Retirees may find their pensions increased by up to 20% due to the decision by the Supreme Court of Justice of the Nation (SCJN) of invalidating the calculation of pensions based on the Unit of Measure and Update (UMA).
The SCJN ruled in jurisprudence that the UMA may not be used to determine the daily quota or the payment limitation of a pension, given that it is a benefit of a labor nature based on the minimum wage (SM) and, therefore, the minimum wage must be the point of reference.
The minimum wage (102.68 pesos) has a higher value than the UMA (84.49pesos); thus, pensioners have experienced a reduction in their income since the change was made in 2016, which caused the filing of amparo proceedings.
In accordance to a comparison made by the Senate Commission on Social Security, the difference between a pension based on the UMA and a pension based on the SM is of almost 20%; based on an average pension of 5 minimum wages: the monthly pension based on UMA would be of 12,673.5 pesos, while the pension based on the SM would be of 15,402 pesos, that is, a difference of 2,728.5 pesos.
This increase in the value of pensions is also due to the increase of the minimum wage in January this year, when it increased from 88.36 to 102.68 pesos per day and to 176.72 for the 43 municipalities that comprise the North Border Free Zone.
The calculation of pensions based on the UMA is a mis-interpretation of the Constitutional Reform of 2016, in which the minimum wage was de-indexed with the objective of being eliminated as an index, base unit, measure for purposes foreign to its nature, in the opinion of the presidents of the Social Security Commissions in the House of Representatives and the Senate of the Republic.
“We believe that there is a legal loophole, there is a mis-interpretation of the Reform. We want to provide clarity, but we also need to ensure that the institutions (IMSS and ISSSTE) [Mexican Social Security Institute and Institute for Social Security and Services for State Workers] have sufficient resources to address the issue”, states congresswoman Mary Carmen Bernal (PT), in an interview with El Economista.
For her part, congresswoman Gricelda Valencia de la Mora (Morena) also believes that pensioners “have been gravely affected by the mistaken interpretation of the Reform, with the result that the IMSS and ISSSTE started using the UMA to calculate the value of the pensions, when the law establishes that it must be made based on minimum wages.”
The president of the Social Security Commission of the Senate states that, in order to recover the purchasing power of the wages and, at the same time, ceasing to harm the well-being and dignity of the retirees, a “padlock” at the legal level must be established to prevent the use of the UMA as a reference for these payments.
In this regard, Ricardo Martínez Rojas, partner at the De la Vega & Martínez Law Firm stated that “the Social Security (IMSS) Law and the complete financial Structure of the IMSS have always been based on minimum wages. In fact, the collection of the maximum due is set at 25 times the minimum wage and we must take into account that when a pension is paid, a part of the salary is being paid; this is why it is called social security dues base salary.”
Constitutional reform, the next step
The legislators agree that the next step in this matter is to make a Reform to the Constitution to establish that pensions are part of Social Security and, therefore, fall not within nature than the UMA but within that of the minimum wage.
The jurisprudence of the SCJN points in the same direction: “Since the retirement pension of the workers is a Social Security benefit derived from the employment relationship and based on the salary itself, in fact, in order to generate it and pay it, the fund created throughout the active labor life of the worker by means of dues from the received salary is the basis for it; these dues are capped at ten times the minimum wage. It is clear that this is a labor benefit”.
Mary Carmen Bernal states that this jurisprudence is in agreement with the statements made by the workers and, therefore, a Reform must be made to the Constitution to bring an end to the “legal loophole”. The decision of the highest court in the nation, she states, places the topic within the priorities of Congress.
(With information provided by Pilar Martínez)
Originally published in “El Economista” by Gerardo Hernández, September 25th, 2019
