Legal-Economic Reforms to the Social Security System in Nicaragua
On Friday, February 1, two thousand nineteen, Presidential Decree Number Six indent Two thousand nineteen (06-2019) was issued, called “Decree of Reforms to Decree Number 975, General Regulations of the Social Security Law”, approved by the Directing Council of the Nicaraguan Institute of Social Security (INSS) in Session Number three hundred twenty-five (325) of January 28, two thousand nineteen.
Among the main reforms incorporated, we find the following:
1) The contributions to finance the benefits currently granted by the Nicaraguan Institute of Social Security in the various schemes, as of February 1, 2019, are as follows: a) For the Disability, Old Age, Death and Occupational Hazards Branch it went from 10% to 13.50% for employers with 50 or more workers and 12.50% for employers with less than 50 workers. On the other hand, in charge of the worker went from 4% to 4.75%.
2) The contributions of the Optional Insurance for the comprehensive regime went from 18.25% to 22.25% and for the Disability, Old Age and Death regime from 10% to 14%.
3) The contributions of ministers of any religion increased from 13.6% to 17.60% for the comprehensive optional regime and from 7.6% to 11.60% for the optional regime of Invalidity, Old Age and Death.
4) The maximum limit for the remuneration subject to Workers’ and Employers’ contributions, which as of January 2019 was Ninety-six thousand eight hundred and forty-one Córdobas with fifty-six centavos (C$96,841.56), was eliminated.
5) The number of weeks of contribution for the calculation of the old-age pension was increased from two hundred and fifty (250) to three hundred and seventy-five (375), among others.
According to the “Considering” section of the Decree, the objective of these reforms is to further guarantee comprehensive health protection for policyholders and their beneficiaries, given the need to improve the financial balance of the pension system and the INSS health system.
However, some members of the private sector have stated that the reforms in question, in addition to being able to affect the amount of new pensions, more than 750,000 contributors approximately, will see their salaries reduced after the increase of 0.75 percentage point of their contribution to the system, which will go from 6.The formal business sector will have to pay up to 3.5 percentage points more in its contribution this year 2019, which will increase from 19 to 22.5 percent, affecting the competitiveness of the private sector, increasing operating costs and may force many companies to reduce the number of staff they have.
Paul Rodríguez Medina
Associate
García & Bodán
Nicaragua