2024-05-21-KPMG_Global-Argentina_–_Argentina_Adopts_New_Benefit_Adjustment_Formula_3页_217kb

Argentina Adopts New Benefit Adjustment Formula

Core Content

On March 22, 2024, Argentina's President issued National Decree DR 274/2024, which introduced a new formula for adjusting pensions under the country's contributory pension program. This reform is set to take effect in July 2024 and will be implemented by the National Social Security Administration (ANSES).

Main Points

• New Adjustment Formula: Pensions will be adjusted monthly based on the national consumer price index (INDEC) from two months prior.
• Transitional Measures:
  • A 12.5% increase will be applied in April 2024.
  • Additional increases in May and June 2024 will be calculated using the higher of the old or new adjustment formulas.
• Inflation Context: The new formula is a response to high inflation, which reached 288% annually in March 2024.
• Previous Formula: Before this reform, pensions were adjusted quarterly based on a 50-50 split between the change in ANSES revenues and the change in national wages (measured by INDEC or the Ministry of Labor).
• Impact on Pensions: The previous formula led to a 27.18% increase for the first quarter of 2024, which was insufficient to keep pace with the 51.6% inflation rate for that period.
• Government Reform History: This is the fourth change to the benefit adjustment formula since 2008, indicating a long-term effort to better align pension adjustments with inflation.

Key Information

• Effective Date: The new formula will apply from July 2024.
• Measurement Basis: Adjustments will be based on the national consumer price index (INDEC), reflecting real-time inflationary pressures.
• Transitional Increases:
  • April: 12.5% increase.
  • May and June: Based on the higher of the old or new formulas.
• Impact on Employers:
  • The updated pension amounts will affect social security contributions, which will now vary monthly.
  • This change will influence the calculation of Income Tax Withholding for company directors.

KPMG Insights

• Relevance for Employers: Companies with Argentinian payroll should be aware of the impact on social security contributions and tax calculations.
• Professional Advice: Questions regarding the rules, applicability, and next steps should be directed to a qualified tax professional or a member of the KPMG GMS team in Argentina.
• Contact Information:
  • Rodolfo Canese, Partner: Tel. +54 11 4316 5643 | Email: rcanese@kpmg.com.ar
  • Cecilia Nuñez, Director: Tel. +54 11 4316 5749 | Email: cnunez@kpmg.com.ar

Conclusion

The new benefit adjustment formula aims to better protect pensioners from inflation by aligning pension increases with real-time inflation data. This reform reflects a strategic effort to improve financial stability for retirees and to eliminate ad-hoc adjustments. However, it also introduces new complexities for employers, particularly in social security contribution calculations and tax withholding. Companies are advised to seek professional guidance to navigate these changes effectively.