Pellerano & Herrera The Pellerano & Herrera Foundation

Law concerning the Dominican System of Social Security

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A. Introduction

B. General Principles

1. Objective of the Law, regulations, and principles of the Social Security System.

The objective of the new Social Security Law has been to establish the Dominican System of Social Security (hereinafter “SDSS”) within the framework of the Constitution of the Dominican Republic, to regulate and develop the reciprocal rights and duties of the State and citizens concerning financing to protect the population against the risks of old age, disability, unemployment due to old age, survival, illness, maternity, childhood and occupational hazards. The SDSS comprises all public, private and mixed institutions that perform social security activities, main or complementary, physical and human resources, as well as the rules and procedures governing them.

This System of Social Security will be ruled by the new Social Security Law, by laws in force which create pension and retirement funds, as well as health insurance, benefiting specific sectors and groups, and by rules complementary to the Social Security Law, which comprise the regulations that are to be issued by the Social Security National Council and the Social Security Treasury, which must be approved by the Executive Power, as well as by the resolutions of the Superintendence of Pensions and Health Risks and Occupational Hazards.

On the other hand, the SDSS will be governed by the following principles:

Universality: The SDSS must protect all Dominicans and residents in the country, without any discrimination due to reasons of health, gender, social, political or economic status; Binding: Affiliation, contribution and participation are mandatory for all citizens and institutions under the norms and conditions set forth herein; Integrality: Every person, without distinction, will have the right to enough protection to guarantee enjoyment of life and adequate exercise of their faculties andproductive capacity; Unity: Social Security benefits must be coordinated to constitute a whole, to correspond to the level of national development; Equity: The SDSS will guarantee in an effective manner access to services to all beneficiaries of the system, particularly those who live and/or work in far away or marginalized zones; Solidarity: Based on a contribution dependent on the level of income and access to health and occupational hazard services, without taking into account the individual contributions made; likewise, based on the right to a minimum pension guaranteed by the State under the conditions established herein; Free choice: The affiliates will have the right to choose any administrator and accredited service provider, as well as to change it when deemed convenient;
h. Plurality: Services may be offered by Health Risk Administrators (ARS), Providers of Health Services (PSS)and by Pension Fund Administrators (AFP), public, private or mixed, under the supervision of the State and in accordance with all other principles of Social Security; Separation of roles: The roles of performance, financing, planning, collection and assignment of the resources of the SDSS are exclusive of the State and will be carried out with institutional autonomy with respect to risk management and provision of services; Flexibility: Starting with the coverage explicitly contemplated under the present law, affiliates may opt for complementary health and pension plans, in accordance with their earnings and needs, covering additional costs of same; Participation: All social and institutional sectors involved in the SDSS have the right to be taken into account and participate in the decisions which may affect them; Graduality: Social Security will be developed in a gradual and constant way in order to protect the whole population, by providing quality, timely and satisfactory services; Financial balance: Based on the relationship between guaranteed payments and the amount of financing, in order to ensure sustainability of the Dominican System of Social Security.

2. Rights and duties of the affiliates.
In accordance with the provisions of this Law, all beneficiaries of the SDSS have the right to be assisted by the Directorate of Information and Protection of Affiliates (DIDA) with regards to all the services which may be necessary for its production to be effective. This assistance includes information about its rights, duties, appeals and friendly and legal proceedings, filing of complaints and demands, representation and follow-up of cases, among others.

The affiliate may choose a Pension Fund Administrator (AFP) to manage his individual account and the Health Risk Administrator (ARS) and/or Health Services Provider (PSS) of his preference. No AFP, ARS and/or PSS may reject or cancel the affiliation of a beneficiary due to age, gender, social, health or work status.

3. Beneficiaries, benefits and affiliation.
All Dominican citizens and legal residents in the national territory have the right to become affiliated to the SDSS, having the right to promote health, prevent illnesses, and to the protection, recovery and rehabilitation of their health and preservation of the environment, without any discrimination, as well as benefit from old age, disability and survival insurance and occupational hazard insurance.

On the other hand, the Law establishes that the SDSS will be comprised by the following financing regimes:

A Contributive Regime, which will be comprised of public and private salaried workers and employers, financed by workers and employers, including the State as an employer; A Subsidized Regime, which will protect own account workers with unstable income and lower than the national minimum wages, as well as the unemployed, disabled and destitute, financed basically by the Dominican Government; A Contributive Subsidized Regime which will protect independent professionals and technicians and own account workers with average income, equal or higher than the national minimum wages, with contributions from the workers and a State subsidy to compensate the lack of an employer.

The SDSS is based on a unique system of affiliation, contribution, benefits and provision of services. Consequently, the population presently affiliated to the regime of the Dominican Social Insurance and those affiliated to the regime of health plans and health insurance are integrated with their characteristics to the SDSS, in order to eliminate any duplication of coverage and payment. Also, there will be only one social security registry which will incorporate all beneficiaries of all retirement and pension plans in existence.

4. Financing, payment and subsidies.
With respect to the Contributive Regime of the SDSS the Law has established that it will be financed by mandatory payments and contributions of affiliates and employers; the benefits, interests and revenues arising from the reserves of the Solidarity Fund; the proceeds of the fines applied as a consequence of non-compliance with the present law and its complementary norms; conversion into cash of assets and profits yielded by its properties; and by donations, inheritance, legacy, subsidies and allotments made in its favor.

In order to make viable SDSS financing, it has been established that the increase in payments, both for the worker as well as the employer, will be applied in a gradual way during a period not to exceed five years through successive gradual increases.

On the other hand the Social Security Law envisages the obligation of the employer to contribute to the financing of the Contributive Regime, both to the Old Age, Disability and Survival Insurance as well as to the Family Health Insurance with seventy (70) per cent of the total cost and the employee will contribute the remaining thirty (30) per cent. The cost of the Occupational Hazard Insurance will be covered one hundred per cent (100%) by the employer. In addition, the employer will provide zero point four (0.4) per cent of the quotable salary to cover the Social Solidarity Fund of the pension system.

Payments and contributions of Social Security to reserves and investment proceeds generated by the affiliates’ pension funds will be exempted of all direct or indirect taxes or burdens. It has been established that pensions whose monthly amount is lower than five (5) minimum national salaries will also be exempted. However, earnings and profits obtained by the Pension Fund Administrators (AFP), the PSS and the Health Risk Administrators (ARS) will be subject to payment of applicable taxes.

Payments to the SDSS must be made by the employer at the latest within the first three (3) working days of each month. For dependent workers quotable salary is the one referred to under Article 192 of the Labor Code. In the case of self-employed workers, the basis for contribution will be the national minimum salary, multiplied by a factor related to the average level of income of each social segment of this regime. For the purposes of contribution, tax exemption and penalties, the national minimum salary will be equaled to a simple average of the legal minimum salaries of the private sector established by the National Salary Committee of the Secretariat of State of Labor.

Concerning financing of the Subsidized and Contributed Subsidized Regimes the Law establishes that the first will be financed with contributions by the Dominican State, in accordance with Article 8 of the Constitution of the Republic. The contributions to the Contributive Subsidized Regime will originate from two sources: contributions from the beneficiaries and subsidies to be provided by the Dominican State to compensate for the lack of formal employers. The amount of this subsidy will be inversely proportional to the real income of each category of self-employed worker. The contributions of the independent workers will be calculated on the basis of a multiple of the national minimum salary.

5. Direction, Regulation and Administration
The SDSS is organized based on specialization and separation of functions. The direction, regulation, financing and monitoring correspond exclusively to the State and are inalienable, whereas, the administration of risks and lending of services will be the responsibility of public, private or mixed institutions duly accredited by the appropriate public institution. In this respect, the SDSS will be comprised of the following agencies:

Social Security National Council (CNSS), autonomous public agency higher body of the System responsible for the direction and management of the SDSS and as such is responsible for establishing policies, regulate functioning of the system and its institutions, guarantee coverage, protect the beneficiaries, as well as ensure institutional development, integrality of its programs and financial stability of the SDSS; Social Security Treasury, agency responsible for collection, distribution and payment of the financial resources of the SDSS, and management of the unique information system. To ensure social solidarity, avoid adverse selection, control expenditures and guarantee credibility and efficiency, will count on the technical support and managerial capability of a specialized agency equipped with state-of-the art electronic equipment; Directorate of Information and Protection of the Affiliates (DIDA), public agency for the orientation, information and protection of the beneficiaries is responsible for promoting the SDSS and inform affiliates of their rights and duties; receive claims and complaints as well as processing them and providing follow up until their final solution; advise affiliates regarding friendly or contentious appeals due to refusal of benefits; carry out studies concerning quality and timeliness of the AFP, National Health Services (SNS) and the ARS services; and disseminate its results in order to contribute in an objective manner to decision making of the affiliate; and monitor, from the point of view of the user, the performance of the SDSS; Superintendence of Pensions; autonomous public agency supervisor of the field; Superintendence of Health and Occupational Hazards, autonomous public agency supervisor of the field;
f. National Health Insurance (SNS), autonomous public agency; Pension Fund Administrators (AFP), of a public, private or mixed nature; Health Risks Administrators (ARS), of a public, private or mixed nature, profitable or non-profitable organizations; Health Service Providers (PSS), of a public, private or mixed nature, profitable or non-profitable organizations; Public, private or mixed agencies, profitable or non-profitable, which as their main activities carry out functions complementary to social security.

