On February 7, 2020, Law 13-20 was enacted, which imposes various modifications to Law 87-01, which created the Dominican Social Security System (SDSS).
The fact that Law 87-01 included a complex system of cumulative surcharges and late payments prevented many micro, small, and medium-sized businesses from registering and retaining their workers in the system. This surcharge mechanism created a debt that was unpayable for many employers and had consequences for workers, who were denied access to the Social Security System. As a result of this situation, Law 13-20 was passed.
Following the implementation of this new legal provision, the Social Security Treasury (TSS) gained legal personality, allowing it to act autonomously in court and pursue debt collection. The same name was also given to the General Directorate of Information and Defense of Affiliates (DIDA), to enhance its capacity to carry out its functions of disseminating and informing about Law 87-01. Both entities operate as decentralized autonomous entities, attached to the Ministry of Labor.
The law establishes that bank accounts that the TSS must open in the National Financial Network cannot be subject to any type of embargo or objection, so they cannot withhold payments they are required to make in accordance with the law, nor can they act as a third party subject to embargo.
Part of the strengthening of the TSS's functions is the power granted by law to impose fines on employers who fail to register their workers, report their wages, or pay Social Security contributions. The TSS may also apply coercive collections and seize debts owed by employers for nonpayment of Social Security contributions and the fines imposed.
The law establishes the minimum requirements for the Social Security Treasurer, who will be appointed by the President of the Republic from a shortlist presented by the National Social Security Council. This appointment will be for a four-year term, which may be ratified for an additional period of equal duration.
The law redistributed the cost and financing of the Contributory Regime, which for the Old Age, Disability and Survivors Insurance (SVDS) will be financed with 9,97% of the contributory salary and the contributions to cover these costs will come from the following sources: 2,87% from the affiliate and 7,10% from the employer.
An important contribution of Law 13-20 has been the progressive reduction of the service fees that Pension Fund Administrators may charge, which will range from an annual fee on the managed balance charged monthly of up to 1.20% in 2020 to 0.75% by 2029. They may also charge for optional services, if expressly requested by members.
This bill significantly reduces the penalties imposed by Law 87-01 against offending employers, reducing the cumulative monthly penalty from 5% of the amount involved in the improper withholding to a surcharge equivalent to the average monthly profitability percentage generated by the individual capitalization system in the calendar month prior to the period of the unpaid payment notification. This is in addition to a monthly penalty of 0.3% on the amount of unpaid contributions. This legislation maintains the possibility of initiating civil and criminal actions, but these will be initiated by the Social Security Treasury.
Furthermore, it is established that surcharges resulting from employers' failure to pay mandatory contributions will apply only to amounts owed for mandatory contributions and will not apply to amounts owed for surcharges, interest, late payments, or penalties.
Under Law 13-20, the General Directorate of Internal Revenue (DGII) may request the deactivation of Tax Receipt Numbers (NCF) until offending employers who maintain violations for periods exceeding 60 days comply with their payment obligations.
As part of the strengthening of the TSS's functions, special collection procedures were created by the TSS. Through these procedures, the institution will be able to recover amounts resulting from employers' noncompliance with their obligations and the accumulation of debts that are 60 days or more overdue for mandatory contributions to the Dominican Social Security System. A special inspection body was also created, composed of technicians and auditors. These will be the only officials competent to verify and issue infraction reports for violations of Law 87-01, such as the failure to register workers with the SDSS, the failure to report wages, and the failure to pay mandatory contributions to the system.
Finally, as an exception, employers who, at the time Law 13-20 came into effect, had overdue debts with the Social Security System (for contributions related to employee contributions and employer contributions to the Contributory Regime) may settle the debt in full and regularize their status by paying the principal amount owed, with the total elimination of any surcharges, late fees, interest, or penalties. This is provided that they make the payment or sign a payment agreement with the Social Security Treasury within six months of the law's entry into force. To date, the Social Security System has recalculated the amounts payable so that delinquent employers can be current and workers can enjoy the benefits of the Dominican Social Security System.
By Prinkin Elena Jiménez Chireno
Ontier
