Mexico: Transitional Regime for Retirement Allowance Plans between the Social Security Law of 1973 (Abrogated) and the Amended Version (in force)
On 24 January 2020, the Second Chamber of Mexico’s Supreme Court issued its ruling regarding the upper limit that shall apply regarding retirement allowance plans of those employees who are listed under the Transitional Regime of the Allowance System, between the 1973 Social Security Law (abrogated) and the current Social Security Law.
The case law resulting from this judgment, arises as a contradiction of the thesis between two courts that adopted dissenting legal criteria, consisted of establishing whether to quantify the amount of the retirement allowance at 10 times the minimum wage established therein, or 25 minimum wages as the current Social Security Law establishes, for employees who are placed in the transitional regime and who choose to retire in accordance with the Social Security Law of 1973.
The Supreme Court determined that the correct upper limit of the average salary to apply regarding the retirement allowances plans is 10 times the minimum wage, since the 25 minimum wages provided for in the twenty-fifth Transitory Section of the Social Security Act of 1997, only applies to insured persons who choose to retire according to the scheme established in the current Social Security Act.
It is important to note that even with the previous Law of 1973 (abrogated), the legal effects for those who are insured and have chosen that allowance scheme continue to apply, and do not suddenly cease as a result of the new legislation. Therefore, the allowances must be granted precisely under the parameters of the 1973 legislation.
For more information on these articles or any other issues involving labour and employment matters in Mexico, please contact Oscar De La Vega (Partner) of De La Vega & Martinez Rojas S.C. at ODelaVega@dlvmr.com.mx or visit www.dlvmr.com.mx.
