Less than a week ago, the Assembly and the Executive clashed over a second veto to the Reform Law of Social Security and the BIESS Bank Law sent from the Presidency. This law came into effect on July 22, 2024, and was finally sent for publication in Official Register No. 605. However, it announced that it would take legal action to amend the articles it considers unconstitutional in the bill.
The government bench assures that this decision responds to technical and not political issues, and they do not rule out filing an unconstitutionality lawsuit in the Court to correct what they consider violations in the new Law, especially in articles 7 and 9.
The President questioned the article concerning the composition of the IESS Board of Directors, which will be composed of 3 members: one from the executive, one from the employers, and one from the affiliates. He also questioned that the designation of the latter should be done through an election organized by the National Electoral Council (CNE, which stands for its initials in Spanish) even though there is no funding for its development.
The Executive also objected to establishing a 10-year term for the payment of the debt that the State owes to this institution.
REFORMS TO THE LAW OF THE ECUADORIAN INSTITUTE OF SOCIAL SECURITY
Regarding the regulation of contributions and benefits (Art. 6), the Reform establishes that the creation of new benefits must have funding based on prior actuarial studies.
The original Law did not contain this text; however, it was supplemented by what is prescribed in Article 369 of the Constitution of the Republic, which in its final part provides that all benefits of the Ecuadorian Social Security Institute (IESS for its Spanish initials) will have sufficient funding.
The Reform adds an additional characteristic to the legal nature of the IESS, considering it, apart from decentralized, “of an autonomous nature.” (to Art. 16)
The Principles of Organization of the IESS stated in Art. 18 of the Original Law with the Reform include those principles that govern the Public Administration, namely: “autonomy, division of businesses, geographical deconcentration, operational decentralization, decentralized and hierarchical internal control, accountability for the acts and deeds of its authorities, and guarantee of good governance.”
The Reform now provides that the approval of the IESS general operations budget will be prepared by the Director General by December 31 of each year in conjunction with the Ministry of Finance to create several monitoring and control mechanisms in the finances and thus prevent the State’s debt to the IESS from increasing.
The Reform modifies the composition of the IESS Board of Directors, but the Original Law has the same composition: 1) A member representing the affiliates in public and private employment; 2) affiliates without an employment relationship and retired people; 3) a member representing employers; 4) a member representing the Executive Branch, who will be elected from a shortlist proposed by the President of the Republic and appointed by resolution of the National Assembly within fifteen days after its receipt, if there is no pronouncement by the Legislative Branch, the first of the shortlist will be directly appointed.
The reform includes more requirements for the Executive Branch’s delegate, who must also pass the Assembly’s filter.
The National Electoral Council will be responsible for electing the other two members: the affiliates and the retirees; the quorum for sessions remains with 2 of the 3 Members.
REFORMS TO THE IESS BANK LAW
The Board of the IESS Bank will be composed of five (5) principal members: a representative of the affiliates, a representative of the retirees, a representative of the employers, a representative of the Ministry of Economy and Finance, and the President of the IESS Board of Directors. The IESS Bank Board will be chaired by the President of the IESS Board of Directors. (Art. 8 BIESS Law). The Original Law established 4 Members. The one included in the current Board according to the reform is the Delegate of the Minister of Finance.
The election method also changes. The delegates of affiliates, retirees, and employers through a public contest organized by the IESS Board of Directors (not the Bank). They will also be qualified by the Superintendency of Banks. The quorum is established with three members.
An important reform is related to the fact that from now on, what the State must contribute to the IESS and the BIESS cannot be less than the amounts established by Law.
It is about correcting the fact that contributions so far have been arbitrary, since although the State contributed what the Law says; simultaneously or successively, it acquired debts with Social Security, which in most cases exceeded what was contributed and increased the State’s debt to Social Security every year.
One of the main reforms is that within four months from the publication in the Official Register, the value of the State’s debt to the IESS must be determined. In the event of reconcilable differences, the Mediation and Arbitration Center of the Attorney General’s Office will be approached; the irreconcilable ones, to the Ordinary Justice.
For more information, please contact the email laboral@bustamantefabara.com