Amendments to the retirement and pension fund system. Regulatory rules

Law No 22,262 amended Law No 24,241 that governs the Integrated Retirement and Pension Fund System (Sistema Integrado de Jubilaciones y Pensiones - “SIJP”). Section 1 of Decree No 313/2007 establishes the dates upon which the provisions of Law No 26,222 shall become effective.

1.    Taxable base

To calculate the individual contributions of employees and self employed workers, the social insurance taxable base (the maximum amount of which is equal to 75 times the value of the social security benefit (MOPRE), i.e. $ 6,000) shall apply to earnings accrued as from April 1, 2007.

2.    Free choice

As from April 1, 2007 employees and self employed workers entering the labor market and not exercising their right to choose between the official (sistema de reparto) or private (sistema de capitalización) social security systems within 90 days as from the beginning of the employment relationship shall be covered by the official system.

Workers entering the labor market before April 1, 2007 who do not expressly select the official social security system shall be covered by the private system, even though the term to exercise their right of selection expires after such date.

The term within which the worker must choose between both systems shall begin on April 12, 2007 and end on December 31, 2007. The option selected within such term shall be effective as from January 1, 2008.

3.    Additional Benefit for Permanence (Prestación Adicional por Permanencia)

As from July 1, 2007, the beneficiaries of SIPJ whose Additional Benefit for Permanence was calculated at 0.85% per year of service contributing to the official system, shall be entitled to have such benefit recalculated so that their monthly Additional Benefit for Permanence will be determined at 1.5% per year of service contributing to the official system.

4.    AFJP fees

The fees charged by AFJP (Retirement and Pension Funds Managers), that shall not exceed 1% of the taxable base on which they are set, shall apply to earnings accrued as from April 3, 2007, the effective date of Decree No 313/2007. Likewise, up to December 31, 2007, the disability and death insurance cost may be added to such percentage.

The system for the financing of disability and death insurance payments that are guaranteed by AFJP shall apply to claims payable as from January 1, 2008.

5.    Workers in the private system

The ninety day-term for transfer of the balance in retirement accounts of men over 55 and women over 50, not exceeding an amount equal to 250 MOPRES, i.e. $ 20,000, to the Official System, unless otherwise expressly decided by the worker, shall commence on April 12, 2007.

6.    Contribution percentage

As from May 28, 2007, the individual contribution payable by workers entering the Integrated Retirement and Pension System, irrespective of which system is selected, shall be equal to 11%.

The contribution corresponding to earnings accrued as from January 1, 2008 shall be 11% irrespective of which system is selected.

Law No 22,262 amended Law No 24,241 that governs the Integrated Retirement and Pension Fund System (Sistema Integrado de Jubilaciones y Pensiones - “SIJP”). Section 1 of Decree No 313/2007 establishes the dates upon which the provisions of Law No 26,222 shall become effective.