Writing by: Lic. Jeannette Bravo, Partner – Labor and Administrative Law
The Reform to the Organic Law of the Social Security Fund, established by Law 462 on March 18, 2025, introduces significant changes to ensure the sustainability of the pension system in light of the insolvency issues facing the Social Security Fund. 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. Regarding this point, the reform establishes that within six years, an actuarial evaluation of the old-age retirement pension must be carried out, and if required, a Bill must be presented to the National Assembly to raise the retirement age (by a maximum of three years).
Impact on the Business Sector: The Reform to the Organic Law of the Social Security Fund
Regarding the impact on the business sector, the most significant change is that the employer’s share of the payroll tax is increased by 3%. This increase will be implemented gradually as follows:
A) From the entry into force of this law until February 28, 2027, it will be equivalent to 13.25% of the wages paid to employees.
B) From March 1, 2027, until February 28, 2029, it will be equivalent to 14.25% of the wages paid to employees.
C) From March 1, 2029, it will be equivalent to 15.25% of the wages paid to employees.
Audit and Inspection
Un factor importante es que se amplía la facultad de auditoría e inspección de la CSS de lugares de trabajo y la recaudación de la información, ampliando la facultad de examinar la información de bases de datos administrativas, financieras y/o contables de terceros, a través de comunicación formal debidamente motivada.
An important factor is that the auditing and inspection powers of the Social Security Fund (CSS) are expanded, particularly regarding workplace audits and information collection. It expands the authority to examine the information in administrative, financial, and/or accounting databases of third parties through formal communication, duly motivated.
Similarly, this authority is accompanied by changes in penalties for non-compliance, which, depending on the nature of the violation, may rise to US$50,000.
At the core of the reform, the pension system is modified, and the Single Capitalization System with Solidarity Guarantee is created. This will consist of a non-contributory minimum pension for those who have been unable to make sufficient contributions and a contributory solidarity capitalization component, which is a solidarity guaranteed pension based on the contributions accumulated in the affiliate’s individual accounts. As a result, those who contribute under this system may reach a minimum replacement rate of 60% of the average base salary of the old-age retirement pension, in accordance with the criteria established in the law.
For more details about the reform, please refer to the official publication in the Official Gazette here.
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