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Costa Rican Department Of Social Security Announces Changes In Pension And Retirement
The Costa Rican Department of Social Security (CCSS) has proposed an increase in total contribution to the Disability, Old Age and Death Fund (IVM) from 8.5% to 14%. They have also announced that early retirement will be phased out, while some changes are already in effect beginning this month.
Many have cautioned that the Costa Rican pension system funds may become insufficient in paying retires from 2027 forward. Some have even anticipated that the crisis could begin as early as 2023. As a precaution against these possibilities, the CCSS has proposed changes to the contributions employees and employers make to the system.
If these changes to the contribution of IVM were to be accepted, workers would have to contribute 5.5%, employers 6.5%, and the State 2.0%. Before making the final decision, CCSS will evaluate an upcoming independent study on the finances of the pension system.
Furthermore, the CCSS reported that the ‘Early Penalized Retirement’ benefit that was created in 2005 and allows the retirement of women and men aged 60 to 62 years (certain conditions apply) will be phased out completely by 2018. In addition, effective November 1, any employee who wishes to retire earlier while this benefit is in effect must accumulate 360 contributions (quotas) instead of the 300 that are currently requested. This amount will increase every 18 months until the cancellation of the benefit in December 2018.
It is vital that all companies with operations in Costa Rica keep abreast of these and other changes in local regulations. In TMF Group, our knowledge of the laws, regulations, and local requirements and processes is at the heart of everything we do. We can help you settle in to Costa Rica safely and efficiently while staying within compliance.Contact our team for more details.