Capítulo V. Recursos y sistema financiera

The social security regime must be financed as follows:

a). During all the time in which it extends and benefits only the working class, or part of it, by the method of triple contribution based on the obligatory contributions of the workers, of the employers and of the State;

b). When it includes the whole population, on the basis of the method of a single contribution proportional to the income of each inhabitant who is an active part of the process of production of goods or services, as provided in article 27; and also with the contributions of the State, if these are necessary; and,

c). During the intermediate stages not provided for in the two preceding subsections, by the obligatory methods that the Institute determines in accordance, both with its financial needs and administrative facility, and with the characteristics and contributive possibilities of the layers of population that it protects

The regulations must determine in each case the moment of the contributions, in accordance with the total cost that the actuarial estimates establish for the respective benefits, as well as the manner and moment of collecting or receiving the former and the procedure or rules that must be followed to calculate them.

Within the total cost are included the payment of benefits, the administrative expenses and the capitalization of obligations.

In the stage provided for in subsection a) of the preceding article, the following rules must be observed:

a). The three parties must contribute to defray the total cost of the benefits that are given at a determined moment, in the following proportion:

Workers..........................................................25%

Employers........................................................50%

State..............................................................26%

Nevertheless, those proportions may be varied if it concerns protection against occupational risks or workers who earn only the minimum wage, in which cases the Institute is empowered to place the totality of the contributions of workers and of employers at the exclusive charge of the latter; or if it concerns workers who, because of their high wage level, have a greater contributive capacity than the average of workers, in which circumstance their contributions may be raised, but at no time may these be greater than those of their respective employers, or in the other cases in which, with reasoned criteria, the Institute so determines; and

b). The contributions of the employers may not be deducted from the wages of the workers, and any act or agreement to the contrary is null ipso jure.

The contribution of the State as such and as employer must be financed with the taxes created or determined for that purpose, which must be private availabilities of the Institute.

The product of those taxes must be included in the common mass of income of the State, but at the order of the Institute, which is the only one authorized to dispose of the respective fund.

In order that the Institute always receives the exact contribution of the State that corresponds to it as such and as employer, it must permanently coordinate its activities with the entities or bodies in charge of the formation and auditing of the national budget of income and expenditures, and calculate with sufficient anticipation the burdens that its support may imply for the public treasury.

Nevertheless, if at the expiration of a fiscal year the product of the aforementioned taxes is insufficient, the Executive Branch must present to Congress, without loss of time, the corresponding budgetary extension bill; and if there is a surplus, the Institute is obliged to place the excess of taxes received at the order of the National Treasury.

The resources that the Institute derives from the legacies or donations made to it must be applied in accordance with the acts of will that gave origin to one or the other or, in the event of a manifest impossibility of fulfilling them, in some other form that results in the improvement of the services that it supplies.

For the correct and rapid collection of the income of the Institute, the following rules must be observed:

a). The certifications of the Management on sums owed to the Institute constitute an executive title, and the latter must be collected in accordance with the economic-coercive procedure, provided that it concerns contributions;

b). The credits in favor of the Institute have the privilege of first-class credits with absolute preference over any others, except those that the respective debtor has in favor of third parties for wages, or those that originate, in accordance with the terms and conditions of the Civil Code on first-class creditors, in common judicial expenses, expenses of conservation and administration of property subject to insolvency proceedings, or indispensable expenses of repair or construction of immovable property; and,

c). For the exclusive purposes of the collection of the debts originating in contracts in favor of the Institute, the latter may use the special executive procedures that the laws establish in favor of banking or credit entities.

The Institute is empowered to apply the financial system of distribution or that of collective capitalization or another that it deems convenient to any of the various classes of benefits.

Nevertheless, it must orient its activities toward the establishment of simpler, more efficient financial systems with a greater social sense, such as the so-called social budget (Social budgeting).

For the purposes of this article, the Institute must act, in every case, in accordance with what technique indicates.

Every three years and, in addition, whenever the Board of Directors deems it convenient, actuarial reviews of the financial forecasts of the Institute must be made.

However, the Institute must annually estimate, by the most recommendable technical methods, the amount of its obligations, and it is obliged to proceed in accordance with the following rules, in the event that an actuarial review indicates a deficit in its availabilities to face those obligations:

a). Immediate readjustment of the benefits for the gradual elimination of the deficit;

b). Readjustment of the contributions, with the same purpose;

c). Maintenance of the scale of benefits, to be paid only in proportion to the solvency index that the respective actuarial review indicates; or

d). Joint application of the three preceding measures.

The Institute must regulate the distribution of its funds in accordance with the actuarial estimates that have served as its basis, or with those that are adopted by virtue of the results yielded by the reviews ordered in the preceding article.

The interest rate used in the actuarial forecasts of the Institute must not be higher than the average return that may reasonably be expected from the investments over a long period of years.