Colombia: Constitutional Court weighs Constitutionality of Special Decree reducing the pension contribution rate for two months and declares its unconstitutionality

Despite having not been formally issued, the Colombian Constitutional Court has communicated the reasons included in the decision C-258, 2020 to declare the unconstitutionality of Decree 558 through the press release # 31 of July 22 and 23.

According to the Court, the fact that Decree 558 changed the pension contribution rate for April and May from 16% to 3% and limited that those payments will only be considered for monthly minimum pensions, specifically contradicts article 215 of the Constitution as implies a violation to the social rights of employees; in addition, it breaches article 48 of the Constitution, due to the purpose of the measure which was guaranteeing liquidity to both employers and employees, as it was changing the purpose of the pension contribution. In the end, the Court stays that Decree 558 did not guarantee the financial sustainability of the Pension System to recognise the monthly minimum pensions in the future for those who will be entitled to it, taking into account this two months of the measure with a reduced pension contribution rate.

On the other hand, the Court found that the second measure taken by Decree 558 regarding the transfer to the public regime of private regime pensioners did not have a material connection with the reasons of the emergency (the COVID-19 outbreak). In the opinion of the Court, Decree 558 was trying to find a solution of a structural problem in the pension regime, which was part of the reason for the measure. As well as with the first measure, the Court could not find the measure compatible with the financial sustainability of the pension system in the future, as the public regime would have had to finance pensions from the private regime and decree 558 did not guarantee the means for those payments.

Finally, the Court ordered the national government the adoption and implementation of a suitable mechanism to pay the remaining balance of the pension contribution by employers and employees, as well the guarantee of the reinstatement of those pensioners who were translated to COLPENSIONES.

Having the important effects of this decision, it is crucial to analyse each case and to generate a strategy to make the pension contribution in favour of the system, by both employers and employees, as soon as the government issues the mechanism to do it.

For more information on these articles or any other issues involving labour and employment matters in Colombia, please contact Alejandro Castellanos (Partner) of López & Asociados at alejandro.castellanos@lopezasociados.net or visit www.lopezasociados.net