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Diane

Nov 30, 1919, 12:00 AM

Post #1 of 4 (4360 views)

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Mexican "Social Security"/employment funds?

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David, I hope you can enlighten me so I can help a friend of mine. My friend is on the entertainment/activities staff of a resort in the Cancun area. It seems he just RECENTLY found out that his employers, past and present, apparently contribute to a retirement/savings-type fund. Would this be along the same lines as our Social Security system? He was also led to believe that this money could be jeopardized by changing jobs. Because his resources are limited, as well as computer access, I would love to research this for him and pass the information to him. However, where do I find this information in a format that I can read and understand?
If you could enlighten me on this I would be so grateful.
Gracias por todo!
Diane



DavidMTY

Nov 30, 1919, 12:00 AM

Post #2 of 4 (4355 views)

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Mexican "Social Security"/employment funds?

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Hi, I will do my best without doing additional research. <p>FIRST, IF IT IS AS I AM ASSUMING, YOUR FRIEND'S MONEY IS PERFECTLY SAFE. YOU NEED TO READ THE FOLLOWING AND ANSWER THE RELEVENT QUESTION I POSE AT THE END TO BE SURE.<p>You weren't very specific as to what his fund is. That is necessary to make any definitive statements. Let's assume you are talking about the "Retiro", or the S.A.R. type accrual system. S.A.R. stands for "Sistema del Ahorro para el Retiro", and it has been around long before the Afores.<p>This system was developed in the early '90s because the IMSS itself was grossly unfair in IMSS retirement distributions. Basically, unlike the US system, it gave the same benefit to someone working the last 10 years and retiring as it did for someone who had paid their whole life. Plus it only took recent salary into consideration, so if you had a late raise or hardship you could receive unfairly great or poor relative benefits. Also, one could not contribute to their own account which could deny someone the ability to get a reasonable pension by being willing to make up the differnce required during the shorten period.<p>Mexico looked at its own terrible savings rates, pension inequity, and then looked at the IRA's in the US and came up with the SAR administration.<p>SAR's contemplate, if I recall, a 2% payroll benefit the employer was responsable for depositing in a savings institution the employer chose under a single account created by the employer with two subsections (Retirement and Home Purchase). Plus I believe the employee could add their own limited contributions subject to law. <p>The SAR's basically failed as a program, as originally intended, because of the lack of flexibility, information conveniently available to the employee (worker), and even duplication of accounts which lead to abuse and frequently unintentional loss. <p>So in 1997 the law was reformed in a way that respected what workers had up until that time accrued, but added the following:
1) allow the worker to chose their "Afore" who administers their money
2) Have the federal government, in addition to the company, also contribute to very low earners to insure their pension would be at least at the minimum wage level upon retiring.
3)Qualify safe investments with higher returns, typically serving the public interest (such as mortgages, infrastructure)<p>The new reforms guarantee one single employee account in which all the following are deposited:
This single account has three sub accounts:
(1)RETIREMENT: Required employee contributions and employee payroll deductions, Employer contributions (This is SAR)), Federal Government Contributions.
(2)HOME: Required employer's contributions tax for residential purchase (This is INFONAVIT).
(3)VOLUNTARY: Contributions made by the employee, or which are a perk/benefit above those required by SAR and INFONAVIT made by the employer (These are 'optional' contributions).<p>The new system with Afores in place today should guarantee that the employee has no loss as the law specifies that an employee always has the right to transfer their Afore to the accredited financial institution. Those who didn't select an Afore before the deadline a couple of years ago are safe, too. Their money was first under IMSS (who administered the original SAR program, too, etc.), in a Banamex "Concentradora" account under their name, and in 2001, transfered to the Afore CONSAR (Comisión Nacional de Sistemas de Ahorro para el Retiro). You can get that money transfered as well as any other Afore, to the Afore of your own chosing.<p>So that is the basic scoop on Mexican I.R.A.'s. The question you need to answer in your friend's case is, "Is the [savings plan] they are referring to an Afore, or is it something different offered by the company which would be subject to the company's own laws. The latter would not be under the law described above. It would be some sort of employer program utilizing some variation of a vesting technique. Definitely the way I would manage my good employees in


David

Nov 30, 1919, 12:00 AM

Post #3 of 4 (4353 views)

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David, thank you! You are so very generous.

