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Doing Business in Mexico 2015

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93 Doing Business in Mexico 2015 Pensions Old-age pensions, as well as those for disability, have been increased in recent years. The pensions are normally payable from age 65 if the person has paid social security premiums for the required minimum of 1,250 weeks. Early retirement at reduced rates of pension can be taken from age 60. There are minimum guaranty pensions equal to the monthly minimum salaries. Currently employees can qualify for one of two different pensions. Employees who began working after July 1, 1997 receive their pension through AFORE; employees who started working before that date can receive their pensions through AFORE or through the traditional system. Retirement Savings System (SAR) and Old Age In order to supplement retirement pensions under the regular social security system, which have been deemed insufficient to provide adequate retirement benefits, a Retirement Savings System is established. The employer's contribution per employee is 2% of salary, with a wage ceiling of 25 times the minimum wage for Mexico City. The Old Age system includes an additional contribution per employee of 3.15% of salary. These employer contributions will be credited to individual employees' restricted interest-bearing bank accounts established specifically for this purpose. The funds so accumulated over the years may be withdrawn, under certain rules, only upon retirement or unemployment due to disability and will be partially or totally exempt upon withdrawal, together with any other retirement payments received from the employer, following the general rule for taxation of pensions payments (i.e., pensions are taxable only to the extent that they exceed nine times the minimum wage). Employees may elect a company authorized to manage the fund (Individual account) for the Retirement Savings System (Administradora de Fondos para el Retiro—AFORE). Totalization agreements Except for Spain and Canada, Mexico has not subscribed to totalization agreements with other countries. Additionally, whenever an employer sends an employee overseas (for training, exchange programs, scholarship programs, etc.), the Mexican employer is still required to cover the assignees' medical expenses and to not suspend them from any pension or other benefit programs in which they have a vested right. Housing On May 1, 1972 the National Workers' Housing Fund Institute (INFONAVIT) was inaugurated under the terms of amendments to the federal labor law and a law establishing the Institute. Obligations of employers The Mexican Constitution provides that all agricultural, industrial, mining, and other enterprises of whatever nature are required to provide adequate housing for their employees; this obligation must be fulfilled by means of contributions in the name of the individual employee. In accordance with the law, employers are required to contribute to the Institute amounts equal to 5% of the earnings of their employees, calculated on the same basis as for social security purposes. Foreign employees of Mexican companies working in Mexico are also entitled to the housing contributions. 10

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