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The affiliation to a Mandatory Alternative Pension Fund does not prevent the transfer of the Pension Regime

If a member of the individual savings scheme meets the conditions set forth in article 13 literal e) of Law 100 of 1993 to transfer to the average premium regime with defined benefit, is able to do so due to its affiliation to an alternative plan of pensions.

Legal Framework

The Social Security Law established in article 87 the possibility of members of the individual savings regime to opt for Alternative Capitalization Plans, administered by the Alternative Funds, which even when they administer the mandatory pension contributions, which differ from those usually offered by the Pension Fund Administrators, where diversification is allowed investment in high-risk assets to obtain a greater capitalization of savings, involving the constitution of a patrimony independent of that of traditional funds.

Affiliation to these alternative plans or funds requires compliance with minimum capitalization goals and implies for the affiliate to waive of the minimum profitability guarantees and the minimum guaranteed pension. Additionally, article 107 of the Social Security Statute establishes that members of an alternative pension plan may voluntarily transfer the value of their individual account to another authorized capitalization or pension plan, or move to another managing entity, once per semester.

Regarding Alternative Pension Plans, the limited general regulation is found in Title 1, Book 32 of Decree 2555 of 2010. However, it does not exist until today regulation regarding transfers of the pension scheme from the individual savings scheme to the average premium regime administered by Colpensiones in these specific cases.

Based on the mentioned regulations, the Financial Superintendency issued a concept on July 18, 2008, by which it stated that a change from an alternative pension fund could only be legally possible towards another fund of the same nature.

In this context, there have been cases of affiliates in which requests for the transfer of the Pension Regime to the Average Premium Regime have been rejected by COLPENSIONES and by the Pension Fund Administrator (AFP)

Recent Case-Law

In recent sentence SL3457-2021 issued on August 11, 2021, the Labor Chamber of the Supreme Court of Justice exhibit jurisprudential precedent on these matters. This is a case in which an affiliate filed a request to a pension fund transfer at COLPENSIONES and the respective AFP, on a date prior to starting the grace period of the 10 years prior to reaching pension age and having fulfilled the minimum time of permanence 5 years required by law to make the change of regime. The request being denied by the administrators based on the Concept of the Financial Superintendence, and the particular interpretation of the aforementioned articles of Law 100 of 1993.

In that order, the affiliated sued before the ordinary labor jurisdiction, pointing out, among other reasons, that there are no limits on the freedom of affiliation, choice and transfer other than those established by the current Law 797 of 2003.

The Labor Chamber of the Superior Court of Bogotá, when resolving an appeal filed by the defendants, decided to revoke the judgment of first instance, stating in summary that the adherence by the affiliate to an alternative pension plan entails the waiver of the guarantees of minimum pension and profitability inherent to the individual savings regime, and which therefore implies renouncing the benefits recognized in the average premium regime, additionally it pointed out that there is no regulation on the conditions of return to the basic plan of the individual savings regime or to the regime average premium.

Once the Court's decision was contested in cassation, the Labor Chamber of the Court decides to reverse the sentence after resolving the legal problem raised. To find the answer, the Court in its decision made a normative analysis where it finds the following:

  • Article 13 of L. 100 of 1993 establishes the freedom to choose the pension scheme and affiliation as an expression of protection to the right to social security enshrined in the Political Constitution.
  • The only limitations on the right to affiliate and choose the pension scheme are those set forth in Law 797 of 2003, which amended article 13 of Law 100 of 1993, referring to the grace period of 10 years before reaching the pension age and the minimum period of stay of 5 years in a certain pension scheme.
  • The essential characteristics established by the regulations on alternative pension plans are: i) It allows mobility between plans, administrators and insurers; ii) It involves the separation of assets and the distinction between accounts for the capitalization and the insurance of the different risks; They imply the waiver of the guarantees of minimum profitability or minimum pension, in the terms established by the National Government and; iv) does not exempt the employer or the affiliate from paying mandatory contributions.
  • The eventual waiver of the minimum pension and profitability must be read in harmony with the applicable legal framework, and with the understanding that the legal precepts are part of the chapters of L. 100 of 1993 referring specifically to the Individual Savings Scheme with Solidarity, so it is evident that the waiver refers to the guarantees provided for that regime contained in articles 60 and 65 and not to other legal prerogatives.

Once both the regulatory framework and the characteristics of the pension plans have been reviewed, the Court clearly and expressly establishes that: a member of the individual savings regime who met the conditions set forth in article 13, literal e), of Law 100 of 1993, is authorized to transfer to the average premium regime with defined benefit, regardless of its affiliation to an alternative pension plan.”

As can be seen, the clear and correct pronouncement of the Supreme Court of Justice allows us to reaffirm that the two pension regimes in Colombia have different legal and financial nature and are not comparable. The rules that regulate their permanence and due opportunity to transfer to assure the contributing their free choice in the exercise of fundamental constitutional right, may never be replaced by lower rank norm and the scope of a single scheme, in a Social State Law, the National Constitution and the general rules prevail over the rules of a special nature.

At CMS Rodríguez-Azuero we are proud to have led the defense of our clients to achieve this important sentence of the Supreme Court of Justice, and we will be looking forward to receiving any comments or requirements in relation to this type of process.

Authors

Portrait of Adriana Escobar
Adriana Escobar
Partner
Bogotá
Portrait of Juan Carlos González
Juan Carlos González
Associate Director
Bogotá
Mauricio Higuera