The County Governments Retirement Scheme Bill, 2026

Background

The County Governments Retirement Scheme Bill, 2026 seeks to establish a unified, structured retirement benefits scheme for county government employees in Kenya. Prior to this, county employees were served by fragmented legacy frameworks, including those established under the Local Authorities Provident Fund Act (Cap. 272). This Bill consolidates these retirement systems into a single defined contribution scheme to ensure long-term social security, professional fund management, and streamlined governance.

Key Amendments

• Repeal of Cap. 272: Repeals the Local Authorities Provident Fund Act (Cap. 272) (Section 54).
• Establishment of the Scheme: Establishes the County Governments Retirement Scheme as a body corporate with perpetual succession, a common seal, and the capacity to sue, be sued, hold property, and enter contracts (Section 4).

New Obligations

• Membership Requirements: Admission is mandatory for county state officers, county public officers, and employees of associated organizations that execute a deed of adherence (Section 5).
• Administration and Governance: Establishes a Board of Trustees under Section 6. The Board consists of:
  • A chairperson elected by the Trustees;
  • Members appointed by the Council of County Governors, the County Assemblies Forum, County Public Service Boards, and County Assembly Service Boards;
  • Representatives from water service providers and trade unions;
  • A competitively recruited Chief Executive Officer who acts as the non-voting Board secretary.
• Fund Management & Custody: The Board must appoint a licensed fund manager (Section 21) to implement investment policies, and a custodian (Section 22) to hold scheme assets in safe custody.
• Remittance Timeline: Employers must deduct and remit contributions to the custodian by the 10th day of the succeeding month (Section 24(5)).

Penalties

• Late Remittance Penalty: Remittances delayed beyond 15 days attract a monthly interest rate of 5% of the unpaid contribution (Section 24(7)).
• General Non-Remittance and Misappropriation: Under Section 49, any person who willfully fails to remit contributions, gives false information, or misappropriates assets commits an offence. Upon conviction, they face a fine up to KSh 5 million, imprisonment up to 5 years, or both.
• Corporate Liability: Where an offence is committed by a body corporate, directors, general managers, and secretaries are also deemed to have committed the offence unless they prove the act occurred without their knowledge or consent (Section 49(2)).
• Failure to Comply with Recovery Notices: If a sponsor fails to pay sums demanded under summary recovery proceedings, they face a fine of up to KSh 5 million (and up to 2 years' imprisonment for natural persons), with an additional daily fine of KSh 1,000 for continuing offences (Section 50(4), (5)). Summary recovery balances attract a compound interest rate of 3% per month (Section 50(3)).
• General Penalty: Contraventions of the Act where no specific penalty is provided attract a fine of up to KSh 100,000, imprisonment for up to 1 year, or both (Section 51).

Transitional Provisions

• Staff and Asset Transfer: Under Section 55, all existing assets, property, records, and liabilities of the Local Authorities Provident Fund are transferred to and vest in the new Scheme.
• Continuity of Service: Employees of the defunct Local Authorities Provident Fund continue as employees of the new Scheme on their existing terms of service. Existing trustees of the former fund serve out the remainder of their unexpired terms as trustees under the new Act.