6. Collection, Distribution and Payment system
The Social Security Treasury will be responsible for the collection, distribution and payment system and will be approved by the CNSS with the advice of an inter-institutional expert commission. It will include a unified, simple and functional computer program to facilitate employers the calculation and distribution of payments in the three regimes of the SDSS. Employers will make the payments within the first three (3) working days of each month through a national banking network or through agencies duly accredited. In turn, the Treasury will identify employers in default, as well as evasion and avoidance and will proceed in accordance with norms and regulations in force. This system of collection and payment will enter into effect within a period not to exceed one (1) year after the date the law became effective.

It has been established that the Treasury will transfer to the AFPs the items corresponding to the “personal account” and “affiliate’s life insurance” and the “AFP commission” from the Old Age, Disability and Survival Insurance within a period not to exceed two (2) working days. AFPs will register the corresponding resources to the personal account of each affiliate and will immediately invest them according to the provisions of the present law and complementary regulations. In the same manner and period of time, the Treasury will transfer the item “Social Solidarity Fund” to the specialized account of the public AFP and the item “Operations of the Superintendence” to the Superintendence of Pensions, in the proportions established by the Law.

On the other hand, the role of risk management and provision of services will be performed by specialized agencies public, private or mixed. Management of pension funds will be the responsibility of agencies called State Pension Fund, Autonomous and Decentralized Institutions Pension Fund, Pension Fund Administrators (AFP), whereas, Management of Risks and Provision of Health Services and Occupation Hazard will be the responsibility of the National Health Insurance, Health Risk Administrators (ARS) and Provider of Health Services (PSS).

In this respect, the National Health Insurance will be responsible for all public employees and autonomous or decentralized institutions and their families, at the time the present law becomes effective, except those who have an Insurance contract until its expiration date and those who have self-managed insurance or may create them in the next three years, after the law is promulgated. In addition, it will be responsible for all informal workers of the Contributive-Subsidized Regime; the beneficiaries of the Subsidized Regime, who will be looked after by the Secretariat of State of Public Health and Social Assistance (SESPAS) and private sector workers who choose it.

Whereas, Health Risk Administrators will be responsible for all workers of the formal or informal not subsidized private sector who may choose them.

7. Transition period
The law envisages a transition period not to exceed ten (10) years after its date of promulgation, in order to develop the conceptual opening necessary to promote in a reliable manner construction of the new social security system; to plan and execute transformation of the old regime of Social Insurance into a Dominican System of Social Security, guaranteeing continuity and continued improvement of services; to reorganize affiliated public and private institutions to adequate their models and services to the principles of social security; to affiliate the population in a gradual and progressive way in order to adequate the process to the financial possibilities of the public, labor and employers’ sectors; carry out the socio-economic studies envisaged by the law.

It will be the responsibility of the Social Security National Council (CNSS) to form a Transition Technical Commission, of an interdisciplinary and inter-institutional character, which will be integrated by technicians and professionals highly qualified in their respective fields, with the objective of providing advice to the Dominican Institute of Social Insurance (IDSS) and the Secretariat of State of Public Health and Social Assistance (SESPAS) in the development of its administrative capacity and provider of health services and occupational hazard. In the same manner will give advice to the Instituto de Auxilios y Vivienda (INAVI) for the reformulation of its functions within the framework of the Dominican System of Social Security and will advise the National Health Insurance and other ARS and PSS, AFP and the existing pension funds in the reorganization of its services. In addition, will prepare a plan to train human resources in social security relevant to the needs of public and private professionals, technicians and administrative personnel which will be required by the Dominican System of National Security (SDSS).

C. Old Age, Disability and Survival Insurance
1. Objective

The pension fund system has the main objective of remedying the loss or reduction of income due to old age, death, disability, unemployment in old age and survival.

The structure of the systems allows the development of individual personal accounts for the affiliates, based on social solidarity in favor of workers and low income population. Nevertheless, the system will allow additional contributions in order to obtain complementary benefits.

2. Pensions under the Contributive Regime
The pension regime entails mandatory affiliation of the salaried worker and the employer regardless of the variety of functions of the workers, the quantity or his change of AFP. The decision to become affiliated to a specific AFP rests solely with the worker, and the worker is responsible for notifying the details of his affiliation within a period of ninety (90) days as of the date enforcement of the law. When a worker provides services to one or more employers, he should choose one of these and inform the rest so they may remit the corresponding payments to the same account. Dominican citizens residing abroad will have the right to become affiliated to the pension system.

In the old social insurance system will remain affiliates who meet the following conditions:

Workers of the public sector and autonomous and decentralized institutions, except those who wish to join the individual capitalization system envisaged under the present law; and Those already pensioned and retired by the State, the IDSS, the Social Security Institute of the Armed Forces and the Policy (ISSFAPOL) and those of the private sector who at present enjoy an old age, disability and survival pension by virtue of laws 1896 and 379 or under a specific law.

The pension system established by the present law will be joined in a mandatory manner by public and private workers residing in the country or abroad except the exceptions previously mentioned regarding workers who will remain under the old system of social insurance or allocation system.

Pension funds created prior to the Law and presently in existence must comply with certain requirements in order to continue operating, among them are: (i) contributions are equal or greater than those established under the present law; (ii) that amounts destined to personal accounts are accumulated in an exclusive individual account of each affiliate; (iii) that pension funds are invested and obtain real minimum earnings; (iv) that it includes life and capability insurance with benefits according to the present law and its complementary norms among others.

Existing pension plans may become an AFP as long as they carry out relevant financial and actuarial studies and said conversion will require the approval of the Superintendence of Pensions. Within a period not to exceed four (4) years as of the date of enforcement of the present law pension and retirement funds created by law as complementary may become an AFP in accordance with the Law and complementary rules.

All citizens will perverse the years accumulated and the rights acquired in their respective pension plans.

New affiliates, regardless of age, will receive a pension in accordance to the contributions made, plus interests and earnings accumulated during his working life.
Dominicans residing abroad will receive a pension in accordance with the amount of their contributions plus accumulated interests and earnings, in the same currency in which contributions were made, with the right to update it periodically according to consumer price index. Affiliates who are older than 45 years, who due to the limited time contributing to the fund do not reach minimum pension, will receive at the time of retirement a lump sum in the amount of their personal account plus accumulated interest.

The rights acquired by affiliates to two or more pensions will be preserved.

BENEFITS OF THE CONTRIBUTIVE REGIME
The social security system will grant the following benefits: (i) old age pension; disability pension, whether total or partial; (iii) severance pension due to old age; and (iv) survival pension.

Old age pension
Old age pension comprises protection of the retired person and his survivors. The right to an old age pension is acquired when the affiliate becomes 60 years old, and has contributed for at least 360 months. Also, when being 55 years old and has accumulated a fund that allows enjoyment of a pension higher than 50% of minimum pension.

The right to a total disability pension is acquired when the affiliate suffers a chronic illness or injury regardless of origin. It will be considered total disability when it reduces two thirds of productive capacity, and partial disability, between half and two thirds; and having exhausted the right to benefits due to non-professional illness or occupational hazard in accordance with the law.

Amount of total or partial disability pension
Pension due to total disability will be equivalent to sixty per cent (60%) of basic salary and in the cases of partial disability will correspond to thirty per cent (30%), as long as it does not affect the production economic capacity of the affiliate. In both cases pension will be calculated based on the average of the indexed quotable salary of the last three (3) years. In case of the death of the affiliate, pension benefits will be granted to survivors under the conditions and limits established under article 51. From the pension amount, the insurance company will deduct the affiliate’s contribution to old age, disability and survival insurance and will deposit it in his personal account. These benefits will be revised and updated every three (3) years.

Technical Commission on Disability
The Technical Commission on Disability will establish the norms, criteria and parameters to evaluate and qualify the degree of disability.
The degree of disability will be determined by Regional Medical Commissions in accordance with the evaluation norms and qualification of the degree of disability, prepared by the CNSS.

Severance pension due to old age
The affiliate will have the right to a minimum pension in the case of severance due to old age when the person is deprived of a salaried job, is fifty-seven (57) years old and has contributed a minimum of three hundred (300) months.

Survival pension
In case of death of the active affiliate, beneficiaries will receive a survival pension of not less than 60 per cent (60%) of the quotable salary of the last three (3) years or fraction, adjusted by the Consumers Price Index (IPC). The surviving spouse who is older than 50 years and younger than 55 will have the right to seventy-two (72) months of pension and survivors older than 55 to a life pension. Survival pension will be financed with the amount accumulated in the personal account of the affiliate plus the contribution of the survival insurance. These benefits will be reviewed every five years.

Amount of minimum pension of the contributive regime
Minimum pension of the contributive regime will be equivalent to one hundred per cent (100%) of the lowest minimum wage. The Superintendence of Pensions will establish the way in which the Social Solidarity Fund will provide complementary funds. Minimum pension applies only to those retired due to old age and is not extensive to cases of disability and survival.

