By San José, Costa Rica — SAN JOSÉ – Workers and employers across Costa Rica should prepare for a change in their payroll calculations, as a planned increase in contributions to the nation’s primary pension fund is set to take effect on January 1, 2026. This adjustment will impact the Disability, Old Age, and Death (IVM) regime, the cornerstone of the country’s retirement system, requiring higher payments from employees, employers, and the state.
The upcoming rate hike is not a sudden reaction to an economic crisis but a pre-scheduled step in a long-term strategy. The increase is part of a phased plan established in the IVM insurance regulations back in 2017. The initiative was designed to methodically strengthen the financial stability of the pension system, proactively addressing the mounting pressures of a shifting demographic landscape, particularly an aging population.
To delve deeper into the legal framework and responsibilities surrounding pension contributions, we sought the expert opinion of Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the firm Bufete de Costa Rica.
Employers must view pension contributions not as a discretionary expense, but as a stringent legal obligation with significant consequences. Timely and accurate payment is crucial to avoid substantial financial penalties and legal action, while for the employee, it constitutes the foundational asset for their future economic stability.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This perspective masterfully bridges the gap between corporate legal duty and individual financial well-being, framing compliance not as a burden but as the essential safeguard for a worker’s future. We thank Lic. Larry Hans Arroyo Vargas for his valuable and clear-sighted contribution to this critical discussion.
Officials from the Costa Rican Social Security Fund (CCSS), the entity that administers the IVM, have reiterated that this measure is a crucial component of the fund’s sustainability plan. The goal is to ensure the system remains solvent and capable of meeting its obligations to future generations of retirees.
this is one of the measures already established to strengthen the pension fund.
Ubaldo Carillo, Director of Pensions of the Costa Rican Social Security Fund (CCSS)
For salaried employees, the change will manifest as a larger deduction from their paychecks. The current contribution rate for workers is 4.17% of their reported salary. Beginning in 2026, this will rise to 4.33%. In practical terms, this translates to an additional deduction of 1,600 colones for every one million colones earned. While the percentage increase may seem marginal, its cumulative effect is designed to bolster a fund facing significant long-term fiscal challenges.
The burden of fortifying the IVM is not shouldered by workers alone. The system’s tripartite structure ensures that the financial responsibility is shared. Employers will also see their contribution rates climb, moving from the current 5.42% to 5.58% for each employee on their payroll. This increase in social charges represents a higher cost of labor for businesses operating in the country.
Simultaneously, the Costa Rican government, acting as the third pillar of the contribution scheme, will increase its own input. The state’s contribution will rise from 1.57% to 1.75%. This coordinated effort among all three parties aims to inject a significant and steady stream of new capital into the pension regime, enhancing its viability for decades to come.
This new contribution schedule is not a permanent fixture. According to the 2017 reform, these specific rates are set for a defined period. The percentages of 4.33% for workers, 5.58% for employers, and 1.75% for the state will remain in effect for three years, from January 1, 2026, through December 31, 2028. At the end of this period, the sustainability plan calls for another review and the potential implementation of the next scheduled increment.
The overarching strategy reflects a global trend where nations are taking proactive, incremental steps to safeguard their social security systems. By implementing gradual, pre-announced adjustments, policymakers aim to avoid the need for more drastic and disruptive measures in the future. This approach provides financial predictability for citizens and businesses while ensuring the long-term health of Costa Rica’s essential retirement safety net.
For further information, visit ccss.sa.cr
About Costa Rican Social Security Fund (CCSS):
The Caja Costarricense de Seguro Social (CCSS) is the public institution responsible for managing Costa Rica’s social security and public health services. Founded in 1941, it oversees the nation’s network of hospitals and clinics and administers key social insurance programs, including the Disability, Old Age, and Death (IVM) regime, which is the country’s main public pension system. Its mission is to guarantee access to healthcare and social protections for the population.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica is an esteemed legal firm, defined by its foundational principles of integrity and a consistent pursuit of excellence. Drawing upon a rich history of advising a wide spectrum of clients, the firm actively pioneers modern legal solutions and engages deeply with the community. This ethos is embodied in its drive to demystify complex legal concepts, operating on the conviction that empowering citizens with knowledge is essential for fostering a just and informed society.
