 introduced a tiered contribution system to enhance retirement benefits for Kenyan workers. Tier I contributions apply to earnings up to the lower earnings limit, currently set at KSh 8,000, while Tier II contributions cover earnings between this limit and the upper earnings limit, which has progressively increased. The third phase of the Act’s implementation, effective from February 2025, doubled the maximum contribution from KSh 2,160 to KSh 4,320, reflecting the government’s push to bolster social security. This decision has significantly boosted NSSF’s assets, which grew by KSh 220 billion since February 2023, reaching KSh 476.8 billion by December 2024.</p>
<p dir="ltr">The move to include MCAs in the Tier II contributions has sparked mixed reactions. Proponents argue that it ensures equity, as MCAs, who earn substantial salaries and allowances, should contribute to the national pension scheme like other public and private sector workers. The increased contributions are expected to provide MCAs with more substantial retirement benefits, aligning with the Act’s goal of improving financial security for retirees. Supporters also highlight the broader economic benefits, noting that the growth in NSSF contributions has strengthened the fund’s ability to invest in government securities, listed shares, and other assets, supporting Kenya’s pension industry, which reached KSh 2.25 trillion by the end of 2024.</p>
<p dir="ltr">However, the decision has faced resistance from some county leaders. The Council of Governors (CoG) had previously challenged the NSSF’s refusal to grant exemptions for Tier II contributions, arguing that the mandatory deductions strain county budgets. In a letter dated January 29, 2025, CoG’s chief executive, Mary Mwiti, called the NSSF’s stance “baseless in law” and urged counties to revert to the contribution rates under the older NSSF Act of 1965, which capped contributions at KSh 200 per employee, matched by the employer. Critics, including private pension administrators, have also raised concerns that the high NSSF contributions could undermine private pension schemes, as some employers abandon their more generous retirement plans to comply with the mandatory rates.</p>
<p dir="ltr">The legal journey of the NSSF Act of 2013 has been contentious. Initially enacted in December 2013, its implementation was delayed by legal challenges, with the Employment and Labour Relations Court declaring it unconstitutional in 2014. However, the Court of Appeal overturned this ruling in February 2023, affirming the Act’s legality and paving the way for its phased implementation. The Supreme Court later upheld the Act’s constitutionality, dismissing claims that it required Senate concurrence, as social security falls under the national government’s mandate.</p>
<p dir="ltr">For MCAs, the Senate’s rejection of the exemption means an immediate impact on their payslips starting this month. Those earning above KSh 72,000 will see deductions capped at KSh 2,160, matched by their county governments, totaling KSh 4,320 per month. While this reduces take-home pay, it ensures that MCAs are integrated into the national pension framework, contributing to a more robust retirement system. The decision also underscores the government’s commitment to uniform application of the NSSF Act, despite ongoing debates about its financial implications for counties and private employers.</p>
<p dir="ltr">As Kenya moves forward with these reforms, the focus remains on balancing immediate financial burdens with long-term retirement security. The NSSF’s growth trajectory suggests that the increased contributions are strengthening the fund’s capacity to support retirees, but challenges such as unremitted employer contributions, estimated at KSh 26.9 billion as of June 2023, and difficulties in tracing former members highlight the need for improved administrative efficiency. For now, MCAs and other workers must adapt to the new reality of higher pension contributions, as Kenya strives to build a more secure financial future for its citizens.</p>
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