By Tom Larsen
In the 1970s, a new type of pension plan was developed for many government and private workers in Ecuador. Called “Closed Pension Funds” they were designed to supplement the IESS pension and help retired workers live in dignity and comfort.
Sixty-five companies signed up, the most prominent being Petroecuador and its subsidiaries, Petrocomercial, Petroindustrial, and Petroproducción. Employers and employees contributed, and the funds were invested for the employees’ future.
Sounds great, doesn’t it?
In 2015, a law was passed requiring that the funds be managed by BIESS, the bank that collects and distributes funds for IESS. Now thousands of retirees are claiming that their monthly benefit has been reduced drastically, some by as much as eighty percent.
Luis Vásquez retired from Petrocomercial in 2009, says he was receiving a monthly pension check of about $1,000. Now he receives $218, the monthly basic salary for the year he retired. Since the changeover, many retirees have requested the balance of their funds be returned to them. According to Article 13 of Resolution 122-2015-15-F of the law, when the employees reach retirement age, the money belongs to them. So far, only a small percentage has received their funds. In many cases, only the capital portion was returned, not any accrued earnings. In some cases only the employee’s contribution, not the employer’s contribution, was returned.
This is not the first time that retirees found their benefits slashed. In 2009, the employer’s contribution was replaced by what is called a “solidarity transfer” whereby general tax revenues were contributed to the fund. That all sounds great, but the end result of this, according retiree representatives, was that retiree’s pension checks were reduced. Some employers made up the difference, but only until 2013.
Fernando Revelo retired from Petrocomercial in 2016 because of a physical disability. BIESS paid him a lump sum of $6,000, which is the amount that he had paid in, without his employer’s contribution, or any earnings. Revelo estimates that the total value of his pension is nearly $60,000.
So what is happening here? The answers are shrouded in secrecy and double-talk, retiree say. BIESS claims that “there is no legal, administrative, financial or actuarial argument for the assets of the fund to be distributed among the expartícipes.” Expartícipes are retirees who elect to opt out of the program. Officials cited a 2016 letter from the National Social Security Administration to that effect. Retirees, of course, want to know how this can be true, since the Resolution clearly states that the money belongs to them.
Further muddying the waters is a 2013 decision by the Superintendent of Banks, that all accounts must be audited to determine the exact amounts in each account, and the overall health of the fund. BIESS claims that the audits have not been completed, and so they don’t know how much is actually in each account. They claim that over the last three years they have returned over $350 million to retirees who have fulfilled their legal requirements.
BIESS administrators also say that the fund is not in danger, citing the fact that last year there were 39,000 new participants, and only 5,000 disaffiliations.
There’s sure to be more to this story, so stay tuned.
Information for this article was taken, with permission from Diario El Mercurio. Read the entire article in Spanish here: http://www.elcomercio.com/actualidad/jubilados-pedido-ahorros-biess-deuda.html