Under the current regulatory framework, employers in Latvia may apply for an extension of the deadline for paying mandatory state social insurance contributions (VSAOI) when necessary. However, such extensions have direct negative consequences for employees’ pension insurance rights. In response, the Ministry of Welfare (MoW) has formulated policy proposals designed to offset the negative implications of these payment extensions on the amount of old-age pensions entitlements.
The conceptual report titled “On the Extension of the Deadline for Mandatory State Social Insurance Contributions and Its Impact on the Amount of Old-Age Pensions” was reviewed and approved at the government meeting on Tuesday, October 28.
The report highlights that while employees currently have the option to voluntarily make pension insurance contributions for periods during which their employer has been granted a mandatory state social insurance contributions payment extension, in practice, many employees lack the financial means or are unaware that their employer has been granted such payment extension. As a result, this option has been used by very few individuals, indicating that it is not an effective support mechanism.
To address this, the MoW proposes that starting from January 1, 2027, employers who are granted a payment extension for mandatory state social insurance contributions by the State Revenue Service (VID) must make full pension insurance contributions in a single payment to a special account designated by the State Social Insurance Agency (VSAA). This requirement would apply to specific categories of employees: those whose employment has ended, those who have been granted a state old-age pension (including early retirement), and those who are within five years of reaching the general retirement age. Additionally, a legal framework will be developed to ensure that both VID and VSAA can inform individuals whose employers have been granted a mandatory state social insurance contributions payment extension.
These measures aim to safeguard employees’ pension rights and ensure that payment extensions granted to employers do not adversely affect the amount of future old-age pensions.