Fondo de Asistencia Laboral: What you need to know

The employer must choose an entity authorised by the Comisión Nacional de Valores (CNV - National Securities Commission) and arrange the opening of the Cuenta Individual del Empleador (Employer’s Individual Account). The authorised entity will assign a unique identifier known as the ID FAL, which the employer must report to ARCA so that it can redirect the corresponding contributions to the Labour Assistance Fund.

The CNV will determine the information that must be associated with each ID FAL, but each ID FAL must include at least the Tax Identification Number (CUIT), the details of the collective investment vehicle account and the validity period of such vehicle. Also, the CNV will maintain the register of Authorised Entities and authorised collective investment vehicles.

Mandatory and/or voluntary contributions, returns, interest, investment income and amounts credited to the employer through the use of the Fund are exempt from Income Tax and are not subject to Value Added Tax (VAT), as are the results generated as a consequence of transformations experienced by the Fund due to corporate reorganisations.

Contributions made by employers to the Fund will be deductible for Income Tax purposes, whereas compensation payments made to employees using FAL resources will not give rise to a tax deduction for the employer.

Fees charged by the Authorised Entity and any other participating party are subject to both Income Tax and VAT. Amounts received by employees upon termination of employment are exempt from VAT, but will receive the treatment established for Income Tax purposes.

Accounts used exclusively by mutual investment funds and financial trusts through which Labour Assistance Funds are implemented, as well as credits and debits arising from subscriptions and redemptions of fund units and similar transactions, shall be exempt from the Tax on Bank Debits and Credits.

Authorised Entities may not charge more than 1% annually, calculated on the total assets under management, as a fee for their services. This fee may accrue and be charged to the mutual investment fund or financial trust at the frequency determined by the National Securities Commission (CNV).

Large companies will contribute to the fund an amount equivalent to 1% of the remuneration used as the basis for calculating employer contributions to the Sistema Integrado Previsional Argentino (SIPA - Argentine Integrated Pension System) for each employee. Micro, Small and Medium-sized Enterprises (MiPyMEs) and non-profit organisations registered with ARCA will contribute 2.5% per month.

The Agencia de Recaudación y Control Aduanero (ARCA - Customs Revenue and Control Agency) will act as the remittance agent, ensuring integration into the Contribución Unificada de la Seguridad Social (CUSS - Unified Social Security Contribution) and channelling the amounts to the employer’s corresponding ID FAL.

The FAL contribution rate is deducted from the employer’s payroll contributions to the social security subsystems. “The contribution to the FAL is not added to the social security charges already paid by the employer; rather, it is taken from the social security contribution rate,” explains Verón. “The contribution is part of the employer’s contribution burden and therefore does not represent an additional net cost for the employer.”

The reduction is not cumulative across periods and will not generate credits for refund or offset. Nor does it affect the additional rates established under differential and/or special pension schemes. Likewise, it shall not apply during periods in which the employer’s obligation to contribute to the Labour Assistance Fund has been suspended or interrupted, nor in the case of employees incorporated under the Régimen de Incentivo a la Formalización Laboral (RIFL - Labour Formalisation Incentive Regime).

The fund must guarantee full coverage of severance obligations, even under reasonable adverse scenarios involving simultaneous terminations, and shall be governed by the principles of sufficiency, liquidity and prudent diversification. The Secretariat of Labour, Employment and Social Security of the Ministry of Human Capital and the Secretariat of Finance of the Ministry of Economy will establish and periodically review the parameters used to determine such coverage.

The National Securities Commission (CNV) and the Customs Revenue and Control Agency (ARCA) shall provide the Secretariats with technical reports relating to investment vehicles and payroll and declared remuneration data, respectively, for the proper determination of the minimum coverage.

The regulation clarifies that FAL coverage is limited to the amounts corresponding to effectively registered data. “If the employer incorrectly registered the employment relationship, whether by declaring a salary lower than the actual one, recording a later employment commencement date than the true date or declaring fewer working hours, the Fund will only provide capital based on the data appearing in the records,” explains Verón. “However, the employee does not lose the right to claim the difference, and the employer remains responsible for unpaid wage and any applicable penalties.”

If the FAL is implemented through a financial trust, trustees must implement operational continuity mechanisms at least 24 months before expiry, contemplating either renewal or the migration and transfer of assets to another vehicle.

The employer may request that the Authorised Entity migrate the accumulated resources to another collective investment vehicle authorised by the CNV. Such migration may occur provided that there are no outstanding payment obligations, that the transfer is carried out in accordance with the criteria established by the CNV and that ARCA is notified of the transfer of funds to another instrument.

In the event of cessation, dissolution, liquidation or bankruptcy of the employer, the FAL account shall be terminated and, where applicable, any remaining resources shall be transferred to the employer, unless otherwise ordered by judicial measures.

In cases of transfer of an undertaking, employee assignment or corporate reorganisations, FAL funds shall be transferred to the new employer in proportion to the percentage of employees transferred or assigned.