Types of pension
At the time of retirement the affiliate may choose one of the following options:

A pension under the modality of programmed retirement, keeping the funds with the Pension Fund Administrator (AFP), in which case the affiliate preserves ownership over the fund and assumes the risk of longevity and future profitability; A pension under the modality of life annuity, in which case the balance of the individual account is transferred to an insurance company losing property of the fund in exchange said company assumes the risk of longevity and profitability, and a guarantee of an agreed upon life annuity.

Cost and financing of the Contributive Regime
The old age, disability and survival insurance of the Contributive Regime will be financed with a total contribution of ten per cent (10%) of the quotable salary, distributed according to certain percentages to the personal account, the affiliate’s Life Insurance coverage, Social Solidarity Fund, the AFP’s commission, among others.

Maximum and minimum limits of quotable salary
The law establishes a maximum quotable salary equivalent to twenty (20) national minimum salaries. On the other hand, minimum quotable salary will be the same a one legal minimum salary of the sector where the affiliate works.

Incompatibility of pension and severance pay due to retirement or pension
The right to a pension due to old age, disability and survival of the Contributive Regime exempts employers from the compensation established under the Labor Code, Law 16-92, regarding severance payment due to pension or retirement.

Affiliate’s personal account
Contributions to the affiliate’s personal account constitute a pension fund exclusively his, which will be invested by the selected AFP, under the conditions and limitations established under the present law and its complementary norms. The fund and its earnings cannot be embargoed, will not be subject to taxes and can only be withdrawn when the affiliate complies with retirement requirements, under the modalities established by the present law and its complementary norms.

Social Solidarity Fund
The Law establishes a Social Solidarity Fund in favor of low income affiliates, older than 65 years, who had contributed at least 300 months in any of the present pension systems and whose personal account does not accumulate enough to cover it. In such cases, said fund will contribute the necessary amount to complete a minimum pension.

Employer solidarity contribution
The Social Solidarity Fund will be financed through solidarity contributions of 0.4% of the total quotable salary paid exclusively by the employer.

PENSIONS UNDER SUBSIDIZED REGIME
Beneficiaries of solidarity pension
A solidarity pension is established to benefit the disabled, unemployed and destitute population as part of a general policy oriented towards reducing poverty levels. Among them are: (i) persons of any age with severe disabilities; (ii) persons older than sixty (60) years who lack resources to satisfy their basic needs; (iii) unemployed single mothers with under-aged children who lack resources to satisfy their basic needs and to guarantee education of same.

Benefits of the Subsidized Regime
Old Age and Survival Insurance of the Subsidized Regime will comprise pension due to old age and total or partial disability and survival pension.

Pension distribution
The Law has made the Secretariat of State of Finances responsible for the monthly delivery to the provincial development councils the pension checks corresponding to their jurisdiction. In turn, the Provincial Development Councils will proceed to distribute them among their municipalities, following the procedures that to this effect will be issued by the complementary norms. The Superintendence of Pensions will monitor this process and will inform the CNSS on a regular basis.

PENSION UNDER THE SUBSIDIZED CONTRIBUTIVE REGIME
Benefits
Old age, Disability and Survival Insurance of the Subsidized Contributive Regime will includes pension due to old age and total or partial disability and survival pension.

Old age pension
The affiliate acquires the right to old age pension at any age older than 60 years, as long as the fund accumulated in his/her personal account guarantees at least minimum pension.

Amount of minimum pension under the Subsidized Contributive Regime
Minimum pension under the Subsidized Contributive Regime will be equivalent to seventy per cent (70%) of private minimum salary, indexed according to the increase of the minimum private salary. The Dominican Government will guarantee minimum pension to those self-employed workers who, having complied with the requirements of the present law and its complementary norms, have not accumulated in their personal accounts the amount necessary to obtain it.

Survival pension
In the case of death of a retired person of the Subsidized Contributive Regime, the following beneficiaries will continue receiving the pension: the surviving spouse, or in its absence, common law partner, as long as neither one had a legal impediment to enter into marriage; (ii) legitimate, natural or adopted children, single, under 18 years of age, or single children older than 18 years and younger than 21 years who can demonstrate having been a regular student during six months prior to the death of the affiliate; and (iii) children of any age who are disable according to pension regulations. This right is lost at the moment the conditions previously stated are modified or end.

SOCIAL SERVICES FOR THE AGEING
Special programs for ageing adults
The Law makes the Dominican Government responsible for strengthening the National Council for the Ageing to develop special services oriented towards valuing the contribution of older people, to the development of their capacities and experience, to promote their upgrading and entertainment, as well as enjoyment of their retirement years.

PENSION FUND ADMINISTRATORS
Pension Fund Administrators (AFP)
Pension Fund Administrators (AFP) are financial institutions constituted in accordance with the laws of the country, with the exclusive purpose of managing the personal accounts of the affiliates and adequately invest pension funds; grant and manage benefits of the social security system, strictly adhering to the principles of social security and the provisions of the present law and its complementary norms. AFPs may be public, private or mixed and will have at least one office or agency at the national level to provide services to the public and attend to their claims. Besides, they may install offices and agencies using the infrastructure of other agencies of the financial and commercial sector and open agencies or operating offices abroad to provide their services to Dominican citizens residing abroad, as long as they operate as agencies typical of the AFPs and legally different than the leasing entity.

Creation of a public AFP
The Law establishes that the Dominican State will have at least one public AFP managed with administrative criteria in accordance with the present law. Said AFP will administer the pension funds of affiliates who choose it and in addition will administer the Social Solidarity Fund created by the Law.

Minimum capital of the AFP
The Law establishes that AFP will have a minimum capital of ten million pesos (RD$10,000,000.00). This capital must be indexed annually in order to maintain its real value and should be increased by ten per cent (10%) for each five thousand affiliates in excess of ten thousand. In case capital is less than the corresponding minimum, the Superintendence of Pensions will grant a period not to exceed ninety (90) days to complete it, being during that period under constant supervision. In the case of non-compliance with this requirement, the authorization to operate as an AFP will be cancelled.

Independent capital and accounting
In accordance with the Law capital of the Pension Funds is the exclusive property of affiliates; it cannot be embargoed and is independent and different from the Pension Fund Administrators (AFP) capital, which will be obligated to maintain separate accounting: one on the personal accounts, pension funds and investments and another on its own capital and operations. The Superintendence of Pensions has the legal status to carry out supervision and audits that it deems convenient to ensure strict compliance with this provision.

Basic records and information
The Superintendence of Pensions will determine the information that AFPs will keep and the records they will keep regarding their own transactions, those regarding related persons and those of the pension funds administered. Prior to negotiating a financial instrument, the AFP is obligated to record whether it is in his name or on account of the pension funds. Pension regulations will establish internal control mechanisms, as well as the information and filing systems to register the origin, destination and date of the transactions.

Responsibility for damage caused to pension funds
AFPs may carry out transactions, legal agreements, deferrals, and renewals and other commitments in order to protect the stability, liquidity and profitability of the financial instruments acquired. Also, they may participate with the right voice and vote in creditors’ meetings or in any type of bidding procedure, except when the debtor is a person related to the respective AFP, in which case this can only participate with voice. This should answer with its own capital for damages caused to pension funds due to non-compliance of any of its obligations, and are obligated to compensate the pension funds they managed for any direct damage to them, any of their directors, dependents or persons to whom they provide services, which were caused as a consequence of implementation or omission, depending on which, of any of the actions to which this law and its complementary norms refer to. The directors and executives who participated in such actions will be responsible in solidum of said obligation. The Superintendence of Pensions may file in benefit of the pension fund the legal actions it considers relevant to obtain applicable compensation to the fund by virtue of said responsibility.

AFP commissions
AFPs can only charge or receive income from its affiliates and employers on account of the following:

a. A monthly commission for administration of the personal fund, which will be independent of the results of investments and cannot exceed zero point five per cent (0.5%) of the monthly quotable salary;
b. A complementary annual commission applied to the administrative fund of up to thirty per cent (30%) of the profitability obtained above the interest rate of the certificates of deposits of commercial banking. The Superintendence of Pensions will determine the formula to ascertain said profitability;
c. Charges for optional services, expressly requested by affiliates;
d. Interests charged to employers for delays in payment of the administrative commission.

Directors of the AFPs
Executives of commercial banks, stock markets, investment funds, mutual funds or securities brokers cannot become directors of AFPs.

Obligations of the directors of the Pension Fund Administrators (AFP)
AFPs’ directors must always go on record regarding those issues which involve conflict of interests, particularly with regards to the following:

(i) AFP policies and voting for the election of directors in companies whose shares have been acquired with resources from the pension funds; (ii) internal control mechanisms established by AFPs to prevent actions which could affect compliance with norms established by the present law; (iii) proposals to contract external audits; (iv) appointment of AFP agents to invest the resources of the Pension Funds abroad; (v) general investment policies of the pension funds; (vi) policies regarding transactions with resources from the pension funds with people related to the AFP.

Activities prohibited to the AFPs
The law prohibits directors of an AFP, its controllers, managers, administrators, and in general, any person who due to his/her post or function makes decisions or have access to information regarding investment of the AFP, to divulge confidential information of the AFP, use said information in detriment of same, divulge regarding decisions and operations of the AFP outside the declarations established by Law to the Superintendence, to involve an AFP in activities which work in detriment of the up-keeping of minimum equity requested by the law among others.

