Reduction of pension contributions and protection measures for pensioners

The National Government issued Legislative Decree 558 of 2020, whereby provisions related to the contribution of dependent and independent workers to the pension subsystem are issued and measures are adopted to protect pensioners under the programmed retirement modality. In accordance with the above, we present the main points addressed in the regulation.

1. Reduction in the amount of pension contributions.

Employers, from the public and private sector, and independent workers who decide to avail themselves of the relief established in this decree, may pay as contribution to the pension subsystem the amount of 3% for the contributions of the months of April and May, which must be made in the months of May and June respectively, considering the following:

a) Payment of contributions: independent workers must pay 100% of this contribution while employers must make it in the corresponding amounts (75% the employer and 25% the worker). Consequently, in the case of employers, the payment will be reduced as follows:

It should be noted that the Ministry of Health and Social Protection will be responsible for making the pertinent modifications to the Integrated Contribution Payment Plan (Planilla Integrada de Liquidation de Aportes - PILA) to access this alternative.

b) Base Contribution Income: the calculation of the IBC for purposes of payment of contributions to the pension subsystem shall be made in accordance with the regulations in force, as follows:

Employers: the IBC will be the result of the sum of the total salary payments, the total non-wage payments that exceed 40% of the total remuneration (Art. 30 of Law 1393 of 2010) and the calculation of the novelties of the period (vacations, leaves, disabilities and/or other contingencies).

Self-employed workers: in accordance with the provisions of Article 244 of Law 1955 of 2019, self-employed workers who receive net income equal to or greater than one (1) SMMLV must contribute to the Comprehensive Social Security System, for which their IBC will be calculated as follows:

Self-employed workers with a contract for the provision of personal services: the IBC will correspond to 40% of the monthly value of the contract without VAT.

Self-employed and independent workers with a contract other than the rendering of personal services: the IBC will correspond to 40% of the monthly value of their income without VAT, minus costs, and deductions. Additionally, when the exercise of their activities implies subcontracting and/or purchase of inputs or expenses, the cost presumption scheme adopted by the Pension and Parafiscal Management Unit (UGPP) through Resolution No. 209 of 2020 will be applicable.

c) Accounting of weeks: the Administrators of the General Pension System shall consider the weeks contributed during these months for purposes of calculating and granting the minimum pension guarantee, in the Individual Savings with Solidarity Regime, or the old age pension, in the Average Premium Regime.

1. Protection for pensions recognized under the programmed retirement mode.

In order to protect those pensioners who receive a monthly payment equivalent to one (1) SMMLV through the programmed withdrawal modality, whose balances in their individual pension savings account may be affected by the financial risk caused by the COVID-19, the present decree establishes a special payment mechanism with which the Fund and Severance Pay Administrators may transfer to the Colombian Pension Administrator –“Colpensiones”-, the value corresponding to the balance of the individual savings account and its yields, the value of the pension bond and the additional amount, in order for the latter to manage said portfolio and make the payment of pensions, with the same characteristics of a life annuity, thus guaranteeing that the pension allowance is not less than one (1) SMMLV.

2. Conclusions

Undoubtedly, this decree provides great support for the reduction of labor costs borne by employers, as well as those incurred by self-employed workers. To this must be added the measure adopted by the Ministry of Health in Decree 538 of 2020, which allows that, during the sanitary emergency, and until the calendar month following its termination, no moratorium interest will be caused for the late payment of contributions to the Social Security System.