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: Hi, I will do my best without doing additional research. <p>: FIRST, IF IT IS AS I AM ASSUMING, YOUR FRIEND'S MONEY IS PERFECTLY SAFE. YOU NEED TO READ THE FOLLOWING AND ANSWER THE RELEVENT QUESTION I POSE AT THE END TO BE SURE.<p>: You weren't very specific as to what his fund is. That is necessary to make any definitive statements. Let's assume you are talking about the "Retiro", or the S.A.R. type accrual system. S.A.R. stands for "Sistema del Ahorro para el Retiro", and it has been around long before the Afores.<p>: This system was developed in the early '90s because the IMSS itself was grossly unfair in IMSS retirement distributions. Basically, unlike the US system, it gave the same benefit to someone working the last 10 years and retiring as it did for someone who had paid their whole life. Plus it only took recent salary into consideration, so if you had a late raise or hardship you could receive unfairly great or poor relative benefits. Also, one could not contribute to their own account which could deny someone the ability to get a reasonable pension by being willing to make up the differnce required during the shorten period.<p>: Mexico looked at its own terrible savings rates, pension inequity, and then looked at the IRA's in the US and came up with the SAR administration.<p>: SAR's contemplate, if I recall, a 2% payroll benefit the employer was responsable for depositing in a savings institution the employer chose under a single account created by the employer with two subsections (Retirement and Home Purchase). Plus I believe the employee could add their own limited contributions subject to law. <p>: The SAR's basically failed as a program, as originally intended, because of the lack of flexibility, information conveniently available to the employee (worker), and even duplication of accounts which lead to abuse and frequently unintentional loss. <p>: So in 1997 the law was reformed in a way that respected what workers had up until that time accrued, but added the following:
: 1) allow the worker to chose their "Afore" who administers their money
: 2) Have the federal government, in addition to the company, also contribute to very low earners to insure their pension would be at least at the minimum wage level upon retiring.
: 3)Qualify safe investments with higher returns, typically serving the public interest (such as mortgages, infrastructure)<p>: The new reforms guarantee one single employee account in which all the following are deposited:
: This single account has three sub accounts:
: (1)RETIREMENT: Required employee contributions and employee payroll deductions, Employer contributions (This is SAR)), Federal Government Contributions.
: (2)HOME: Required employer's contributions tax for residential purchase (This is INFONAVIT).
: (3)VOLUNTARY: Contributions made by the employee, or which are a perk/benefit above those required by SAR and INFONAVIT made by the employer (These are 'optional' contributions).<p>: The new system with Afores in place today should guarantee that the employee has no loss as the law specifies that an employee always has the right to transfer their Afore to the accredited financial institution. Those who didn't select an Afore before the deadline a couple of years ago are safe, too. Their money was first under IMSS (who administered the original SAR program, too, etc.), in a Banamex "Concentradora" account under their name, and in 2001, transfered to the Afore CONSAR (Comisión Nacional de Sistemas de Ahorro para el Retiro). You can get that money transfered as well as any other Afore, to the Afore of your own chosing.<p>: So that is the basic scoop on Mexican I.R.A.'s. The question you need to answer in your friend's case is, "Is the [savings plan] they are referring to an Afore, or is it something different offered by the company which would be subject to the company's own laws. The latter would not be under the law described above. It would be some sort of employer program utilizing some variation of a vesting technique. Definitely the way


DavidMTY

Nov 30, 1919, 12:00 AM

Post #4 of 4 (4352 views)

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Any time, Diane &amp; David(?), and...

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...just to add that many companies and employee groups have also managed small "Fondos de Ahorro," in my experience. These things are independent of the law and can vary in what they are for and in design as much as one can be creative. Typically they are voluntary and the company via HR may be involved, or they can even be administered by employees or the union. One example at one of my companies was simply run by the cleaning lady who collected 500 pesos every quincena (every two weeks) and held a lottery to see who got all the money that quincena. Mexicans especially like this kind of thing even though it was a zero sum game, since it was for the calander year, and once you "won" once you couldn't win again but continued contributing. (No one quit, thank goodness after winning). The perceived benefit is you don't notice the 500, but when you get the 12,500, especially if it is early in the year, you can really make that purchase you always wanted!<p>What can I say...it doesn't meet my Scottish & Regiomontano sense of thrift, but it is infinitely superior as a gamble than simply paying the bank the exhorbident credit card terms.<p>Now back to your friend's case. His strategy is the following.
(1) Go to HR (or whoever handles payroll, if need be) & require appropriately that they tell him what savings plans he is participation in.
(2) Ask if there are any other savings plans besides IMSS/SAR/INFONAVIT that the company has and if his is participating, whether the employees contribute or the company contributes.
(3) Find out the account number and what Afore he has, and then deal directly with the Afore company to appropriately administer.
(4) Request a "cash out" on the informal saving program(s), if any, with the "finiquito" (final paycheck) if not already taken. This payment would be independent of the finiquito, so if he already got the finiquito, just requist a cash out (finiquito del plan informal de ahorros) later. If they deny that, ask for the policy ("La Pólitica de la empresa del plan"). The cash out should be signed for and received in cash, or possibly at a future payout date, but only if the latter is absolutely necessary.
(5) Note that in quitting, your friend is entitled to a finiquito by law which includes the proportional part of his aguinaldo and possibly other prorated benefits like prima vacacional.
(6) I assume by all my reply that your friend was an employee, not a contractor, etc. If they have him on IMSS, he is an employee.<p>Good luck...David(MTY)
 
 
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