Operations prohibited unless they are expressly authorized
Any company, society, person or entity which, in accordance with the norms and procedures of the Superintendence of Pensions, has not complied with the requirements and provisions of the present law, is prohibited from attributing itself the status of an AFP. In such a case, the Superintendence of Pensions will order the immediate suspension of its activities, without detriment to application of the corresponding legal sanctions. Any violation to the provisions of this article will be penalized by the Superintendence of Pensions with a fine in benefit of the Social Solidarity Fund in an amount to be established in the complementary norms. In the case of recidivism, it will be duplicated, without detriment of the corresponding criminal and/or civil responsibility.

Merger and liquidation of an AFP
Any merger of two or more AFPs must comply with the provisions of the Commerce Code, be authorized by the Superintendence of Pensions and fulfill the requirements of the present law and its complementary norms. In addition, the public must be informed through a publication in two newspapers of national circulation within five (5) days of the date of its authorization. This publication must inform about the amount of commissions the resulting AFP will charge. Merger of the AFPs cannot diminish its capital nor the Pension Fund.

Bankruptcy of an AFP
If an AFP goes bankrupt, the Superintendence of Pensions must intervene to guarantee affiliates their incorporation to another AFP within a period of thirty (30) days. On the contrary, the Superintendence of Pensions will transfer in a proportional manner to the existing AFPs the balances of the personal accounts within a period not to exceed ten (10) days. In the same way and in the same proportion must transfer to existing AFPs the other accounts of the Pension Funds, including profitability fluctuation reserve.

INVESTMENT OF PENSION FUNDS
Pension Funds
Pension funds belong exclusively to affiliates and will be constituted with the mandatory, voluntary and extraordinary contributions as well as with its earnings. It constitutes an independent capital different fro the capital of the Pension Fund Administrators (AFPs), without these having authority or the power to dispose of same, except in the ways and modalities expressly consigned by the present law. Said fund cannot be embargoed and the accounts that constitute it are not susceptible to legal withholding or blockage. AFPs will keep current accounts destined exclusively to management of the pension fund. These accounts will be separate and different than the accounts related to the AFP. Affiliate’s contributions, as well as the earnings of his investments and any other type of income in favor of the affiliates must be registered in the affiliate’s personal account and deposited in the pension fund. From said account the AFP can only draw for the acquisition of titles and financial instruments in favor of the Pension Funds and to pay benefits, transfers and estrangements explicitly established by this law. The norms, procedures and frameworks of these operations will be consigned in the pension regulations and will be supervised by the Superintendence of Pensions.

Investment of the Pension Fund Administrators (AFP)
Pension Fund Administrators (AFP) will invest pension fund’s resources with the objective of obtaining real profits to increase the individual accounts of affiliates, within the norms and limitations established by the present law and its complementary norms. Real profit is understood as that resulting from deducting nominal profitability rate from the inflation rate of the corresponding period. Any other destination given to the Pension Funds which is not that stated in an explicit way by the present law, will be considered illegal subject to all its consequences. Within the limits established for investment of pension funds, under equal profitability and risks, AFPs should prioritize placement of resources in activities which optimize the impact on employment generation, housing construction and promotion of industrial and agro-industrial activities, among others.

Prohibited and restricted investment areas
Pension Fund Administrators (AFPs) will not be able to invest in securities which require collateral or liens on the assets of the funds. The funds cannot be invested in shares of an AFP, of insurance companies or risk rating companies. Investments can only be made in companies belonging to owners and executives of an AFP up to a limit of five per cent (5.0%) of total portfolio, as long as they comply with provisions of Articles 99 and 101 of the present law. The AFPs cannot settle financial instruments with resources from the pension funds at prices which hurt their profitability, in relation to that existing in the formal markets at the moment the transaction is made. In the case of infringement, the resulting difference will be repaid to the pension fund by the corresponding AFP, in accordance with procedures established by the present law and its complementary norms. The AFP will not be allowed to sell to Pension Funds securities of its own portfolio, nor purchase from the Pension Funds securities they have in their portfolios.

Risk classification and investment limits
The Risk Rating Commission will determine the degree of actual risk of each type of financial instrument, diversification of investments among the generic types and investment limits by type of instrument.

Administration of several investment portfolios
Pension Fund Administrators (AFPs) may operate several investment portfolios with a varied composition of financial instruments with varying degrees of risks and actual profitability, without detriment to that stated under Article 103. AFPs will provide detailed information to the Superintendence of Pensions, with the periodicity it establishes, regarding said composition, as well as the amounts of each portfolio. Affiliates will receive information on same, particularly regarding its profitability and risk, and will have the right to decide on a year basis in which of the portfolios administered by the AFP they wish to place the totality of their individual accounts.

Custody of AFP’s investments
To safeguard affiliates’ interests, at all times, securities and financial instruments, physical, electronic or in any other type, equivalent to at least ninety-five per cent (95%) of the amount invested from the Pension Fund, must be under the custody of the Central Bank of the Dominican Republic, under the conditions determined by it. AFPs must notify the Superintendence within a period not to exceed one working day about any purchase or sale of securities, physical, electronic or through other means, and this in turn will notify the Central Bank on a daily basis the amount of the portfolio that each AFP should have in custody, as well as its composition.

Reserve and use of profitability fluctuation
Reserve of profitability fluctuation will be created with surpluses of actual earnings of the last twelve (12) months of a Pension Fund which exceeds weighted average of actual profitability of all pension funds during the last twelve (12) months, less two percentage points. Said reserve will be calculated on a monthly basis.

SUPERINTENDENCE OF PENSIONS
Superintendence of Pensions
The Superintendence of Pensions is a government agency, autonomous, with legal status, and capital of its own, so that in the name and in representation of the Dominican Government fully exercises the job of ensuring strict compliance with the present law and its complementary norms in the area of its concern, to protect the affiliates’ interests, to monitor financial stability of the Pension Fund Administrators (AFP) and to contribute to strengthen the Dominican system of social security. It is empowered to contract, to file suit and be sued and will be monitored by the General Comptroller of the Republic and/or the Accounts Chamber only with regards to analysis of income and expenditures. It will be chaired by the Superintendent of Pensions, who will be responsible for ensuring it operations in accordance with the powers vested on him by Law, as well as other authorities inherent in same.

INFRINGEMENT AND SANCTIONS
Principles and general norms
The Law considers a violation any non-compliance due to actions or omissions of the obligations set forth by the present law and its complementary norms, as well as punishable conduct stated in same. Each infringement will be dealt with independently even when it has a common origin. Employers and Pension Fund Administrators (AFP) will be responsible for infringements committed by their dependents in the exercise of their functions. The authority to impose a sanction expires after five years, counted as of the date of commission of the fact and the action to enforce the sanction prescribes after five years, as of the date of sentence or resolution.

Authority to impose sanctions
The Superintendence of Pensions will have full authority to determine infringement and impose sanctions envisaged in the present law and its complementary norms.

Right to appeal
Employers and Pension Fund Administrators (AFP) will have the right to appeal before the CNSS the decisions on sanctions and fines imposed by the Pension Superintendence without this implying that under any circumstances they are to be suspended.

It is important to note that all existing pension plans at the moment the new social security law becomes effective may continue operating, as long as they fulfill all and every requirement of the new law.

D. Health Family Insurance
1. Objective, Rights and Protection
The new Social Security Law has established as the objective of the Health Family Insurance (SFS) the integral protection of the physical and mental health of the affiliate and his/her family, as well as providing universal coverage without exclusions due to age, gender, social, work or territorial status, guaranteeing regular access of the most vulnerable social groups while ensuring financial stability, through rationalization of the cost of services and administration of the system. It comprises promotion of health, prevention and treatment of illnesses, rehabilitation of sick persons, pregnancy, childbirth and its consequences. Does not include treatment derived from traffic accidents nor occupational accidents and professional illnesses, which are covered under Law 4117, on Mandatory Insurance for Motor Vehicles and by the Occupational Hazard Insurance established by the new Social Security Law. Costs incurred in services derived from traffic accidents will be covered the mandatory motor vehicle insurance or in its absence, by the party responsible for same.

On the other hand, the Law has established as a responsibility of the CNSS the creation and functioning of a National Accident Fund.

Family selection of services
The Dominican System of Social Security (SDSS) will guarantee free family selection of a Health Risk Administrator (ARS), of a National Health Insurance (SNS) and/or PSS of its choosing, under the conditions and methods established by the present law and its complementary norms. The selection made by the titular affiliate will be valid for all his/her dependents. Once the transition period stated under Article 33 of the Law has expired, the affiliate will be free to choose the ARS and/or PSS of his preference, as well as to change it when he considers that its services do not satisfy his needs. Affiliates may change once per year, with a 30 days’ notice.

The Superintendence of Health and Occupational Hazard will regulate this process, will establish the period to make the changes of ARS, SNS and/or PSS and will watch over the development and conservation of a regulated competition environment to promote quality services, timely and satisfactory to affiliates.

