Amendment to Panama’s Social Security System

Relevant aspects of Law 462 of 2025, which amends Panama’s Social Security System

By: Javier José Vallarino and Karen Tejeira

Increase in the Employer’s Contribution

The employer’s contribution is increased gradually or staggered by three (3) percentage points, as follows:

• As of April 1^st, 2025, it increases 1%, from 12.25% to 13.25%.
• As of March 1st, 2027, it increases 1%, from 13.25% to 14.25%.
• As of March 1^st, 2029, it increases 1%, from 14.25% to 15.25%.

Employees Contribution

The contribution paid by employees does not increase, it will remain at 9.75%.

Increase in Penalties for Non-Compliance

The amount of penalties or fines that the Social Security Fund (“Caja de Seguro Social”) may impose on employers in the event of non-compliance with their employer obligations is increased, as follows:

• False statements, underreporting or omissions: fines of up to US$30,000.00.

• Failure to comply with the obligation to provide information requested by Social Security Fund: fine of up to US$ 50,000.00.

• Simulation of legal acts: Fine of up to US$.50,000.00.

• Penalties for other violations of the Organic Law and its Regulations: Fine of up to US$25,000.00.

Retirement Age

The retirement age (reference age) is maintained at 57 years for women, and 62 years for men.

The reference age for accessing the old-age retirement pension shall be reviewed in the next six (6) years.

Self-Employed Workers

All self-employed workers (not subject to legal subordination or economic dependence) who enter the Social Security Fund system as of the date of entry into force of Law 462 (March 18^th, 2025), shall be included in the new capitalization system with solidarity guarantee:

• For Disability Risk, Old Age and Death System, self-employed workers shall contribute to the social security system 9.36% of the self-employed worker’s contributory income.

• On a voluntary basis, the self-employed worker may also join the Sickness and Maternity (risk) program, in which case he or she shall contribute to the social security system 8.5% of the contributory income declared, which may not be less than US$ 800.00 per month.

New Capitalization System with Solidarity Guarantee in Terms of Old-Age Retirement Pension

The following shall be included in the new capitalization system with solidarity guarantee:

• Insured workers who are assigned to the exclusively defined benefit subsystem or the mixed pension subsystem, and voluntarily decide to participate or migrate to the single capitalization system with solidarity guarantee, within the following twelve (12) months as of March 18^th, 2025.

• Employees or self-employed workers, who join the system for the first time, as of the enactment of Law 362, that is, as of March 18^th, 2025.

• Insured employees who, as of March 1^st, 2036 (but we estimate that this shall be “modified” to 2032), are still included or assigned to the mixed pension subsystem.

“Mi Caja Digital”

The new administration of Social Security Fund has developed the “MI CAJA DIGITAL” program, through which all insured employees shall be able to have immediate access to valuable information that shall allow them:

• To specify in which system for calculating the old-age retirement pension they are included.

• To know their history of contributions made to the Institution.

• To project or calculate your old-age retirement pension.

• To project or calculate their old-age retirement pension if they decide to change to the new capitalization system with solidarity guarantee.

Annual contribution from the State

The State undertakes to make an annual contribution of US$ 966,000,000.00 to the Social Security Fund to cover the actuarial deficit of the Disability Risk, Old Age and Death System, which shall be adjusted annually.

On Investments

The Board of Directors of the Social Security Fund may delegate up to 10% of the Reserve Funds of the programs managed and directed by this Institution, to be administered/invested by private investment administrators, the remaining 90% of the administration and execution to be maintained under the control of the National Bank of Panama (“Banco Nacional de Panamá”) and the Savings Bank (“Caja de Ahorros”).

Consequently, Law 462 of 2025 does not privatize the Reserve Funds of the Social Security Fund.

For more information on how this may affect your business in Panama, contact us at bd@icazalaw.com.