Errata to the Framework Law of the Social Protection System

PROTECTED AND OBLIGATED PERSONS.- Subject to coverage within the Social Protection System are eligible Honduran and foreign nationals who meet the conditions established in applicable regulations to access benefits and services, who have access to coverage of their needs in the different stages of the life course and, in accordance with the agreements and international reciprocity conventions that Honduras subscribes in this matter. The following are obligated to contribute to all Regimes established in the previous Article, with the exception of the Social Protection Floor Regime, through their employer contributions and individual quotas, as applicable to what is established in the Social Security Law, its Regulations and other applicable regulations: Employers and their workers who earn a salary in cash or in kind or of both types and who provide their services to a natural or legal person, regardless of the type of labor or service relationship that binds them and the form of remuneration; as well as the legal entity regardless of the economic nature of the employer, company or public, private or mixed institution that uses their services. To the contributions of employers and workers are added those made by the State as an employer, as well as the solidarity contributions that it makes to the Social Protection System, in its condition as State, to subsidize groups of workers in situations of socioeconomic vulnerability. Workers who carry out remunerated labor on their own account and who do not require the economic assistance of the State are obligated to pay contributions to the Social Security System under the conditions established in the Social Security Law and the regulations approved for such purpose. Workers are obligated to provide to employers and to the Honduran Social Security Institute (IHSS) the necessary data for compliance with the obligations derived from the present Law, the Social Security Law and other applicable legal regulations. On page A 23 of the Official Gazette La Gaceta, in the first and second column, Article 8 should be read as follows:

BENEFITS, PLANS AND PROGRAMS OF THE SOCIAL PROTECTION FLOOR (SPF).- With the purpose of achieving inclusive, equitable socioeconomic development with a gradual and progressive vocation toward universality, the Social Protection Floor (SPF) must progressively provide, through public, private or mixed institutions, at least the following benefits:

• 1)

  Basic income per child, as well as access to other goods and services that guarantee the adequate integral development of the child, including but not limited to the following programs:

  • a)

    Conditional Cash or In-Kind Transfers;

  • b)

    Comprehensive Child Development Programs, with Emphasis on Early Childhood;

  • c)

    Basic School Supplies;

  • d)

    School Nutrition;

  • e)

    Scholarships and Solidarity Assistance Program; and, f) Other Educational Benefits, Protection and Care of Minors that may be established in accordance with the Law.

• 2)

  Plans and Programs that promote Comprehensive Health;

• 3)

  Plans and programs that promote employment, food and nutritional security of families;

• 4)

  Recreational plans that promote prevention, culture and sports for healthy recreation and integral development of families and communities;

• 5)

  Assistance plans and temporary shelters for children in situations of abandonment or vulnerability of rights and other population groups with high degrees of socioeconomic vulnerability;

• 6)

  Assistance plans and subsidies in cash or in-kind that promote financial inclusion for rental, purchase, construction and improvement of housing; as well as to cover financing for other basic needs that allow improvement of the assets and socioeconomic conditions of families;

• 7)

  Assistance plans for elderly adults, persons in situations of widowhood, orphaned minors and persons with disabilities with total and permanent incapacity, properly documented in their cases and living in extreme poverty;

• 8)

  Assistance plans in kind that contribute to the realization of a dignified funeral for low-income persons;

• 9)

  Creation of a National Scholarship Fund for students with disabilities; and,

• 10)

  Other essential programs and plans for the adequate promotion and social protection of the community, which are approved by the Council of State Secretaries. The minimum requirements, coverage and other aspects that quantify and qualify the granting of benefits and services provided by the Social Protection Floor (SPF) must be defined within the framework of laws, regulations and other special regulations issued for such purpose, and must observe the principles of targeting, prioritization and transparency. On page A 24 of the Official Gazette La Gaceta in the first and second column, Article 10 should be read as follows:

SOLIDARITY AND SOCIAL PROTECTION FUND FOR POVERTY REDUCTION.- For financing the Social Protection Floor Regime (SPF), the State Secretariat for Finance must allocate in the General Budget Project of Revenue and Expenditure of the Republic that it sends to the National Congress the budgetary allocations to proceed with the financial strengthening of the Solidarity and Social Protection Fund for Poverty Reduction, which must be constituted and strengthened in accordance with what is established below:

• 1)

  The amount resulting from the solidarity contribution of the State as such, referred to in Title V of "Law on Budget of Public Finances, Control of Exemptions and Anti-Evasion Measures", contained in Decree No. 278-2013 dated December 21, 2013;

