On July 23, 2020, the Constitutional Court issued a decision in which it declared the unconstitutionality of Legislative Decree 558 of 2020, by which the Government had implemented a series of measures in pension matters, as a consequence of the serious economic affectation generated by the pandemic situation and in order to reduce the economic burdens of employers.
The measures that the Government had adopted at the time in the Decree were as follows:
- The Decree 558 indicated the possibility for employers and independent employees to avail themselves of a benefit that consisted in the reduction of the percentages of contributions to the General Pension System during the months of April and May 2020, payable in the months of May and June correspondingly. This benefit allowed to reduce the contribution of the 16% to 3% of IBC.
- Additionally, the Decree 558 stated that the Pension Fund Administrators should proceed with the transfer to Colpensiones of those retired persons with a legal minimum monthly salary allowance and who were in a programmed withdrawal modality, and who could be affected by the decapitalization in their accounts as a consequence of the volatility of the markets as a result of the conjuncture derived from Covid-19.
It is necessary to indicate that to date, the text of the decision of the Constitutional Court has not been made public in order to establish the fundamental reasons for the scope of the decision.
Therefore, based on the information published so far, and considering the statements of the President of the Court, Alberto Rojas Ríos, who indicated that "the sentence has retroactive effects, that is, everything returns to the state it was before of the issuance of the Decree”, there are a series of concerns related to the beneficiaries of Decree 558, specifically those who agreed to the benefits referring to the Social Security System in Pension.
As we already pointed out, and until the sentence is published, its scope and application being clear, there are many concerns, which among the most relevant, are considered the following:
- What will be the deadlines for the reimbursement of contributions to the Social Security System in Pension?
- How will the reimbursement of the contributions will be made?
- Can these refunds be paid in quota, or in advance?
- What will happen to the contribution of an employee who is no longer under a labour contract?
- Will moratorium interest apply in case of breach of the obligation?
- Will the debt be assumed by the government, employers or employee?
- Which other Legislative Decrees issued during the emergency could have the same treatment by the Constitutional Court, and which is the legal certainty that we have in labour and social security matters?
What is clear is that in the event that employers are ordered to assume the debt for having initially accepted the benefit indicated in the mentioned Decree, it could cause a negative economic situation for employers, directly affecting their cash flow and therefore its resources, entrusted in the legality of the law, without now counting with the resources to cover the remaining percentage of the pension contribution for the months of April and May.
At CMS Rodríguez-Azuero we will be very alert to the content of the decision, as well as the measures and parameters indicated there, to define how it will be carried out and who will be responsible for the missing percentage of the contributions to the General Pension System.