As preventive measures of monopolistic practices and unbalance, the Law delegates in the CNSS the inclusion in the complementary norms of clear mechanisms and procedures geared to:

Prevent selection of risks, as well as discrimination due to age, gender, social status and geographic location;

Prevent and avoid monopolistic practices both in health risk administration as well as in the provision of health services; and

Protect the performance of health professionals, in accordance with the norms and procedures established under the General Health Law and Law 6097 dated 13 November 1972, regarding Organization of Hospitals’ Medical Corps, and its modifications.

On the other hand, in order to avoid concentration of property and control, Article 122 of the Social Security Law establishes that Health Risk Administrators (ARS) cannot be owners, nor have shareholders, with economic interests, direct or indirect, with the Health Service Providers (PSS). Likewise, Health Service Providers (PSS) cannot be owners, nor have shareholders, with economic interests, direct or indirect, with the Health Risk Administrators (ARS).

However, this provision does not apply to those ARS which had been operating during the twelve (12) months prior to promulgation of the present law as owners or shareholders of Health Service Providers, or for those PSS who own or are shareholders of an ARS. Any transaction which implies change of ownership or control of these companies will imply automatic loss of acknowledgement of the acquired rights established by the Law in this respect.

2. Beneficiaries and Services
The Social Security Law has established as beneficiaries of the Health Family Insurance of the contributive regime the following:

Affiliated worker; Retired person of the Contributive Regime, regardless of age and health status; The spouse of the affiliate or retired person or, in the absence of this, the life companion with whom a marital relationship has been shared during the three years previous to his affiliation, or has procreated children, as long as neither one has an impediment to marry; Affiliates’ children under the age of 18; Affiliates’ children up to 21 years of age when they are students; Disabled children, regardless of their age, who are dependents of the affiliate or the retired person. In a complementary way, they may include other relatives who are dependents of the affiliate or retired person, as long as the affiliate covers the cost of their protection.

On a temporary basis, the Law grants the right to health services to affiliates who are deprived of remunerated work. To obtain this they may request an evaluation of their status in order to determine for which regime he qualifies. During sixty (60) days he will keep, together with his dependents, the right to health services in kind but monetary.

On the other hand, as beneficiaries of the Subsidized Regime the Law has established the following:

The unemployed, urban and rural, as well as his family; The disabled, urban and rural, as long as they do not depend economically on a father or tutor affiliated to another regime and have the right to be protected under another regime; The destitute, urban and rural, as well as their family, under the solidarity conditions to be established by the Executive Power from proposals submitted by theSocial Security National Council.

The latter will establish criteria and indicators to ascertain the population that qualifies for the Subsidized Regime.

In cases of national emergency and/or during the campaigns and other especial programs oriented towards preventing illnesses and disability, these beneficiaries must provide community services to the health public sector or environmental sanitation, reforestation and immunization activities of the town halls.

Finally, with respect to the Contributive Subsidized Regime it has been established that beneficiaries of the Health Family Insurance will be:

Professionals and technicians who work independently, as well as their families; Self-employed workers, urban and rural, as well as their families; Those who work at home, as well as their families; Pensioned and retired persons under the Contributive Subsidized Regime;

Regarding services to be provided by the Health Family Insurance (SFS) of the Contributive Regime the Social Security Law has established two types of benefits: in kind and money.

The following in kind benefits are covered by the SFS for the Contributive, Subsidized and Contributive Subsidized regimes:

Basic Health Plan: It will consist of promotion of health services and preventive medicine, primary health services, specialized services and complex treatments by referral from primary attention, diagnosis exams both biomedical as well as radiology, pediatric-odontological and preventive services, physiotherapy and rehabilitation when they are prescribed by a specialist; complementary benefits, including equipment, medical prosthesis and technical assistance to the disabled according to the list to be provided by the CNSS.

Nurseries’ services: The SDSS will develop nurseries to take care of workers children from forty-five (45) days of birth until they become five years old. These services will be the responsibility of experts, under the supervision of the Superintendence of Health and Occupational Hazard. In addition, public and private institutions, could finance, install and manage nurseries to strengthen and complement these social services. Children nurseries’ will provide nourishment adequate to age and health; maternal-child health services; pre-school education; psycho-social development activities; and recreation; and will be financed with funds provided by the SFS, resources provided by the Dominican Government, resources provided by private institutions; and grants provided by national and international companies, institutions, and foundations, as well as countries and international organizations. Finally, the Law has created a Nurseries National Council (CONDEI) with the authority, among others, to formulate policies, norms and procedures for the creation, design, building and/or equipping and operation of nurseries and supervision of same.

In order to avoid excessive payments, the Law establishes that services not included in the Basic Health Plan which exceed coverage must be covered by the affiliate or the employer and regulated by the CNSS.

Monetary benefits have been established only for the Contributive Regime:

Subsidy due to illness: The affiliate will have the right to a cash subsidy due to temporary disability to work. This will be granted after the fourth day of the disability up to a maximum of twenty-six (26) weeks, as long as the worker has contributed during the twelve months prior to the disability, and will be equivalent to sixty per cent (60%) of the quotable salary of the last six months when receiving ambulatory care and to forty per cent (40%) if assistance is provided in a hospital. Maternity subsidy: The affiliated worker will have the right to a maternity subsidy equivalent to three months of the quotable salary. To have the right to this benefit the affiliate must have contributed at least eight (8) months of the period of twelve (12) months prior to the date of childbirth and does not perform any type of remunerated work during that period. This benefit exonerates the employer from the obligation to pay a full salary referred to under Article 239 of the Labor Code.

Children young than one year of age of affiliated workers who receive a quotable salary lower than three (3) national minimum salaries will have the right to a nursing subsidy for a period of twelve (12) months.

We feel it is necessary to point out that the above-mentioned article of the Labor Code states that the maternity subsidy must be paid in equal parts, that is, 50% the employer and the remaining 50% by the social insurance.

3. Costs and Financing
The SFS of the Contributive Regime is based on a financial regime of simple distribution, based on a total contribution of ten per cent (10%) of quotable salary: three per cent (3.0%) to be paid by the employee and seven per cent (7.0%) by the employer, distributed in the following items as follows:

Nine point forty three per cent (9.43%) for people’s health care; Zero point ten per cent (0.10%) to cover nurseries; Zero point forty per cent (0.40%) for payment of subsidies; Zero point seven per cent (0.7%) for the operations of the Superintendence of Health and Occupational Hazard.

However, during the first five years as of the date the Health Family Insurance of the Contributive Regime becomes effective, its costs and contributions will be as follows:

Item

Year 1

Year 2

Year 3

Year 4

Year 5

Total

9.0%

9.5%

10.0%

10.0%

10.0%

Health Care of People

8.53%

9.03%

9.43%

9.43%

9.43%

Nurseries

0.10%

0.10%

0.10%

0.10%

0.10%

Subsidies

0.30%

0.30%

0.40%

0.40%

0.40%

Superintendence

0.07%

0.07%

0.07%

0.07%

0.07%

Distribution of Contribution

Affiliate

2.7%

2.85%

3.0%

3.0%

3.0%

Employer

6.3%

6.65%

7%

7%

7%

In accordance with Article 141 of the Law, as of the date of enforcement of the present law, double insurance contribution is to be eliminated. Therefore, a single affiliation system to the Dominican Social Security System (SDSS) is established, which can only be granted by the CNSS and will be valid throughout the country. Within a period not to exceed twenty-four (24) months as of the date of enforcement of the SFS, the CNSS will provide, for legal purposes, a social security identification card to substitute other existing ones.

With respect to the Subsidized Regime it will be financed with a contribution from the Dominican Government, charged to Public Expense Law. Its amount will be determined based on the number of people served, and the per capita cost of the basic health plan.

On the other hand, a maximum quotable salary has been established equivalent to ten (10) national minimum salaries. Workers, who provide services to two or more employers and/or receive income for independent activities, must declare said income in order to determine the quotable salary.

In addition, it has been established as an obligation of the employer to register the affiliate, to notify the real salaries or modifications, to withhold contributions and to submit same to the Social Security Treasury within the time established under the present law and its complementary norms. Without detriment to other sanctions that may correspond, the public or private employer is responsible for damages caused to the affiliate and his family, when due to non-compliance of the obligation to register him, to notify salaries and modifications to same, or making payments of the contributions to the corresponding agency, medical services are not provided, or when the amount of the subsidies to which they are entitled is reduced. The company manager or director of the institution will also be personally responsible.

Finally, for the financing of the contributive subsidized regime the new Social Security law establishes the obligation of the CNSS to determine, through studies, the distribution of the per capita cost of the Basic Health Plan between the worker and the Dominican Government, taking into account the actual contributive capacity of the various segments of self-employed workers, as well as resources available to the Dominican Government. The Executive Power, advised by the CNSS, will by decree establish the percentage of the contributions and its distribution.

Once the transition period is over, and with the objective of guaranteeing actual access to health services to the most vulnerable population, the Social Security Treasury will deliver to each ARS and the SNS a monthly allowance by multiplying local protected population by the cost of the basic health plan, charged to the item “Care of people’s health”.

