The proposal for reforms to the CSS pension plan presented by the government was modified by the Labor Commission of the Legislative Assembly on Tuesday night

PANAMA - In Brief 05 Feb 2025 by Marco Fernandez
Most legislators opposed the proposal due to the three-year increase in the retirement age, arguing that the Government failed to adjust the public sector payroll, thus placing the financial burden on the older population. This claim holds some truth: the number of new public employees increased by about four thousand since July, including seven hundred in the Legislative Assembly. However, this issue has minimal relevance to the long-term sustainability of the pension program. Many deputies likely cited this as a justification to protect their political interests, given widespread public opposition to this initiative. Key elements of the reform after the first debate are the following: Retirement Age: No changes to the current retirement ages (62 for males and 57 for females). Employer Contributions: Increased by three percentage points. Transition Options: A transition year for current insured individuals to choose between staying in their existing system (Exclusively Defined Benefit or Mixed System) or moving to the new notional accounts system (solidarity capitalization). New contributors will automatically enroll in the latter. Non-Contributory Pension: The $140 per month non-contributory pension is eliminated. Government Contributions: The Ministry of Economy and Finance’s contribution increases to US $1.443 billion (2% of GDP and 14% of current government revenues). The funding gap remains unaddressed. Fund Structure: Ambiguity persists regarding the continuation of the Single Solidarity Fund and whether reserves of the two sub-programs will be separated. General Reserve Fund Management: 90% of the funds will be managed by state-owned banks (Banco Nacional de Pa...

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