Law of the Individual Capitalization Labor Reserve Fund Administered by the Private Contributions System (RAP)

The purpose of this Law is the creation and administration of the Individual Capitalization Labor Reserve Fund constituted in the Private Contributions Regime (RAP) with the purpose of guaranteeing the acquired rights of workers, through the benefits derived from the application of this Law for workers in the country.

This Law is of public and social order and is binding on all natural or legal persons that are not state entities, that govern their labor relations in accordance with the Labor Code.

The Private Contributions Regime (RAP) shall administer the Individual Capitalization Labor Reserve Fund, which shall be constituted by the contributions made by the employer in order to guarantee payment for severance or seniority benefits to workers once the individual labor relationship has terminated. The administrative management of the Fund must be carried out with the greatest transparency, efficiency and effectiveness in accordance with the regulations established for such purposes by the National Banking and Insurance Commission (CNBS), especially in relation to the management of contributions, commissions, fund investments, distribution of returns generated by the fund, constitution of reserves and any other aspect related to its management.

The Individual Capitalization Labor Reserve Fund, constituted in the Private Contributions Regime (RAP), shall be composed of mandatory employer contributions equivalent to four percent (4%) monthly of ordinary salary, based on a mandatory contribution ceiling of three (3) minimum salaries at their highest level. The contributions made by the employer must be credited expressly in the name of the worker in the individual account in the Private Contributions Regime (RAP). These individual capitalization accounts shall be subject to regulation by the National Banking and Insurance Commission (CNBS), with respect to the obligations established for supervised financial institutions.

Workers and employers are prohibited from making pacts or agreements to change, substitute or modify the characteristics established for the individual Labor Reserve account created by this Law. Employers that, upon its entry into force, already have agreed by individual or collective agreements or by special laws, the annual payment of severance benefits or seniority benefits, are not obliged to constitute the Individual Capitalization Labor Reserve, deducting the same from the agreed payment or failing that in accordance with what is agreed between both parties.

When the worker ceases the labor relationship, for any cause of termination of the individual work contract, they shall have the right to receive from the Private Contributions Regime (RAP) the amount constituted in the Individual Capitalization Labor Reserve account in their name. The amount constituted as labor reserve together with its returns in case of unjustified dismissal shall be deducted from the amount to be received by the worker for severance benefits. In the event that the balance in the Individual Capitalization Labor Reserve is greater than the corresponding Severance Benefit, that difference, regardless of the resulting amount, must also be granted to the worker as Labor Compensation for Employment Stability or Seniority Benefits. In case of termination of the work relationship for any cause other than unjustified dismissal, the value of the amount constituted in the labor reserve account together with its returns shall be paid to the worker as Seniority Benefit as Labor Compensation for Stability. In the case of workers who voluntarily decide to terminate their labor relationship, one hundred percent (100%) of the balance constituted in their name in the Individual Capitalization Labor Reserve shall be granted as a seniority benefit; it shall be the obligation of the employer to supplement the payment to the worker if the balance of the account in the RAP is less than thirty-five percent (35%) of the amount that would correspond as indemnification for severance benefits, in the case of those workers with an employment history greater than fifteen (15) years of continuous service. In case of death or total or permanent disability for causes other than those derived from Occupational Risks, having an employment history of six (6) months or more, their legal beneficiaries or the worker themselves, as applicable, have the right to receive as Seniority Benefits one hundred percent (100%) of the balance constituted in the Labor Reserve; it shall be the obligation of the employer to supplement the payment to the beneficiaries if the balance in the Labor Reserve account is less than seventy-five percent (75%) of the amount that would correspond as indemnification for Severance Benefits, as provided in Article 120, subsection f) of the Labor Code. In case of death of a worker affiliated to the RAP in whose name the Individual Capitalization Labor Reserve account has been constituted, the amounts constituted and their returns must be delivered to the beneficiary persons designated before the RAP by the worker, in which case no other procedure shall be required; or failing that with the presentation of the sentence declaring the testamentary or intestate heir, duly registered. The Private Contributions Regime (RAP) must establish an expedited procedure so that within a period no longer than one (1) month the amount constituted in the individual capitalization labor reserve account in the name of each worker is paid.

