The New Social Security Law: What to Know
Background
The Social Security Fund (CSS) was created by Law 23/1941, with the aim of establishing a social security system to protect workers in Panama against risks such as illness, maternity, disability, old age, and death. It began operations in 1942, initially focusing on health and maternity insurance for salaried workers in both the public and private sectors.
Over the decades, the CSS has undergone several structural and legal reforms in response to population growth, labor market changes, and the need for financial sustainability. One of the most significant milestones was the enactment of Law 51 of December 27, 2005, which restructured the system, creating two subsystems within the pension program:
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Exclusive Defined Benefit Subsystem – SEBD (solidarity-based):
Applied to people who were 35 or older on December 31, 2005, or were already retired. This model was based on a pay-as-you-go principle, where active workers fund the pensions of retirees, with no individual accounts but rather a common fund. Pension amounts were determined based on the insured’s salary average and years of contributions.
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Mixed Subsystem (with individual accounts):
Applied to individuals under 35 on January 1, 2006, or those who joined the system for the first time after that date. This model combined a solidarity component similar to the exclusive defined benefit subsystem but with more limited scope, and an individual account component, where part of the worker’s contribution was deposited into a personal account to help fund their future pension.
This dual scheme was designed in response to increasing financial pressure, aiming to preserve sustainability and promote greater individual responsibility in retirement planning, while maintaining the principle of social solidarity.
The enactment of Law 51 of 2005 marked a turning point in the history of the CSS by introducing a dual pension system that addressed the demographic and financial challenges of the time. However, despite efforts to ensure the system’s sustainability, structural tensions have persisted. In this context, the need for a new comprehensive reform arises, leading to the recent approval of Law 462 of 2025, a regulation that profoundly redefines the Panamanian pension system and proposes a broader reorganization of the existing schemes and the roles assumed by the State, employers, and workers in relation to social protection.
Analysis of the New Law
The recent approval of Law 462/2025, which reforms the Organic Law of the Social Security Fund (CSS), marks a significant milestone in the evolution of the Panamanian pension system. It introduces a profound transformation in both the legal framework and institutional design. This legislation establishes new foundations for the access, calculation, and financing of economic benefits, aiming to address accumulated challenges related to sustainability, equity, and coverage. Through this reform, the role played by the different actors in the system — the State, employers, and workers — is redefined, promoting a more balanced distribution of responsibilities in matters of social security.
One of the most relevant aspects of the Law is the creation of the Unified Solidarity Fund, which will be managed by the CSS. All revenues intended to finance economic benefits under the Disability, Old Age, and Death (IVM) risk will be deposited into this fund, including those from the exclusive defined benefit subsystem, the mixed subsystem, and the new unified capitalization system with a solidarity guarantee. This centralized mechanism aims to strengthen transparency and efficiency in resource management, ensuring proper allocation across the various existing regimes.
A notable innovation is the creation of the Unified Capitalization System with Solidarity Guarantee, which introduces a pension structure composed of two elements: a non-contributory solidarity component and a contributory capitalization component with solidarity. This mixed structure aims to guarantee a minimum, dignified, and lifelong pension for all insured individuals, including those with discontinuous or informal work histories or limited contribution capacity—thus reinforcing the principle of universal access to social security.
Additionally, the Law includes a transitional mechanism that allows insured individuals currently enrolled in the existing subsystems — exclusively defined benefit and mixed — to voluntarily transfer to the new system within a period of 12 months from the date the law comes into effect. However, this decision will be irrevocable, which is why insured individuals are strongly advised to carefully assess their individual circumstances and projections before formalizing the change of system.
The following individuals will be eligible for pensions under the Non-Contributory Solidarity Component of the Single Capitalization System with Solidarity Guarantee:
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Insured individuals who, regardless of sex, reach the age of 75, whose contributions are fewer than 120 installments and the result of the Old-Age Retirement Pension calculation under the Contributory Component of the Solidarity Capitalization is less than the universal minimum value or US$144.00, will receive the calculated amount as their Old-Age Retirement Pension.
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Insured individuals who, regardless of sex, reach the age of 75, whose contributions are equal to or greater than 120 installments but equal to or fewer than 240 installments, and the result of the Old-Age Retirement Pension calculation under the Contributory Component of the Solidarity Capitalization is equal to or less than the universal minimum value or US$144.00, will be entitled to receive a Minimum Benefit Pension equivalent to the universal minimum value or US$144.00.
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Insured individuals who, regardless of sex, reach the age of 75, whose contributions are fewer than 240 installments and the result of the Old-Age Retirement Pension calculation under the Contributory Component of the Solidarity Capitalization is equal to or greater than the universal minimum value or US$144.00 and less than or equal to the Guaranteed Solidarity Pension, will receive the calculated amount.
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Insured individuals who have reached the age of 57 (women) or 62 (men), whose contributions are equal to or greater than 240 installments and the result of the Old-Age Retirement Pension calculation under the Contributory Component of the Solidarity Capitalization is equal to or greater than the universal minimum value or US$144.00, but lower than the Guaranteed Solidarity Pension, will receive a Solidarity Benefit Pension equivalent to the difference between the Guaranteed Solidarity Pension and the amount resulting from the Old-Age Retirement Pension calculation under the Contributory Component of the Solidarity Capitalization.
To facilitate understanding, we have prepared the following summary table:
|
Age |
Number of Contributions |
Pension Calculation Result |
Benefit Type |
Amount Received |
|
65+ |
Fewer than 120 |
Less than US$ 144.00 |
Old-Age Retirement Pension |
The calculated amount |
|
65+ |
120–240 |
Equal to or less than US$ 144.00 |
Minimum Benefit Pension |
US$ 144.00 |
|
65+ |
Fewer than 240 |
Between US$ 144.00 and Guaranteed Solidarity Pension |
Old-Age Retirement Pension |
The calculated amount |
|
Women 57+ / Men 62+ |
240 or more |
|
