Costa Rica brainstorms to save solidarity pensions

As Costa Rica continues to wrestle with fixing its social security fund (CCSS) and the solidarity-based pension platform (IVM) in particular, a new proposal would siphon funds from mandatory auto insurance (SOA) to keep the system liquid.

The proposal, made by CCSS president Román Macaya, has been endorsed by the board as one of several options in a broad overhaul of the IVM.

“We’re thinking outside the box,” said Macaya, according to local daily La Nación.

Other proposals include strengthening the capacity to conduct up-to-date studies; tapping into the VAT introduced late last year; and consolidating the IVM with other state entities.

The IVM is the largest retirement fund in Costa Rica, receiving contributions from 1.5mn workers and 80,000 employers, including the government.

At end-2018, it had 272,832 beneficiaries but reserves of only 2.5tn colones (US$4.3bn).

Macaya added that the CCSS board has been “brainstorming” on ideas to make the IVM workable and sustainable, not ruling out investment in public works, including roads and airports.

The proposals include adjustments to the parametric variables that trigger eligibility for the solidarity pension system, such as age, level of contributions and changes in pension benefit status, reported La Nación.

Macaya said the board is looking for measures that can be implemented gradually, with the least possible impact on the population. Approved for further evaluation by the board on June 6, each proposal must now go through an actuarial study that evaluates risk and viability.

The CCSS chief added that many of the proposals would require legislative action and/or direct support from other government entities.

“It's not a recipe written in stone. It’s generating ideas with a work plan with options. Everything is on the table,” said Macaya.