4. Risk Administrators and National Health Insurance
The Law defines the National Health Insurance and the Health Risk Administrators (ARS) as public, private or mixed institutions, decentralized, with their own capital and legal status, authorized by the Superintendence of Health and Occupational Hazard to assume and administer the risk of providing the Basic Health Plan to a specified number of beneficiaries, through payment of a per capital amount previously established by the Social Security National Council, in accordance with the present law and its complementary norms. ARS must fulfill the following functions:

Assume the risk of guaranteeing beneficiaries quality, timely and satisfactory protection; Rationalize the cost of services achieving adequate levels of productivity and efficiency; Coordinate the network of PSS to maximize its analytical capacity; Contract and pay in a regular way the PSS; and Submit periodical reports to the Superintendence of Health and Occupational Hazard.

Concerning constitution of ARS and SNS the Law establishes that the following will be authorized to become such:

The Dominican Institute of Social Insurance (IDSS) duly provided with an independent and decentralized administration; Autonomous public institutions, profitable or non-profitable, created to administer health risks; Municipal, provincial or regional institutions created to administer health risks; Private institutions created to administer health risks; Mixed institutions created to administer health risks; Institutions formed by health professionals created to administer health risks under cooperatives methods or any other legal type, profitable or non-profitable; Institutions organized as Self-managed Health Insurance; Any other type devoted to health risk management and which comply with the requirements of the present law and its complementary norms.

As a transitory measure is has been determined to acknowledge and articulate health contract services, health insurance and self-managed insurance is authorized, profitable or non-profitable, registered at the Secretariat of State of Industry and Commerce at the time of promulgation of the present law. These will be able to operate as ARS without the need to comply with all requirements established, during the first two years of implementation of the present law, period during which must complete the requirements and request corresponding authorization to the Superintendence of Health and Occupational Hazard.

Minimum requirements to become accredited as an ARS) or an SNS: without detriment to the conditions set forth by the complementary norms, the ARS and the SNS must, at least, fulfill the following requirements:

Have legal status according to the laws of the Dominican Republic; Count on an administrative and financial organization capable of managing health risks under conditions of efficiency, competitiveness and economic stability; Organize an integral service network at the local level with subrogated units which adequately cover all benefits of the Basic Health Plan; Have guarantee insurance against extraordinary health contingencies and against affiliate’s claims, proportional to the number of beneficiaries, whose minimum amount will be established by the Superintendence of Health and Occupational Hazard; Have available a managerial information system and service record, compatible with the single information system, with capacity to formulate reports and statistics on a regular basis; Guarantee technical capacity to supervise affiliated PSS, regarding quality, timeliness and satisfaction of hired services, within the framework of the present law and its complementary norms; Periodically accredit minimum technical-financial stability level to be established by the Superintendence of Health and Occupational Hazard; Have a minimum operating capital paid in cash, proportionate to the beneficiary population, which will be set, revised and indexed by the Superintendence of Health and Occupational Hazard; Comply with any other requirements set forth by the Social Security National Council (CNSS) and/or the Superintendence of Health and Occupational Hazard.

The SNS and those institutions interested in operating as ARS must formally request the corresponding authorization to the Superintendence of Health and Occupational Hazard. Within a period not to exceed four (4) months as of the date of formal receipt of the accreditation request, the Superintendence will evaluate each request and establish merits of same, having to submit its decision in writing to those interested. If after the four (4) months period has expired an official response has not been received, it will be assumed approved as a matter of law.

On the other hand, both ARS and SNS must have the expressed authorization of the Superintendence of Health and Occupation Hazard to carry out any of the following actions:

Dissolution and liquidation; Merge with another institution; Sale of assets and/or patrimony; Reduction of capital and/or installed capacity; Modification of the bylaws.

When the SNS or an ARS, public, private or mixed, finds itself in a technical, financial or administrative situation which does not guarantee adequate functioning or it incurs in serious violations which could damage the interests of beneficiaries and/or affect social security policies and general objectives of the SDSS, the Superintendence of Health and Occupational Hazard may intervene and adopt corrective measures depending on the seriousness of the case.

Concerning the SNS the new Social Security Law appoints it as the public insurer responsible for managing health risks of affiliates indicated under Paragraph I of Article 31 of the law, which will have the following functions:

Guarantee affiliates quality, timely and satisfactory services; Administer health risks with efficiency, equity and effectiveness; Organize a national network of health service providers with decentralization criteria; Contract and pay health service providers in the way and conditions prescribed by the present law for the remaining ARS; Submit periodic reports to the CNSS and to the Superintendence of Health and Occupational Hazard about resources administration to guarantee its efficient and transparent use; The rest of the functions established for the ARS, stated above.

5. Health service providers
Health Service Providers (PSS) are physical persons legally empowered or public, private or mixed institutions, decentralized, with their own capital and legal status, devoted to providing ambulatory, diagnosis, hospitalization and surgical services accredited by the Secretariat of State of Public Health and Social Assistance (SESPAS) in accordance with the General Health Law. The following may become PSS of the Dominican Social Security System:

Governmental agencies providers of health services, accredited by SESPAS in accordance with the General Health Law; Autonomous public institutions which provide health services; Mixed societies providers of health services, owned by the State and managed by representatives of civil society, as long as they have an independent administration and have been accredited by SESPAS; Foundations and Non-Governmental Organizations (NGOs) which provide health services; Private companies providers of health services; Local agencies providers of health services, created in accordance with the laws of the country to offer services at the municipal or provincial level; Health sector professionals who hold an Exequatur under the conditions established by the Health General Law; and Any service institution, as long as it complies with the requirements to qualify as a health service provider, in accordance with the Health General Law.

Requirements to be accredited as a PSS will be established by SESPAS, in accordance with the Health General Law and complementary norms. Also, SESPAS will be responsible for the regulation of its activities and supervision.

6. Transformation and Development of the IDSS and SESPAS
In accordance with the provisions of the Social Security Law the actual Dominican Institute of Social Insurance (IDSS) will keep its legal status, capital, public tripartite character and will become a risk administrator and health service provider and occupational hazard institution, without the roles of direction, regulation and financing, which will be the exclusive responsibility of the State through the Social Security National Council (CNSS).

For a period of five (5) years as of the date the law was promulgated, the IDSS will preserve all private workers who sixty (60) days before the present law became effective, were only affiliated to the social insurance regime, plus their relatives. And for a period of two (2) years public employees or from autonomous and decentralized institutions will remain in the private insurance programs to which they were affiliated at least for sixty (60) days before the present law became effective and for as long as they wish.

In addition, the population to become affiliated as a consequence of the elimination of the exclusion limit and/or incorporation of new social segments will have the immediate option of subscribing to any of the existing ARS, public or private. Companies and workers who join for the first time will receive the same consideration.

With the objective of strengthening the public health network and to achieve adequate levels of quality, satisfaction, timeliness, efficiency and productivity during the transition period, the SESPAS and the IDSS must carry out reforms which among others include: remodeling and refurbishing of health institutions and construction and furnishing of attention centers in those geographical areas of greater unsatisfied demand; separation of monitoring, managing and supervision responsibilities from the functions of risk administration and provision of health services; and signing of management agreements between the SESPAS and/or the IDSS and the management, professional, technical and administrative staff of health institutions, granting financial, material and moral incentives to achieve population coverage goals and for results obtained in terms of quality, timeliness and satisfaction.

Finally, with the purpose of guaranteeing its normal operations and transformation into a more efficient, productive and sustainable institution, in case there is an operational deficit the Dominican Government will provide a monthly subsidy to the IDSS. This will come from the National Budget, will be temporary and decreasing in nature and will disappear at the end of the transition period. Under no circumstances will these resources come from the Dominican Social Security System (SDSS).

7. Contracting and Payment System
The following payments have been established by the Social Security Law:

Capitation payment: The Social Security Treasury will pay the SNS and all ARS, public and private, a fixed monthly fee per protected person by the administrator and provision of basic health plan services. Its amount will be determined by the CNSS, through actuarial calculations, it will be revised yearly under normal conditions and bi-annually in extraordinary cases. Subject to the above, when necessary technical conditions are developed; said Council may establish differential rates in terms of the individual risk of beneficiaries.

Payment to professionals and health service providers: The SNS and the ARS will make payments to health personnel to cover professional fees, as well as the other health providers, regularly within a period not to exceed ten calendar days after payment has been made to ARS, as long as these have been claimed according to the conditions and within the limits and procedures that to this effect will be established by the complementary norms.

Concerning the types of managing contracts, the Law has established that the Superintendence of Health and Occupational Hazard will regulate minimum conditions of contracts between ARS or the SNS and PSS, promoting ways of shared risks that foster mutually satisfying relationships

The Superintendence of Health and Occupational Hazard will promote and regulate contracting of professionals, technicians and administrative personnel, based on the following course of action:

1.Salary plus incentives to achieve goals, levels of quality, results and performance within the institutional standards established;

2.Professional rates plus incentives to achieve goals, levels of quality, results and performance within the institutional standards established.

Minimum rates for professional fees will be established and revised annually by a national professional fees committee, formed by seven (7) members distributed as follows: two Government representatives; one from the SNS; one from private ARS; two health professionals from corresponding specialized fields; and one affiliates representative. Resolutions adopted by this committee must be approved by the CNSS, which will establish complementary norms for its constitution and operations.

