By Legislative Decree No. 787 dated September 28, 2017, the Legislative Assembly of the Republic of El Salvador approved the amendments to the Law on the Pension Savings System, which will come into effect eight days after its publication in the Official Gazette. These reforms incorporate, among others, the following:
Percentage of contributions and distribution of contributions:
The contribution rate will be 15%, and will be distributed as follows: 7.25% of the basic contribution income to be paid by the worker (currently 6.25%), fully allocated to his individual savings account, and 7.75% to be paid by the employer (currently 6.75%), and of which 3.85% will be allocated to the individual savings account for the employee´s pensions, 1.9% will be used for the payment of the disability and survival insurance contract and the Administrator´s commission, and 2.0% will be destined the Solidarity Guarantee Account.
The employer's contribution to the individual account will start with 0.75% for the period 2017 to 2018, increasing to the limit of 3.85% in 2050; Likewise, the contribution to the Solidarity Guarantee Account by the employer will start at 5.0% for the period from 2017 to 2018 and will decrease to a limit of 2.0% by the year 2050.
Solidarity Guarantee Account:
The Solidarity Guarantee Account is the mechanism that assumes the financing of the longevity benefits, minimum pensions and the obligations of the Pensions Institution with the affiliates of that System, according to the limits established by law.
Return of Balance:
Affiliates who have reached the legal age to retire by old age, and who reach periods of contributions between a minimum of ten years of continuous or discontinuous contributions and less than twenty-five years of contributions, may choose to receive the refund of the balance of their individual account or enjoy a Temporary Economic Benefit or Permanent Economic Benefit, as applicable.