What is its purpose?
Decree 558 seeks to adopt measures in the General Pension System in order to provide greater liquidity to employers, employees and independent contractors.
It also seeks to protect pensioners under the programmed retirement scheme who receive a minimum monthly legal wage from a potential decapitalization of the pension savings accounts supporting the payment of their pension.
Who does it apply to?
This Decree applies to:
• Affiliates to the General Pension System
• Public and private employers
• Employees
• Independent contractors
• Pensioners of the Individual Saving System under programmed retirement
• Colpensiones
• Pension Fund Administrators (PFA)
What are the measures adopted?
1. Partial payment of the General Pension System’s contribution
For April and May 2020, which contributions must be made in May and June 2020, respectively, public and private employers and independent contractors who voluntarily decide to adopt this measure, will pay a 3% contribution to the General Pension System.
This contribution will be paid as follows:
- 75% by employer
- 25% by employee
Independent contractors must pay 100% of this contribution (3%).
To this end, the Integrated Social Security Contribution Form will be temporarily modified.
1.1. What is the base income for contribution?
The base income to perform this contribution will continue being the one set forth in current legislation and must match with the income reported to perform the payment to the General Health System.
This income cannot be inferior to one minimum monthly legal wage (mmlw) nor higher than 25 mmlw.
1.2. How are weeks and access to pension insurance counted?
Pensions Fund Administrators (PFA) must take into account the weeks corresponding to the period quoted under this Decree on behalf of affiliates for:
- Fulfillment of the 1,150 weeks required to obtain a minimum pension guarantee in the Individual Savings System (Régimen de Ahorro Individual).
- Fulfillment of the 1,300 weeks required to obtain a retirement pension of 1 mmlw in the Public Pension System (Régimen de prima media).
- To prove compliance with the weeks required to obtain the disability and survival pensions as well as the pension insurance coverage.
Notwithstanding the above, if there is a transfer between administrators or regimes, no transfer of amounts that are not registered as effectively paid shall be made.
2. Special payment mechanism for pensions recognized under the programmed retirement scheme
2.1. Programmed retirement
PFAs shall access to the special payment mechanism regulated in this Decree, regarding its pensioners under the programmed retirement scheme who receive a pension of 1 mmlw.
For this purpose, PFAs must have previously evidenced that existing resources within the pension savings account are not enough for the pensioners to continue receiving a mmlw pension under this scheme, hence being required to hire an annuity (renta vitalicia) of 1 mmlw.
PFAs must transfer to Colpensiones within a period of 4 months, all resources and assets of the Special programmed Retirement Fund and the information corresponding to pensioners who, on the date of issuance of the Decree, have a decapitalization in their accounts.
2.2. Special payment mechanism
If it is not possible to hire an annuity on behalf of pensioners in the programmed retirement scheme whose balances are no longer sufficient to continue receiving a mmlw pension under this scheme, pension will continue to be paid through Colpensiones. In this case, the pension will have the same conditions of an annuity, this is, it will be equivalent to 1 mmlw and will be paid until the pensioner´s death. Likewise, the survivors’ pension will be paid to his or her beneficiaries for the time legally established for such purpose.
2.3. Transfer of resources through the special payment mechanism
For the special payment mechanism, PFAs must transfer to Colpensiones the amount corresponding to the balance of the individual savings account and its income, the pension bond’s amount and the additional amount, if applicable.
2.4. Review of reserves associated with the special payment mechanism
Once Colpensiones receives all resources and assets, it must verify that the total transferred amount corresponds to the actuarial calculation of all pensions. If the total amount of the transferred resources is not sufficient to cover the value corresponding to the actuarial calculation, the PFA will transfer the remaining amount to Colpensiones.
2.5. Colpensiones liability as paying entity
Colpensiones will act exclusively as the payer of transferred pensions. In consequence, all activities or operations in addition to the pensions’ payment, including legal defense, will continue to be performed by the PFA that recognized the pension.
2.6. Amount of the benefit paid by Colpensiones
Once pensions have been received through the special payment mechanism, Colpensiones will pay all pensions according to the reported amount by the PFA, which cannot be different from 1 mmlw.