8. Superintendence of Health and Occupational Hazard
The new Social Security Law has created a Superintendence of Health and Occupational Hazard referring to it as a Government agency, autonomous, with its own capital and legal status, which, in the name and in representation of the Dominican Government will fully exercise the role of ensuring strict compliance of the present law and its complementary norms, to protect affiliates interests, to monitor financial stability of the SNS and the ARS, supervise timely payment to said ARS and from these to the PSS and contribute to strengthen the National Health System. It is empowered to hire, sue and be sued and will be monitored by the Comptroller General of the Republic and/or the Accounts Chamber, only concerning income and expenditure audits. A superintendent will preside the Superintendence of Health and Occupational Hazard, who will be appointed by decree of the Executive Power from a list of three submitted by the CNSS, and who will remain in his/her functions for a period of four (4) years.

Functions of the Superintendence of Health and Occupational Hazard will be as follows:

Supervise accurate application of the Law, the Health and Occupational Hazard Regulations, as well as the resolutions of the CNSS concerning ARS and the Superintendence itself; Authorize operations of the SNS and ARS; and keep an up-to-date record of same; Propose to the CNSS the cost of the basic health plan and its components; evaluate its health impact, review it periodically and make recommendations for updating of its amount and its contents; Supervise, control and evaluate operations of the SNS and the ARS; monitor them concerning financial and accounting soundness; constitution, maintenance, operation and use of the reserve fund and minimum capital; Request from the ARS and SNS submission of information regarding benefits and services, with the frequency it deems necessary; Order the audit of books, accounts, files, documents, accounting, collection and physical assets of the ARS, SNS and PSS contracted by these; Impose fines and sanctions on ARS and SNS, through well-documented resolutions, when they do not comply with the provisions of the present law and its complementary norms; Revoke the authorization and proceed to liquidate the ARS and SNS according to the provisions of the present law and its complementary norms; Act as conciliatory arbiter when disagreements arise between the ARS or the SNS and the PSS, whether these are health institutions and/or professionals, and establish, as a last resort, prices and rates for the basic health plan; Supervise the Social Security Treasury and the Social Security Collection and Computer Foundation (PRISS) regarding distribution of contributions to the Family Health Insurance and Occupational Hazard Insurance within the limits, distribution and norms established by the present law and its complementary norms; Propose to the CNSS regulation of issues not foreseen concerning Health Family Insurance and Occupational Hazard Insurance; Submit to the consideration of the CNSS all initiatives necessary oriented towards guaranteeing development and financial balance of the system, quality of benefits and users satisfaction, financial stability of the SNS and ARS, and affiliates free choice.

9. Violations and Sanctions
The new Social Security Law considers violations, any non-compliance due to action or omission of the obligations established by same and its complementary norms, as well as punishable conducts consigned under same. Each violation will be handled independently even though they may have a common origin. Employers and ARS will be held responsible for the violations committed by their dependents in the exercise of their functions. The power to impose a sanction expires after three years, counted as of the date the deed was committed and action to enforce sanctions prescribes after five years, as of the date of the sentence or resolution.

In accordance with the terms of the law, punishable with remedial imprisonment and sanctions will be:

The employer who does not register or does not affiliate one or several of his employees, within the terms established by the present law and its complementary norms; or that does not provide true and complete information or that does not inform on a timely basis of the changes and recent events of the company related to contributions; The employer who does not pay contributions within the terms established by the present law and its complementary norm; or that turned out to be the author or accomplice of false registrations or statements which result in undue benefits; Any individual or company who alters documents or credentials granted by the CNSS, with the purpose of inducing enjoyment of undue benefits; The worker who provides false or incomplete information concerning his dependents which originate or may originate undue granting of services and/or economic benefits; The ARS or the SNS which unjustifiably delays benefits set forth under the present law and its complementary norms to one or several beneficiaries. Recurrence of this violation will result in the cancellation on the part of the Superintendence of Health and Occupational Hazard of the authorization to operate as such; The (ARS) or the SNS which does not report to the Superintendence of Health and Occupational Hazard information established by the present law and its complementary norms in the terms and conditions established by the regulations; The ARS or the SNS which delays payments to subrogated providers despite having received payment on time; The PSS who turns out to be an accomplice or author of false diagnosis and medical-surgical procedures, or that originates or may originate wrongful economic benefits; The ARS or the SNS and/or the PSS that discriminate against any affiliate due to reasons of age, gender, social status or any other feature that harms his human condition in accordance with the Constitution of the Republic, the present law and its complementary norms; The ARS, SNS and/or PSS that does not pay or is late with payments of professional fees within the terms and procedures established by the present law and its complementary norms.

The public or private employer who incurs in any of the violations stated above must pay a surcharge of five per cent (5%) per month, cumulative, of the amount involved in the wrongful withholding. The SNS and the ARS which incurs in any of the violations stated herein and its complementary norms must pay a fine of not less than fifty (50) times, nor greater than two hundred (200) times, the national minimum salary. Recurrence and repetition of a violation will be considered as aggravation, in which case the sanction will be fifty per cent (50%) higher. Those responsible for serious violations may be object of civic degradation and imprisonment from thirty (30) days to one (1) year. The CNSS will determine the seriousness of each violation as well as the amount of the penalty within the limits envisaged under this article. Collection of mandatory contributions, as well as commissions on surcharges, fines and interests owed by the employer will enjoy the privileges granted by the Civil Code and Commerce Code. The amount of surcharges will be credited to subsidies.

In the case of the PSS when one of them infringes any of the literals h), i) or j) and conciliation foreseen under Article 178 does not take place, the PSS must pay a fine of not less than 50 times, nor greater than 200 times the national minimum salary, once this violation is established by a common law court.

On the other hand, when an ARS does not make corresponding payment to a professional and/or a PSS it must pay a five per cent (5%) surcharge per month or fraction, cumulative, in benefit of the affected PSS.

The Superintendence of Health and Occupational Hazard will have full powers to determine violations and impose penalties in accordance with the present law and its complementary norms. Said norms will establish each one of the violations and corresponding penalties. Employers, the ARS, the SNS and PS will have the right to appeal before the CNSS the decisions and penalties imposed by the Superintendence of Health and Occupational Hazard, without this implying under any circumstances suspension of same.

E. Occupational Hazard Insurance
1. Objective and Policies
In accordance with the terms of the Social Security Law the purpose of the Occupational Hazard Insurance is to prevent and cover damages caused by accidents and/or professional illnesses. It includes all bodily injuries and all morbid states endured by the worker in the course or as a consequence of the work carried out for someone else. It includes treatment for traffic accidents during working hours and/or on the way to and from work. The Secretariat of State of Labor has been made responsible by the Law to develop a national policy on prevention of work related accidents and professional illnesses, taking into account worker safety, economic situation of companies and predominant educational and cultural factors. Employing companies and institutions will be obligated to implement the basic prevention measures to be established by the Secretariat of State of Labor and/or the Security and Hygiene Committee, remaining the Superintendence of Health and Occupational Hazard empowered to impose sanctions established under the law.

2. Beneficiaries and Benefits
The Law considers beneficiaries of the Occupational Hazard Insurance the following:

The affiliate; In the case of survival pension the affiliate’s or retired person’s spouse, or in his/her absence, the life companion, with whom marital life has been shared during the three years prior to registration, or have procreated children, as long as neither one has a legal impediment to get married; Affiliate’s children younger than 18 years; Affiliate’s children under 21 years who are students; Disabled children, regardless of age, who depend on the affiliate or the retired person.

Risks covered by the Occupational Hazard Insurance include the following:

All bodily injury and morbid state suffered by the worker or trainee as a consequence of the work performed; Injuries to the worker while working and at work, unless there is evidence to the contrary; Work accidents connected or caused as a consequence of the work requested by the employer, even those which were different from the professional category of the worker; Accidents occurred during rescue missions and similar, when they are connected to the work; Traffic accidents within the route and normal working hours; Illnesses whose direct cause is originated from exercising the profession or work carried out by a person which results in disability or death;

Excluded from occupational hazards are those caused by state of drunkenness or under the influence of any psychotropic, narcotics, or enervating drug, except by medical prescription; resulting from intentional damage of the worker himself, or in agreement with another person or the employer; force majeure foreign to the work; traffic accidents away from the route to work and normal working hours; and when damages are caused by deceit or reckless negligence of the worker victim of the accident.

Regarding benefits guaranteed by the Occupational Hazard Insurance the Law envisages the following:

Medical attention and odontological services; Prosthesis, glasses and orthopedic equipment and its repair; Temporary disability subsidy, when the work risk would have caused a temporary disability to work according to that set forth in the Labor Code; Disability indemnity.

DISABILITY PENSION
For the purposes of calculating pensions and indemnities of the Occupational Hazard Insurance basic salary will be the average obtained from remuneration subject to contribution during the last six months prior to the accident and/or professional illness. If the person had not contributed during that period, an average of the months contributed during same will be calculated. Complementary norms will establish corresponding indemnities.

3. Financing, Cost and Quotable Salary
FINANCING, COST AND QUOTABLE SALARY
The Occupational Hazard Insurance will be financed with an average contribution of one point two per cent (1.2%) of quotable salary, to be paid exclusively by the employer. Total contribution of the employer will have two components:

A fixed basic quota of one per cent (1.0%), of uniform application to all employers; and An additional variable quota of up to zero point six per cent (0.6%), established according to the type of activity and the risk of each company. In both cases, said percentages will be applied over the amount of quotable salary.

