Interpretative Rule 01/2016

The Collection Department of the Mexican Social Security Institute (“IMSS”) has issued the Interpretative Rule 01/2016, named “Amounts delivered in cash or in kind to employees, or deposited to the employees’ payroll accounts, that are treated as contributions for pension plans, are part of the base salary for computing social security contributions to the IMSS pursuant to article 27, first paragraph of the Social Security Law”.

Recently, IMSS authorities have identified that some employers deliver in cash or in kind amounts to their employees, or deposit such amounts to the employees’ payroll accounts and register them as contributions for pension plans in the respective accounting records, without adding those amounts to the base salary for computing social security contributions.

This is considered as a wrongful practice by the IMSS authorities, given that in accordance to the legal dispositions, the only amounts that can be excluded from the base salary, are the ones destined to create pension plans that fully comply with the applicable dispositions issued by the National Commission for the Retirement Fund System (“CONSAR”).

This, since retirement plans are created precisely to guarantee that employees will have access to resources from their pension plans until they fulfill every requirement for their respective retirement.

Accordingly, amounts –in cash or in kind– that are delivered to employees, that do not fulfill with the referred requirements, will be considered as part of the base salary for computing social security contributions to the IMSS.

This Rule revokes the diverse Rule 04/2014.

Mexico City, on May 5, 2016