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Forty-two percent of LQ45 employee benefits unfunded: Study
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The trading floor of the Indonesia Stock Exchange (IDX) in Jakarta. (JP/Wienda Parwitasari)
M
ost of the 45 largest companies listed on the Indonesia Stock Exchange (IDX) provide employee benefits, but about 40 percent of the benefit obligations are unfunded, according to a survey.
In a survey conducted by actuarial and consulting company PT Milliman Indonesia, the 45 companies, known as LQ45 companies, had an obligation to pay long-term employee benefits, mostly for retirement, of up to Rp 107.1 trillion (US$8 billion) as of the end of 2016.
However, only Rp 62.6 trillion of that amount was funded, while the remaining Rp 44.5 trillion was unfunded.
“The study shows that Indonesia’s big companies have a significant long-term liabilities,” Milliman Indonesia country manager Halim Gunawan told The Jakarta Post on Thursday.
All companies are required to provide post-employment benefits as stipulated in the 2003 Labor Law, but the law does not require companies to set aside any assets to pay for the benefits.
“It’s true that the companies are not in violation of any regulations, but in terms of best practices, they’re lacking,” Halim said. He added that the amount of Rp 107.1 trillion represented a significant risk that would only grow larger in the coming years.
“Right now, the risk is not as large because of Indonesia’s demographic structure,” he said. “Currently, pensioners can still rely on their children for support. But in 20 to 30 years, pensioners will outnumber the working population.”
He expressed hope that the study would trigger a discussion about how to most effectively manage pension funds. (kmt/bbn)
