Background on Amafore and its Relevance
Amafore, the Mexican Association of Profit-Sharing Funds (Afores), plays a crucial role in Mexico’s pension system. It represents 28 private pension fund management companies that manage retirement savings for over 40 million Mexicans. Amafore’s recent approval of a reform to regulate unemployment withdrawals highlights its commitment to ensuring transparency, security, and fairness in the system.
Fraudulent Practices Detected by Consar
In recent months, the National System of Savings for Retirement Commission (Consar) identified fraudulent practices in unemployment withdrawals. These schemes involved simulating high-salary employment for a single day to qualify for larger unemployment withdrawals. Private offices exploited this loophole by charging hefty commissions for facilitating such fraudulent withdrawals, misleading workers into draining their savings.
Amafore’s Support for the Reform
Amafore expressed its support for the reform approved by the Chamber of Deputies on June 23, aiming to curb these fraudulent practices. The association emphasized that any adjustment to the regulatory framework promoting transparency, security, and preventing misconduct in pension rights is positive.
Amafore acknowledged that, for many formal workers, their individual Afore account represents a significant portion of their wealth. Thus, seeking assistance from accumulated resources during crises can be understandable and necessary.
However, Amafore also reminded workers that these withdrawals reduce not only their savings balance but also the required number of weeks of contributions needed to secure a pension.
Amafore stressed the importance of reintegrating withdrawn funds as soon as possible when workers’ financial situations improve.
Key Changes Brought by the Reform
The reform modifies Article 191 of the Social Security Law, establishing that unemployment withdrawal amounts in Modality A will now be calculated based on the “average base salary of the last fifty-two weeks” (one year) instead of the “most recent base salary before the change.”
Previously, the law allowed desperate offices to register workers with high salaries for a few days to manipulate withdrawal amounts. The reform eliminates this loophole.
Furthermore, the withdrawal limit for those with at least three years in their Afore account is now tied to the worker’s cotization seniority, and the previous cap of 10 UMAs (approximately $34,395 Mexican Pesos) is removed.
Withdrawal Modalities Post-Reform
Unemployment withdrawals are a right available to all workers with an Afore account after accumulating at least 46 days of unemployment.
- Modality A: The smaller of either 30 days of the average base salary from the previous year or 11.50% of total accumulated funds.
- Modality B: The smaller of either 90 days of the base salary from the last 252 weeks (approximately 4.8 years) or 11.50% of total accumulated funds.
To access Modality A, a worker’s account must have at least three years of history. For Modality B, the account needs five or more years of history.
Key Questions and Answers
- What was the issue with unemployment withdrawals before the reform? Private offices exploited a loophole by registering workers with high salaries for brief periods to qualify for larger unemployment withdrawals, charging hefty commissions.
- How does the reform address these issues? The reform modifies the calculation method for unemployment withdrawal amounts, eliminating the loophole that allowed desperate offices to manipulate withdrawal amounts.
- What are the new withdrawal modalities? Modality A: smaller of either 30 days of average base salary from the previous year or 11.50% of total funds. Modality B: smaller of either 90 days of base salary from the last 252 weeks (approximately 4.8 years) or 11.50% of total funds.
- What are the requirements for accessing each modality? Modality A requires at least three years of account history; Modality B requires five or more years.