The Law envisages the possibility of reducing the rate of additional contributions as an incentive for performance in favor of the companies or institutions which demonstrate that they have taken preventive measures to reduce risks of accidents and professional illnesses. Accidents occurred in the route to work will not be taken into account to calculate accident rate of the companies and employers. Complementary norms will determine the degree of accident rates and the corresponding additional quota.

The financial regime of the occupational hazard insurance will be of distribution and should guarantee a financial reserve of not less than two point zero per cent (2.0%), nor greater than five point zero per cent (5.0%) of contributions destined to cover special contingencies.

The Law establishes that the employer has the obligation to register the affiliate, notify real salaries and changes and submit contributions to the corresponding agency, within the time established by the law. The CNSS will determine the agency responsible for the administrative collection of all contributions, surcharges, fines and interest wrongfully withheld by the employer. Once administrative means are exhausted without results, said agency may resort to coercive procedures established by the laws of the Dominican Republic.

Notwithstanding other corresponding penalties, the employer is responsible for damages caused to the affiliate when due to non-compliance of the obligations mentioned above the benefits were not granted by the Occupational Hazard Insurance, or when the amount of subsidy to which he is entitled were reduced.

Also, the owner of the work, company or task, will be considered collaterally responsible for any obligation that, regarding affiliation and contributions, affect his contractors with respect to the workers. The same responsibility will affect the contractor regarding obligations of his subcontractors.

The employer that wrongfully withholds mandatory contributions of one or more workers under his dependency must pay a surcharge of five per cent (5%) per month during the period of wrongful withholding. In addition to stated penalties, delay in payment and/or incomplete payment will result in legal action on the part of the Superintendence of Health and Occupational Hazard.

Finally, the Law establishes that the right to claim enjoyment of the benefits established by the Occupational Hazard Insurance prescribes after five (5) years, counted as of the following day in which the event that gave place to the fact causing the benefit in question took place. Prescription is interrupted by ordinary causes established by the Civil Code and also by submission of the administrative case or corresponding administrative claim, according to the methods to be established by the complementary norms.

Finally to have a clearer idea of the economic impact that the new Social Security Law will have both on employees as well as employers, following is a comparative chart of the costs of the new law vs. previous ones 1896 and 385 complemented the latter by decree 76-99.

Dominican Republic Continues Efforts To Encourage American Investment
Ricardo A. Pellerano

INTRODUCTION
The Dominican Republic has a wide range of business opportunities for United States-based companies, including in tourism, ecotourism, mining, transportation, energy, agriculture, technology, electronics and telecommunications. Indeed, over the past decade, a wide range of new laws and initiatives enacted by the Dominican government has led numerous American corporations to successfully begin operating in the Dominican Republic.

Recently, in fact, a number of American health, finance, and banking companies have discovered -- and have begun to fill -- an interesting business niche resulting from a new law that many Dominicans had believed affected only Dominican workers.

The law creates a Dominican Social Security System. Recognizing an opportunity, American companies have established affiliates to handle the medical, insurance and pension issues arising from the new law. The relative ease with which these U.S. businesses entered a new market, in a new field, in the Dominican Republic illustrates the value that the country places on attracting U.S. and other foreign investment.

SOCIAL SECURITY LAW
The new social security law regulates the rights and duties of the Dominican government and its citizens with respect to the financing necessary to protect workers against the risks of old age, disability, old-age severance, survivorship, illness, maternity, infancy and occupational hazards.

In particular, the social security system offers three types of insurance. These are:

Old Age, Disability, and Survivorship: to compensate for the loss or reduction of income for old age, death, disability, old age severance, and survivorship. Family Health Insurance: aimed at protecting the integral physical and mental health of workers and their families. Occupational Hazard Insurance: intended to prevent and provide coverage for accidents occurring in the workplace and occupational diseases.

The "Social Solidarity Fund" has multiple purposes. For example, the fund is intended to ensure that every person in the system enjoys a pension at the end of his or her working life, in cases where for one reason or another the person's individual account does not have enough funds. It also is intended to ensure that those individuals most in need, who for some reason do not have a job or any other income source, can receive the necessary benefits from the system provided for the rest of the country's citizens.

ENTITIES OPERATING IN THE SYSTEM
The law creating the social security system mandates several bodies to operate within the system. These institutions are required to manage, regulate, finance, and monitor the system; another group has obligations relating to risk management and service delivery. The functions of managing, regulating, financing, and monitoring are carried out, basically, by the following institutions:

National Council of Social Security (CNSS); Social Security Treasury; Pension Superintendency; and Health and Occupational Hazard Superintendency.

The following institutions operate within the system with the functions of risk management and service delivery:

Pension Fund Administrators (AFP); Health Risk Administrators (ARS); Health Service Providers (PSS); Public Pension Fund Administrators; National Health Insurance (SNS); Dominican Institute of Social Security (IDSS); State Secretariat of Public Health and Social Assistance (SESPAS); National Council for the Elderly; National Council of Child-Care Facilities; and Pension and insurance funds instituted by special laws for specific sectors or created through agreement between private institutions (associations, clubs, foundations, enterprises, and others).

Some of these institutions are public entities while others are privately owned. The system also permits the existence of mixed entities: public and private at the same time. These entities may operate as stock companies or as non-profit organizations, but in every case, to operate within the system they have to be authorized in conformity with the provisions of the law.

GOVERNING PRINCIPLE
The social security law contains several important governing principles. These include:

Universality: requiring that the social security system protect all Dominicans and every resident of the country. Freedom of choice: individuals have the right to choose any accredited manager and provider of services, as well as to change it when they consider it convenient, in accordance with the conditions established in the law. Mandatory participation: all citizens and employers must participate in the social security system, whether they have two or more jobs or emigrate out of the country.

Every Dominican citizen has the right and the duty to choose an AFP, an ARS, or a PSS, as determined in his or her own discretion. No one may affiliate with more than one AFP or ARS, even in the case of a person serving more than one employer or performing other productive activities. With respect to the contribution system, if a worker does not affiliate within the given period stated by law, the worker's employer must register the employee in the AFP and in the ARS to which the majority of its employees have registered.

Individuals have the right to receive information every six months on the status of their individual account, stating clearly the contributions made, variations of account balance, profitability of the fund, and commissions charged. Every individual is to be assigned an identification number.

It should be noted that contributions to social security and to the reserves and profits of the investment generated from pension funds are exempt from taxes.

CONTRIBUTION BASIS
The law also contains a formula for determining the amount of contributions that must be made by employees and their employers. The Social Security Treasury is in charge of the collection, distribution, and payment process. For this task, the Social Security Treasury is assisted by the Social Security Collection and Computing Board (PRISS), which in turn controls the Consolidated Affiliation and Information System. The process is as follows:

Companies act as retention agents of the workers' applicable wages. They submit contributions within the first three working days of each month to one of the entities accredited to receive such contributions; The CNSS, together with the Consolidated Affiliation System, authorizes the national banking system and other selected and authorized entities to act as collectors of contributions for the companies as well as for the self-employed workers; After receiving the contributions, in the following two working days, the Treasury will transfer the payment to the AFPs, in the respective entries of Personal Account, Life Insurance, and AFP's Commission; The AFPs apply the resources to the Personal Accounts; The AFPs then invest the resources; and Within the same period, the Treasury transfers to the public AFP the "Social Solidarity Fund" entry into an account opened to that effect.

HEALTH INSURANCE BENEFITS
The social security system pays health insurance benefits in one of two ways: in kind, or in money. The basic health plan provides primary health care including coverage for emergencies, specialized care and complex treatments; hospitalization; surgical assistance; diagnostic tests; dental care; and ambulatory pharmaceutical pay (the beneficiary must only contribute 30 percent of the consumer price).

In the case of a non-occupational disease, if the individual has been contributing for 12 months, the social security system begins payments on the fourth day up to the 26th week of an amount equal to 60 percent of the applicable wages for the preceding six months if provided ambulatory assistance, and 40 percent if hospitalized. The law also contains a maternity grant, equal to three months of applicable wages, so long as the individual contributed during at least eight of the 12 months prior to the birth date. This grant exempts the employer from the full wage payment established by Article 239 of the Dominican Labor Code.

The new Social Security Law also provides two types of pensions from which individuals can select at the time of their retirement. The first is a pension under a planned retirement, keeping his or her funds with the AFP, in which case the individual preserves ownership of those funds and takes the risk of longevity and future profitability. The second is a pension under a life annuity plan, in which case the individual yields full ownership of his or her personal account to the insurance company and in exchange the insurance company assumes the longevity risk and profitability, guaranteeing the individual the life annuity agreed upon. Insurance companies offering these services must be duly authorized and audited by the government's Pension Department in coordination with the Insurance Department.

NONCOMPLIANCE
Employers that fail to meet their obligations under the law risk a fine and or imprisonment. They therefore recognize the necessity for appropriate advice to comply with the rules. It is clear that significant opportunities exist for American companies skilled in handling these matters