Dominican Republic social security reform to lower AFP commissions

The Dominican Republic's President Danilo Medina (pictured) presented legislation to congress in order to overhaul the nation's social security system, including a measure to reduce commissions that the country's pension fund managers (AFPs) charge.

In a speech before legislators, Medina stressed that the initiative would significantly reduce the AFPs' commissions, going from two commissions linked to investment yields that combined can reach 30% to a single account balance-based commission of 1.4%.

The measure would also reduce the 1.4% commission by 0.05% per annum to 0.85% over a span of 11 years.

The modification would generate an estimated 40bn pesos (US$790mn) in savings for workers in the AFP system during the next 12 years.

As detailed in a government statement, other measures in the proposed legislation include:

-Eliminate penalties and late fees on social security contributions, a measure aimed at allowing MSMEs to catch up on payments.

-Re-establish the social security affiliation of more than 150,000 workers, who will thus obtain health insurance, occupational risk insurance and future pensions.

-Strengthen the social security treasury (TSS) and the social security legal defense agency (DIDA), aimed at improvement of workers income and legal support.

-Reduce other surcharges.