Congress seeks to authorize a new 100% CTS withdrawal until 2025: what is the project about?

A new bill that proposes the disbursement of up to 100% of the Compensation for Time of Service (CTS) entered the documentary process of the Congress of the Republic. This time, the author of the legislative initiative is parliamentarian Segundo Montalvo, from the Peru Libre bench, who intends that the deadline for this withdrawal be until December 31, 2025.

Let us remember that December 31 of last year was the last day that Peruvians had the possibility of using 100% of their CTS, after the approval of a rule in the Legislative Branch during the COVID-19 pandemic. Below, learn about the main scope of this bill and other details.

Congress seeks to release the CTS until 2025: what is it about?

The congressman of Peru Libre, Segundo Montalvo, presented last Wednesday, February 21, Bill No. 7089/2023-CR that seeks to authorize workers, exceptionally, to withdraw 100% of CTS deposits until December 31, 2025. According to the initiative, its central objective is for them to be able to solve the increase in the family basket caused by inflation, recession and low economic growth in Peru.

“The State has the obligation to provide the population with the resources so that they can face the inflation, recession and low economic growth that our country is going through, especially if it is taken into account that the Compensation for Time of Service is for the workers themselves” , reads the explanatory statement.

Likewise, article 2 of the proposed law indicates that the beneficiaries will be the workers included within the scope of the Single Ordered Text of Legislative Decree 650, Law on Compensation for Time of Service. In its final complementary provision, it is specified that the Executive Branch will be responsible for issuing the necessary regulatory provisions, within a maximum period of 10 days from the entry into force of the norm.

It is worth mentioning that there is a similar project that was presented by Congressman Luis Aragón, from Acción Popular, in October of last year. This proposal seeks to authorize workers to pay 100% of the CTS until 2025 and withdraw up to 4 UIT from their private pension funds.

What does the opinion of the Labor Commission consist of to withdraw 100% of the CTS?

The Labor and Social Security Commission has ready a opinion that was approved by a majority on Tuesday, November 7, 2023, which proposes extending the validity of the CTS withdrawal until December 31, 2024. This proposal accumulates Bills No. 5009-22-CR, 5185-22-CR and 5311-22-CR of parliamentarians Jorge Flores, Alejandro Soto and Flavio Cruz.

In this regard, the Ministry of Labor and Employment Promotion and the Superintendence of Banking, Insurance and AFP (SBS) have been against the ruling because it would be distorting the objective of this employment benefit; since it is a precautionary mechanism in the event of any contingency situation resulting from layoffs or termination. This bill is ready for debate in the Plenary Session of Congress, whose legislature restarts in March.

When will you make the next CTS deposit?

According to the National Superintendency of Labor Supervision (Sunafil), the CTS is paid within the first 15 days in the months of May and November. That is to say, Companies have until May 15 of this year to make this depositwhose semester period is as follows:

• From November 1 to April 30: May deposit
• From May 1 to October 31: November deposit.

What is CTS?

Compensation for Time of Service (CTS) is a labor benefit that companies grant to workers to protect them when their contractual relationship with the employer ends. In that sense, the CTS is designed as a savings fund for situations in which people become unemployed.

It must be taken into account that CTS deposits are made twice a year: the first payment is in May and the second, in November. In this regard, the amount assigned varies according to the labor regime of the company in which one works.