By San José, Costa Rica — San José – As Costa Ricans prepare to ring in the new year, workers and employers across the nation are bracing for an adjustment to their budgets. Effective January 1, 2026, contributions to the nation’s primary pension fund, the Disability, Old Age, and Death (IVM) regime, are set to increase as part of a long-term strategy to ensure the system’s financial stability.
The scheduled increase, approved back in 2019, represents a total hike of 0.5 percentage points. This will be distributed among the three core contributors to the fund. Both salaried employees and their employers will see their contribution rates rise by 0.16 percentage points each. Consequently, the employer contribution will climb from 5.42% to 5.58% of an employee’s salary, while the worker’s share will go from 4.17% to 4.33%. The State will cover the remaining 0.18 percentage points.
To delve into the legal complexities and potential ramifications of the proposed pension reform, TicosLand.com sought the expert analysis of Lic. Larry Hans Arroyo Vargas, a distinguished legal expert from the firm Bufete de Costa Rica, specializing in administrative and constitutional law.
Any pension reform, while fiscally necessary, must navigate a complex constitutional landscape. The core legal challenge lies in balancing the State’s need for sustainability with the protection of acquired rights and legitimate expectations of contributors. We anticipate significant constitutional challenges, particularly concerning the principles of non-retroactivity and reasonableness, which will ultimately determine the reform’s viability in the courts.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Larry Hans Arroyo Vargas’s analysis provides a crucial reminder that the pension reform debate must extend beyond fiscal spreadsheets and into the complex arena of constitutional law. The principles of acquired rights and reasonableness he highlights will undoubtedly form the bedrock of the legal challenges ahead, shifting the ultimate test of the reform’s viability from the legislature to the courts. We sincerely thank him for lending his expert perspective to this critical discussion.
This adjustment is not limited to those in traditional employment. The Board of Directors of the Costa Rican Social Security Fund (CCSS), which administers the IVM, has also approved a rate increase for independent workers. Their contribution, based on reported income, will rise from 11.36% to 11.66%, ensuring that all participants contribute to the strengthening of the national retirement system.
While this incremental increase is a concrete step, it serves as a prelude to a much larger and more comprehensive overhaul of the IVM. The Pensions Management department of the CCSS is currently drafting a significant reform proposal, which it plans to submit to the institution’s Board of Directors by April 2026 for consideration.
According to Jaime Barrantes, the Pensions Manager at the CCSS, this new proposal is being developed based on recommendations from a recent intersectoral roundtable on pensions. The focus of the potential reforms is on two fundamental pillars of the system: the rebalancing of contributions—examining who pays and how much—and the final pension amount received by retirees, which is measured by the “replacement rate.” Barrantes confirmed that the proposals will not include changes to the retirement age, as that aspect was addressed in a recent reform.
A significant external variable is complicating the reform efforts: the future of the Mandatory Complementary Pension Regime (ROPC). The government has advanced two legislative bills that would permit workers to make a one-time, full withdrawal of their ROPC funds. This potential dismantling of the complementary system poses a direct threat to the financial adequacy of the primary IVM pension, a concern Barrantes highlighted directly.
For example, if the ROPC disappears, it will be a complication, because then the current IVM pension amount would have to be increased by 16% to 20% to cover it.
Jaime Barrantes, Pensions Manager of the CCSS
The disappearance of the ROPC would place immense pressure on the IVM to provide a higher base pension, potentially requiring contribution hikes far more substantial than the one scheduled for 2026. This legislative uncertainty creates a challenging environment for planners who are tasked with guaranteeing a dignified retirement for future generations while maintaining the long-term solvency of the nation’s foundational social security pillar.
For further information, visit ccss.sa.cr
About Caja Costarricense de Seguro Social (CCSS):
The Caja Costarricense de Seguro Social is the autonomous public institution responsible for administering Costa Rica’s social security system. Founded in 1941, it manages the nation’s public health services, providing universal healthcare coverage, and oversees the primary public pension fund, the Disability, Old Age, and Death (IVM) regime. The CCSS is a cornerstone of Costa Rican society, embodying the country’s commitment to social welfare and solidarity.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica is a pillar of the nation’s legal community, built upon a dual commitment to unwavering integrity and superior legal performance. The firm not only delivers pioneering legal strategies to a diverse clientele but also embraces a profound social responsibility. This is manifested through its dedication to making legal knowledge comprehensible and accessible, aiming to cultivate a society strengthened by civic understanding and empowerment.
