Bill introducing changes to the Pension and Retirement System

We summarize below the main provisions included in the Bill which, if approved by both chambers of Congress, the Senate and the House of Representatives, will replace the existing system. 

1.    Private Pension System - The private pension system established under Law No 24,241 (the “Private Pension System”) is eliminated. At present, the Private Pension System exists together with another pension system managed by the Government (the “Government Pension System”). Workers choose whether to join the Private Pension System —in which case they become affiliates of the relevant Pension Fund Manager Company— or the Government Pension System. However, if the Bill is approved by Congress, both pension systems will be unified. Therefore, the affiliates of the Private Pension System and the assets of the Pension Funds shall be absorbed by a new pension regime known as “Sistema Integrado Previsional Argentino” (“SIPA”), managed by one of the Government’s agencies, the “Administración Nacional de Seguridad Social” (“ANSES”).

2.    The SIPA - While the Private Pension System states that each worker joining the system should have its own pension account, where part of the retirement contributions are deposited and which, in time, will finance his or her retirement or pension benefits, the SIPA managed by the Government, as described in this Bill, is based on the payment of current retirement and pension benefits with the funds provided by current workers and future retirement benefits with the funds provided by future workers (no private accounts or capitalization of funds is contemplated).

3.    Guarantee to the affiliates of the Private Pension System - The Republic of Argentina guarantees the affiliates of the Private Pension System that it shall provide them with the same retirement benefits as those provided by the Government to the workers included in the Government Pension System. However, no specification regarding how the Government shall guarantee this commitment is included in the Bill.

4.    Payment of Retirement Benefits issued under the Private Pension System - The Government shall pay the pension and retirement benefits that at present are being paid by the Pension Fund Managers Companies (“retiro programado” and “retiro fraccionario”). The benefits paid by annuity insurance companies (“renta vitalicia previsional”) shall continue to be paid by those companies without change.

5.    Voluntary deposits - Voluntary deposits made by workers to their own pension account known as “imposiciones voluntarias” or “depósitos convenidos” may be maintained under the management of the Pension Fund Manager Companies, which shall continue to operate for that sole purpose. In this event, Pension Fund Manager Companies will need to amend their by-laws in order to adjust the scope of their purpose. The Bill also revokes tax advantages that these voluntary deposits had for the relevant affiliate, as these amounts were entirely deductible from the tax base to calculate the income tax.

6.    Assets of the Pension Fund - Under Law No 24.241, Pension Funds’ assets are separate from the Pension Fund Manager Companies’ assets. The Bill states that the Pension Funds’ assets shall be transferred in kind to the ANSES and they shall apparently form a separate patrimony identified as Fondo de Garantía de Sustentabilidad del Régimen (Fund to Guarantee Sustainability of the Regime). It is not clear what commitments and obligations this fund shall guarantee. The ANSES is the entity that shall manage the SIPA and, therefore, this huge fund that shall include all the assets of Pension Funds. The ANSES shall take over the Pension Fund Manager Companies’ rights and obligations under Law No 24,241.

7.    Control of ANSES - ANSES shall be controlled by a commission formed by twelve members of both chambers of Congress (Comisión Bicameral de Control de los Fondos de la Seguridad Social), six Senators and six members of the House of Representatives. This commission will supervise the performance of the ANSES regarding the SIPA.

8.    Compensation to Pension Fund Manager Companies - The Government recognizes some kind of compensation to the shareholders of Pension Fund Manager Companies. The Bill does not state how the compensation will be calculated and refers to further regulation to be drafted on this matter. However, the maximum amount allowed as compensation is the capital stock of the Pension Fund Manager Companies under liquidation. Compensation would be fulfilled through the delivery of government bonds to the relevant shareholders.

9.    Employees of Pension Fund Managers - The Bill states that the Government intends to maintain the Pension Fund Managers’ employees’ work in some way. However, no detail is included regarding how or where these employees will be able to continue working.