Written by: Lic. Jeannette Bravo, Partner – Labor and Administrative Law
The Reform to the Organic Law of the Social Security Fund, established through Law 462 of March 18, 2025, introduces highly relevant changes to ensure the sustainability of the pension system in light of the Social Security Fund’s insolvency issues. This law was approved and published in the Official Gazette.
The Social Security Fund is a public, autonomous, and non-privatizable entity. Therefore, the reform to the Organic Law does not include an increase in the current retirement age. On this point, the reform establishes that in six years an actuarial evaluation of the old-age retirement pension must be conducted and that, if required, a Bill would have to be submitted to the National Assembly to increase the age (maximum three years).
Impact on the Business Sector: The Reform to the Organic Law of the Social Security Fund
Regarding the impact at the business sector level, the most relevant change is that the employer contribution corresponding solely to the employer increases by 3%. This increase will be implemented gradually as follows:
A) From the effective date of this law until February 28, 2027, it will be equivalent to 13.25% of the salaries paid to their employees.
B) From March 1, 2027 until February 28, 2029, it will be equivalent to 14.25% of the salaries paid to their employees.
C) From March 1, 2029 onward, it will be equivalent to 15.25% of the salaries paid to their employees.
Audit and Inspection
An important factor is that the CSS’s audit and inspection authority over workplaces and information collection is expanded, broadening the power to examine information from administrative, financial, and/or accounting databases of third parties, through duly substantiated formal communication.
Likewise, this authority is accompanied by modified penalties for non-compliance which, depending on the violation, may amount to up to US$50,000.00
As a core element of the reform, the pension system is modified and the Single Capitalization System with Solidarity Guarantee is created. This will consist of a minimum non-contributory pension for those who have not been able to make sufficient contributions and a contributory component of solidarity capitalization, which is a guaranteed solidarity pension based on the contributions accumulated in the affiliate’s individual accounts according to their contributions. Consequently, those who contribute under this system will be able to achieve a minimum replacement rate of 60% of the average base salary of the old-age retirement pension, meeting the criteria established in the law.
For more details about the reform, consult the official publication in the Official Gazette here.
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