The Application of Active Retirement raises some controversies with the Social Security (INSS). Article 204 of the General Law on Social Security (LGSS) defines the economic benefit for retirement in its contributory modality. It is a unique benefit for each beneficiary. And it consists of a lifetime pension that will be recognized to the working person. Under the conditions, amount and form that are determined by regulation. When, upon reaching the established age, the worker ceases or has ceased to work.
Therefore, those persons who meet the following conditions will be entitled to a retirement pension:
- Have reached 67 years of age, or 65 years of age when 38 years and six months of contributions are accredited, without taking into account the proportional part corresponding to extraordinary payments. Full years and months will be taken into account for the calculation of contribution periods, without the fractions thereof being equated to them.
- Have covered a minimum contribution period of 15 years, of which at least two must have been within the 15 years immediately preceding the time of entitlement. For the purposes of calculating the years of contribution, the proportional part corresponding to extraordinary payments shall not be taken into account.
Enjoyment of the retirement pension shall be incompatible with the work of the pensioner, whether employed or self-employed ( art. 213 LGSS ).
Application of Active Retirement. Work and compatibility with the pension
Persons who take retirement may combine their pension with part-time work. In this situation, the pension shall be reduced in the inverse proportion to the reduction in the pensioner’s working time compared to that of a comparable full-time worker.
This retirement pension shall be compatible with the performance of self-employed work for which the total annual income does not exceed the minimum inter-professional wage, calculated on an annual basis. Those who carry out these economic activities shall not be obliged to pay social security contributions.
The activities specified in the previous paragraph, for which no contribution is made, will not generate new rights to social security benefits.
Without prejudice to the provisions of article 213 of the LGSS , which stresses the incompatibility of retirement benefits with any work, a type of retirement is established in which such incompatibility has no effect and whose peculiarities are set out below.
Article 214 of the LGSS sets out the requirements for receiving a retirement pension in its contributory form, which may be compatible with working as an employee or self-employed person, in the following terms:
- Access to the pension must have taken place once the age applicable in each case has been reached. For this purpose, retirements benefiting from bonuses or early retirement that may be applicable to the person concerned are not admissible.
- The percentage applicable to the respective regulatory base for the purpose of determining the amount of the pension due shall be 100%.
- Compatible work may be performed on a full-time or part-time basis.
The amount of the retirement pension compatible with work shall be equivalent to 50% of the amount resulting from initial recognition, after application, where appropriate, of the ceiling of the public pension, or of that being received, at the time of commencement of compatibility with work, excluding, in all cases, the minimum supplement, regardless of the working day or the activity performed by the pensioner.
However, if the activity is self-employed and it is proven that at least one employee has been hired, the amount of the pension that is compatible with the work will be 100%. FULL ACTIVE RETIREMENT
- The law does not define the type of contract or percentage of the working day. Therefore, it is even possible to hire an employee with a temporary and part-time contract.
- The self-employed person must continue to pay contributions to RETA. The contribution will be for the coverage of temporary disability and professional contingencies and for a solidarity fee of 8%. This contribution does not count towards the right to future benefits.
This is what the law says.
Once this type of retirement has been requested, situations have arisen that have created discrepancies between the legislation and the criteria of the bodies responsible for processing it.
To give a few examples, in the case of self-employed corporate workers, the INSS does not recognize 100% compatibility for this group. It is understood that in these cases it is the company to which they belong and not them as individuals. There are certain criteria against and in favor once these resolutions reach the courts. And it will be the Supreme Court that has the power to unify the rulings.
The INSS also does not recognize the compatibility of 100% of the pension in this group, for the same reasons as in the previous case.
Finally, there have also been different criteria when dealing with people included in the Household Employees’ Scheme. This was initially accepted. There were positive resolutions from persons who, having a domestic employee in their name, regardless of the group to which they belonged, were able to access 100% of the benefit.
Later the criteria was changed and, through an internal note, the INSS agreed that this option was not viable. This organization understands that in order to be able to make the new contract for an employee compatible with 100% of the receipt of the pension, it must be within the framework of the activity that gave the pensioner the receipt of his or her pension. Thus, in the same situation, there are people who have agreed to 100% and others whose applications have been rejected as a result of the change in criteria.
If you are in a position to retire, and this option is being considered, do not hesitate to contact us.
Labour Consulting Dpt.