Exempted from the mandatory affiliation obligation established are workers who are contributors to the National Retirement and Pension Institute for Employees and Officials of the Executive Branch (INJUPEMP), the National Social Security Institute for Education Personnel (INPREMA), the Military Social Security Institute (IPM), the Social Security Institute for Employees of the National Autonomous University of Honduras (INPREUNAH), as well as diplomatic delegations and international organizations accredited in the country, when they have agreements that imply different treatment of insurance for their personnel. The existing social security plans and programs in the private sector and state institutions, authorized by the State Secretariat for Labor and Social Security and regulated by the Labor Code, must remain in force for the benefit of workers, unless the benefits of this Law are superior to those already regulated.

The Private Contributions Regime (RAP) may invest the Funds collected from employer contributions in order to obtain returns on them based on its Institutional Strategic Plan, Investment Plan, Investment Policy, risk analysis and operational framework that allows improving the economic benefits that workers will receive. The administrative expenses for this purpose shall be framed within reasonable limits for similar operations handled in the National Financial System. The National Banking and Insurance Commission (CNBS) shall ensure that the Private Contributions Regime (RAP) implements sound, safe and profitable administration of fund investments.

The administration of all funds that the Private Contributions Regime (RAP) has collected as of the date on occasion of the application of the Framework Law of the Social Protection System shall be subject to what is established in this Law. All payment requests processed in application of the Framework Law of the Social Protection System and that meet the corresponding requirements shall be paid in accordance with the administrative procedures established by the Private Contributions Regime (RAP) at the time of entry into force of this Law.

The Private Contributions Regime (RAP) is authorized to continue administering the resources constituted in the name of each worker prior to the entry into force of this Law. The Private Contributions Regime (RAP) is authorized for the collection and administration of the Labor Reserve Fund from the date this Law enters into force.

The contributions and quotations of workers and employers to all Funds administered by the Private Contributions Regime (RAP), as well as the benefits granted under this Law, may not be subject to transactions that are not fixed in the Law, nor may they be seized or subject to any other precautionary measure, except for alimony purposes up to fifty percent (50%).

The employer who fails to comply with the obligations of affiliation to the System or does not pay the employer contributions to the Private Contributions Regime (RAP) as a multiple funds administrator, shall be subject to the sanctioning regime established for such purposes by the Private Contributions Regime (RAP).

The Private Contributions Regime (RAP) shall prepare and approve the required regulations and internal regulations related to the administrative management of funds, in accordance with the aspects indicated, submitting the same for notification to the National Banking and Insurance Commission (CNBS), before its publication, and the latter may require modifications in accordance with current laws and international best practices.

The contributions made to the individual accounts of the Individual Capitalization Labor Reserve Fund, made by the employer, shall not form part of the taxable net income for Income Tax. Additionally, the amounts received by workers in the form of benefits derived from the funds established in this Law shall not form part of the gross income for the purposes of calculating Income Tax.

By virtue of its mandate for the not-for-profit administration of funds contemplated in this Law and the Law of the Private Contributions Regime (RAP), the regime is exempt from the payment of all kinds of taxes, rights, fiscal or municipal fees and public charges and registration, as well as tax rates associated with electronic transfers or similar.

EFFECTIVE DATE. This Decree shall enter into effect on the day of its publication in the Official Gazette "La Gaceta". Given in the city of Tegucigalpa, municipality of the Central District, in the Session Hall of the National Congress, on the thirtieth day of the month of April of two thousand twenty-four. HUGO ROLANDO NOÉ PINO PRESIDENT JOSUÉ FABRICIO CARBAJAL SANDOVAL SECRETARY LINDA FRANCÉS DONAIRE PORTILLO SECRETARY To the Executive Power Therefore: Execute. Tegucigalpa, M.D.C., May 9, 2024 IRIS XIOMARA CASTRO SARMIENTO PRESIDENT OF THE REPUBLIC THE SECRETARY OF STATE IN THE OFFICES OF LABOR AND SOCIAL SECURITY