• 2)

  The solidarity contribution of the State, according to the equivalent amount resulting from applying twenty percent (20%) of all the fees for new concessions granted by the State of Honduras to third parties, from the effective date of the present Law, regardless of their nature or origin;

• 3)

  The amount resulting from applying fifteen percent (15%) of the real profitability generated from non-financial investments conceded by the State to the Provisional Financial Institutes, in excess of four point five percent (4.5%) of the real technical interest required of said Institutes by the National Commission of Banks and Insurance (CNBS);

• 4)

  Additional contributions allocated in the General Budget of Revenue and Expenditure of the Republic for the strengthening of the Social Protection Floor (SPF); and,

• 5)

  Other sources of financing such as: Loans, Contributions and Subsidies from Institutions; Donations, Inheritances and Legacies, as well as national and international cooperation of lawful origin, from natural or legal persons, public or private, of which accounting must be given through a special report in accordance with the norms and procedures regulated by the Superior Court of Accounts (TSC) and the organ or person that should provide the cooperation; and any others obtained legally in any manner. The sum of the amounts contributed by the State to the Solidarity and Social Protection Fund for Poverty Reduction can in no case be less than the amount equivalent to twenty percent (20%) of the total collection of the Sales Tax, collected in the fiscal period of the immediately preceding year. The amounts that constitute the Solidarity and Social Protection Fund for Poverty Reduction must be deposited in the Central Bank of Honduras (BCH) or in one or more Banks of the National Financial System, through a Trust, in order to guarantee that the economic resources collected are exclusively destined to guarantee the continuity and expansion of the benefits derived from the plans and programs of the Social Protection Floor Regime (SPF). Municipal corporations that wish to access the benefits of the programs and benefits of the Social Protection Floor (SPF) must establish agreements in coordination with the State Secretariat for Development and Social Inclusion, in which case they must authorize the State Secretariat for Finance to deduct from the cost of benefits granted and received by the respective communities of each municipality the budgetary items for municipal transfers approved in the General Budget of Revenue and Expenditure of the Republic. On page A 25 of the Official Gazette La Gaceta in the first column, Article 12 should be read as follows:

OBJECT AND BENEFICIARIES.- The Social Protection Regime has as its objective to guarantee the economic means of subsistence in the event of disability, old age or death. For the fulfillment of its objective, the Social Protection Insurance Regime must provide its benefits within the scope of the following pillars: 1) COLLECTIVE CAPITALIZATION PILLAR: It is a contributory plan whose objective is to provide coverage in accordance with the level of contribution effort in the face of contingencies arising from Disability, Old Age and Death (IVM) for all its affiliates and their dependents, based on the actuarial and solidarity distribution of risks, as established by the Social Security Law and other applicable legal regulations, with the Honduran Social Security Institute (IHSS) being the entity that provides and administers the benefits of said pillar; and, 2) COMPLEMENTARY PILLAR OF INDIVIDUAL ACCOUNTS: It consists of the set of benefits and services that in matters of social protection must be contracted by employers and/or workers through Individual Capitalization in Accounts on a mandatory and complementary basis to the other pillars and voluntarily with respect to what exceeds the percentage provided by Law, as well as those coverage administered by specialized institutions by delegation of the different insurance regimes in order to guarantee the objectives of the present Law. Additionally to the aforementioned benefits, the Honduran Social Security Institute (IHSS) must promote the implementation of financing programs and plans for the implementation of programs and financing plans for its affiliates that guarantee their financial inclusion for its affiliates that guarantee their financial inclusion under dignified conditions and that aim at the improvement of the asset condition of their families. The investments made by the Honduran Social Security Institute (IHSS) in the referred programs and financing plans must be carried out by itself or through Supervised Financial Institutions within the framework of what is established in the Investment Regulation approved by the National Commission of Banks and Insurance (CNBS) and other applicable legal regulations. On page A25 first and second column and on page A26 first column of the Official Gazette La Gaceta, Article 13 should be read as follows:

FINANCING OF THE SOCIAL PROTECTION REGIME.- Each of the pillars that constitute the Social Protection Regime must be financed in accordance with the following criteria: 1) COLLECTIVE CAPITALIZATION PILLAR: For financing the provisional coverage of this Pillar, the following are obligated to contribute: The State, Employers and Workers, within the framework of what the Social Security Law and its Regulations provide. The total rate of employer and individual contribution, as well as that of the State as such must be determined in the Social Security Law, taking as the initial minimum base the six point five percent (6.5%) that corresponds to the sum of contributions that as of the effective date of the present Law are already being made to the Disability, Old Age and Death regime established in the Law of the Honduran Social Security Institute (IHSS) and to the Private Contribution Regime (RAP). The referred quota must be made, taking as the basis the technical contribution rate established in the Social Security Law, which initially must be equal to one minimum salary at its highest level, without exception. In the case of companies with fewer than ten (10) workers whose employers and workers do not pay into the Private Contribution Regime (RAP), the implementation of the referred obligation with respect to the Collective Capitalization Pillar to contribute the one point five percent (1.5%) employer contribution and to pay the one point five percent (1.5%) individual contribution is of gradual application starting in January 2018 under the terms agreed by the Economic and Social Council (CES). Within the framework of the principle of sufficiency and sustainability that must govern the system and which must be reviewed every two (2) years by the competent body designated in the present Law. The reserves constituted by the Collective Capitalization Pillar, as a result of State contributions, employer contributions, individual quotas, inheritances, legacies, donations and other economic resources of the Honduran Social Security Institute (IHSS), are amounts exclusively destined for the provision of benefits, services and other applicable operational expenses within the framework of what is established in the present Law, the Social Security Law and its Regulations; and, 2) COMPLEMENTARY PILLAR OF INDIVIDUAL PROVISIONAL ACCOUNTS. Workers and employers must make their contributions to the Individual Capitalization Accounts for provisional purposes within the framework of what the Social Security Law provides, Law of Administrators of Pension and Severance Funds and its Regulations and other applicable regulations. Without prejudice to the obligations derived from what is established in Title VI of the "Labor Coverage Insurance Regime" of the present Law, the contributions of the employer and the mandatory quotas charged to the worker destined for pensions within the scope of this Pillar must be made by applying the contribution and quota percentages established by the Social Security Law on the excess of the Applicable Contribution Ceiling. The funds constituted in individual accounts through this Pillar must be destined to improve the benefits of the preceding regime and pillars based on the individual as these may be, whether voluntary or mandatory. Both the employer and the worker may make voluntary contributions for provisional purposes in addition to their obligations established by Law, provided that these are within the limits of amount, disposition and use established by the Social Security Law, its Regulations and other applicable legal regulations. On page A27 of the Official Gazette La Gaceta, in the second column, Article 19 should be read as follows:

MODERNIZATION AND STRENGTHENING OF THE PUBLIC HEALTH NETWORK.- In order to provide services at adequate levels of quantity, quality, timeliness and efficiency, the State must continuously pursue the administrative, technical and financial modernization of the Comprehensive Public Health Network in such a way as to promote real articulation between the different levels of Health Care from primary health care to services of greater complexity so that continuity exists in accordance with the nature of the service, which involves systems of referral and counter-referral and in which the private sector acts in a complementary manner to the public sector and not as a substitute, under the different modalities established in this same Law. The Public Social Security Institutes of the country are authorized to invest up to seven percent (7%) of their assets in investment projects in physical infrastructure and health equipment whose pre-investment studies conclude the technical, financial and socioeconomic viability thereof and allow the investment portfolio of participating provisional funds to maintain adequate conditions of safety, profitability and liquidity. The investments made by the Institutes in health matters must be made either by themselves or through supervised Financial Institutions within the framework of what is established in the Investment Regulation approved by the National Commission of Banks and Insurance (CNBS) and other applicable legal regulations. The investments that the Institutes make in health matters must be carried out through a single Special Administration Trust and this in turn through a Commercial Company of specific purpose. The administration contracts and Special Operative Regulations of the referred Trust as well as the bylaws of the corresponding Commercial Company must have the non-objection of the National Commission of Banks and Insurance (CNBS). The Commercial Company of specific purpose that is constituted for the purposes described in the present Article enjoys the same tax benefits applicable to the Public Social Security Institutes in accordance with their respective laws. On page A 31 of the Official Gazette La Gaceta, in the first and second column, Article 30 should be read as follows:

FINANCING AND BENEFITS.- To fulfill its purpose, the Labor Coverage Insurance Regime contemplates the Labor Reserve for Individual Capitalization, constituted through mandatory employer contributions equivalent to four percent (4%) monthly of Ordinary Salary based on a mandatory contribution ceiling that initially is three (3) minimum salaries at its highest level and which must be updated annually based on the year-over-year variation in the Consumer Price Index (CPI) published by the competent authority. The quotations thus made by the employer must be credited in the name of the worker in the corresponding individual account within the Labor Reserve Sub-account, managed by entities authorized by the National Commission of Banks and Insurance (CNBS) as Administrators of Pension and Severance Funds, freely chosen by each worker. In the case of companies that have fewer than ten (10) workers they are exempt from this obligation until January 2018, their incorporation must be made from said date in accordance with the graduality parameters defined by the Economic and Social Council (CES). Employers of Microenterprises defined in the reformed Article 120 of the Labor Code must credit to the Labor Reserve Individual Capitalization sub-accounts of each of their workers the percentage determined by the Economic and Social Council (CES). The provisions regarding use and disposition of the Labor Reserve for Individual Capitalization for the different cases or circumstances of determination of the labor relationship must be governed in accordance with what is established in reformed Articles 120, 120-A and 120-B of the Labor Code, as well as by the Special Regulation that for such purposes is approved by the State Secretariat in the Offices of Labor and Social Security, prior recommendation of the Economic and Social Council (CES). The funds constituted through said reserves must be administered in accordance with what the present Law provides, the Social Security Law, the Law of Administration of Pension and Severance Funds, its Regulations and other applicable regulations. Employers must pay into the respective Labor Reserve sub-account of a worker until the respective account reaches an amount equivalent to the amount of the severance benefit provided in the reformed Articles 120 and 120-A of the Labor Code at its maximum level. The employer must resume quotations for those workers who by increase in their ordinary income have the right to receive a greater amount for severance benefit. All salaried workers must have a Labor Reserve sub-account for Individual Capitalization which cannot be substituted or modified in terms different from what this Article establishes by any provision or agreement entered into between private parties of an individual or collective nature. Employers who at the time this Law becomes effective already have agreed, through individual or collective agreements or by special laws, for the annual payment of the severance benefit are obligated to constitute the Individual Capitalization Reserve deducting the same from the agreed payment or failing that in accordance with what is agreed between the parties. In cases where the worker becomes unemployed and has debt obligations for housing fees derived from social credit programs or other social credit programs part of the resources must be used to amortize said credit in accordance with the special regulation in order to protect the worker and his family. The value constituted by the employer as seniority bonus must be received by the worker upon ceasing in his position for any of the causes indicated in Article 111 of the Labor Code and in accordance with what is provided in Articles 113, 114, reformed 120 and 120-A of the same Code as well as what this Law provides for cases of payment of the seniority bonus. On page A 33 of the Official Gazette La Gaceta, in the second column and on page A 34 first column, Article 37 should be read as follows:

ASSETS AND INVESTMENT OF PROVISIONAL RESERVES.- The assets of the Provisional Institutes and the reserves constituted by the different income from individual quotas, employer contributions and State contributions that constitute the Social Protection System are separate and independent from the Public Treasury and must be used exclusively for the purposes set forth in the present Law, the Social Security Law, its Regulations and other applicable regulations. The reserves constituted by the Social Protection System must be invested under the best conditions of safety, liquidity and profitability in publicly offered securities and other investments authorized by Law or by regulation by the National Commission of Banks and Insurance (CNBS), giving preference, under equal conditions, to those that derive greater social benefit to its affiliates as well as the realization of economically profitable projects with high impact on the country's development. The payment of State obligations that arise from the application of the present Law must be honored at the time and form established by the Social Security Law. Those transactions for payment of obligations through titles or securities of the State whose general conditions of valuation produce eventualities with respect to the real market situation and therefore are contrary to the interests of the System and its affiliates are prohibited. The infraction of this provision entails for its authors, accomplices or concealers, as appropriate, administrative, civil and criminal responsibility. On page A 36 of the Official Gazette La Gaceta in the first and second column, Article 45 should be read as follows:

MINIMUM BASIS OF THE STATE'S SOLIDARITY CONTRIBUTION.- In no case can the State's solidarity contribution be less than the equivalent of the sum of zero point five percent (0.5%) of the total employer contributions and individual quotas made to the Provisional Insurance Regime plus zero point five percent (0.5%) of the total employer contributions and individual quotas made to the Health Care Insurance Regime, calculated on the basis of the immediately preceding year. In case the amount resulting from the sum of the above-mentioned values is less than the minimum established as a solidarity contribution the difference must be budgeted and required by the Honduran Social Security Institute (IHSS) within the framework of what is established in the General Budget Provisions so that it be paid in the immediately following year by the State Secretariat for Finance. The solidarity contributions that within the framework of the present Law are expended by the State for the Honduran Social Security Institute (IHSS) through the State Secretariat for Finance must be considered as part of the obligation derived from Article 143 of the Constitution of the Republic and from Article 55-A of the Social Security Law. On page A 37 of the Official Gazette La Gaceta in the first column, Article 47 should be read as follows:

FISCAL INCENTIVES.- The contributions made to the individual accounts of the Complementary Coverage Pillar and those made to constitute the labor reserve must be one hundred percent (100%) deductible from taxable net income for purposes of the Income Tax in accordance with what the corresponding regulations determine. The Honduran Social Security Institute (IHSS) is exempt from payment of all classes of taxes, fees, fiscal or municipal rates and public charges including stamped paper, stamps and registrations as well as fees associated with electronic transfers or similar. Likewise the Specific Purpose Companies are excepted from being taxed with all classes of taxes, fees, fiscal or municipal rates and public charges including stamped paper stamps and registrations as well as fees associated with electronic transfers or similar in the proportion corresponding to the capital constituted by the Provisional Institutes tending toward the realization of works and infrastructure projects that generate socioeconomic development for the country that are constituted from the effective date of the present Law. The Executive Directorate of Revenue (DEI) is authorized to: prior to a favorable resolution of the Social Security Council (CSS) of the National Council for Coordination and Articulation of Social Policies (CONCAPS) and corresponding approval by Executive Decree in Council of State Secretaries may enter into agreements with the different institutions of the Social Protection System that involve fiscal incentives tending toward the gradual and progressive universalization of social protection coverage toward the formalization in the payment of taxes by natural and legal persons and toward the increase of the contributory base and total collected income. The Executive Directorate of Revenue (DEI) must regulate the use of the exemptions established in the present Article for natural or legal persons by the corresponding legal means in order to prevent abuses by institutions that are part of the System. On page A 38 second column and page A 39 first column of the Official Gazette La Gaceta, Article 52 should be read as follows:

AFFILIATION WITH THE SOCIAL PROTECTION SYSTEM.- Salaried workers who begin or become part of the country's labor force from the effective date of the present Law must affiliate with the established Social Protection System. Without prejudice to what is established in the previous paragraph workers who by reason of their profession or who by their nature as employees and officials of the public administration in general are and participants must enter another Plan or Provisional Institute where the State contributes directly or indirectly may remain affiliated or affiliate for the first time to the Provisional Plan or Institute as appropriate provided that the latter is supervised by the National Commission of Banks and Insurance (CNBS) and demonstrates before said supervisory entity that the Administered Provisional Fund complies with the principles of Sufficiency and Sustainability established in the present Law and that the coverage it provides to its affiliates is equal to or greater in all covered risks than the coverage provided by the Social Protection System to its affiliates. Otherwise the affiliated worker may freely choose without any penalties of any kind if he remains in the original Institute or if he wishes to be affiliated to the Social Protection System on the terms defined by the present Law the Social Security Law the Law of Recognition of Individual Quotas and Employer Contributions among Public Provisional Institutes and their Regulations. Exempt from the mandatory affiliation obligation established in the first paragraph of this Article are workers who are already members of participating groups of the Special Risk Regime of the Military Provision Institute (IPM) and the new labor force that begins its service relationship under conditions that require it to be part of said Institute as well as diplomatic delegations and organisms accredited to the country when they have agreements that imply a different insurance treatment of their personnel. The plans and programs of social provision existing in the private sector and State institutions regulated by the Labor Code must continue in force for the benefit of workers except that the benefits of the present Law were greater than those already regulated. On page A 39 of the Official Gazette La Gaceta in the second column, Article 54 should be read as follows:

OTHER ADMINISTRATORS OF PENSION AND SEVERANCE FUNDS.- From the effective date of the present Law only those specialized financial institutions that fully comply with what the Law on Administration of Pension and Severance Funds provides to which Article 58 of this Law refers its Regulations and other applicable regulations may capture and administer new contributions and quotas through Individual Capitalization Accounts of Pension and Severance Funds for the purposes set forth in the aforementioned Law. The Executive Power through the State Secretariat in the Offices of Labor and Social Security and prior consultation with the Economic and Social Council shall elevate to the National Congress of the Republic the draft Law on Administration of Pension and Severance Funds within a maximum period of eighteen (18) months.