Operate contribution reconciliation with a view to retirement
By now, the reality of work is far from being identified with a single activity professed all one's life. Nowadays, in fact, it is very easy for an individual to change occupations frequently. Not only that, it is not uncommon for him to move from one company to another, not to mention from one country to another.
At the time of retirement, however, it can be complicated to want to collect all the contributions made during one's career. These, in fact, may be scattered across different institutions and/or funds.
In the following article we provide an overview of contribution reconciliation, that is, how this tool for collecting contributions works.
Reconciliation of contributions: what it is.
Also known as onerous reconciliation of contributions, contribution reconciliation actually consists of an institution that allows the reconciliation of insurance periods and the subsequent transfer of all contributions paid during them at different institutions and/or funds into a single social security management.
The purpose of contribution reconciliation is to derive a single old-age pension to jobs that have paid contributions to different managements.
Operation
Introduced by Law No. 29 of 1979, contribution reconciliation basically involves moving all contributions accrued elsewhere during a working career to a single institution. The latter institution will consider the contributions as if they had always been paid into its coffers, in order to materialize the pension entitlement of the worker requesting the reconciliation.
In the reconciliation of contributions, the pension will be calculated according to the management rules of the institution with which the application is made.
Alternatives
Contribution reconciliation is not the only procedure for recovering and unifying contribution periods and related contributions paid elsewhere. There are, in fact, alternatives to it:
- Free cumulation, defined by Inps Circular No. 140/2017, through which the unification of contributions occurs free of charge and allows immediate retirement.
Unlike reconciliation, this procedure requires each management to calculate the pension share with regard to the contributions made at its location. This means that each management will perform the calculations according to its own rules.
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Totalization: a similarly free process, which does, however, involve a one-and-a-half year wait to be eligible for retirement.
Contributions paid abroad?
How to redeem periods of work abroad? Is it possible?
The answer is yes: if the work experience took place in a member country of the European Union, thanks to international cooperation agreements. In this case, it is only necessary to submit an application for reconciliation of contributions to the Inps, which will take care of getting in touch with foreign social security institutions.
In the case of occupations carried out in non-EU countries, it is necessary to inquire in advance with the Inps, whether there are any international agreements in force with these countries.
The process of recovery and unification of contributions paid in foreign countries other than Italy is called totalization.
Filing an application to reconcile contributions
What are the coordinates for submitting an application to reconcile contributions? Let's look at them together.
→ Who. All workers who have had careers without continuity are eligible to apply for contribution reconciliation. This means, where there are fragmented careers with contributions paid into different social security schemes.
In fact, at the time of retirement, these professional individuals will incur the need to implement a process of reunification of contributions paid into different social security schemes during their working careers.
→ What: The subject of contribution reunification can be all contributions paid. This means that contributions in any capacity within the category of mandatory contributions are considered valid. But not only that, voluntary contributions (for example, in the case of freelancers) and notional contributions are also considered.
→ Where. The application must be filed with the social security institution, where you intend to make the transfer of contributions.
→ When? There is no time limit for submitting the application: there is no deadline: the application can be submitted at any time.
→ How many times? An application for reconciliation can be submitted only once during the insurance life.
Exception: it is also possible to submit a second one in case it affects the same management as the previous application. It is also possible in case it concerns a different management than the first application, provided that at least 10 years have passed since the previous application.
Conditions
There are special conditions necessary to be eligible for contribution reconciliation:
- The main sine qua non is that the applicant must not have used the contributions in question for the settlement of a direct pension;
- Another constraint is that, in the case of reconciliation in funds other than the Employees' Pension Fund (Fpld), the applicant can only make the reconciliation in the management in which he or she is enrolled at the time of the application;
- In case the management is different from the one of enrollment, there is a requirement of the existence of at least eight years of contributions;
- In the same case as the previous one, the constraint of at least five years of contributions applies. This is in the case of payments to the Inps Fdlp in the period immediately preceding the date of application.
Economic burdens associated with reconciliation
How much does it cost to make a reconciliation of contributions?
Reconciliation of contributions is also called onerous because, unlike totalization and accumulation, it is an onerous practice. This means that it involves economic charges. It was, in fact, free of charge until July 30, 2010, while it became onerous with conversion law 122/2010.
The economic charges involved are:
A sum equal to 50 percent of the difference between the reconciliation charge and the amount of contributions transferred, to which must be added the annual interest rate of 4.5 percent.
From what has just been seen, the economic charges associated with reconciliation depend strictly on:
- Reconciliation charge,
- Time placement of contributions,
- Gestures in which the periods subject to reconciliation are placed.
→ In the case of seniority, the calculation is made by mathematical reserve, that is, by multiplying the pension benefit obtained from the operation by actuarial coefficients specified by law. These are variable depending on the management, age, sex, and contribution years of the person concerned.
→ If the periods subject to reconciliation involve the contributory system, the economic burden should be calculated by taking into account the corresponding contribution rate. This means that the calculation is to be made by multiplying the salary subject to compulsory contribution for the year preceding the year in which the application is submitted by the contribution rate provided by the management in which the reconciliation is requested. The charge should, then, be related to the period to be rejoined.
☝ To obtain a statement of the amount of the economic burden associated with the reconciliation of contributions, the Inps provides a calculation simulator.
The amount due and the method of payment, however, are communicated in the acceptance letter from the social security institution with which the application for reconciliation was filed.
Warning. You do not have to make the reconciliation once you receive the acceptance letter, nor do you incur penalties if you do not complete the process. In fact, if payment does not take place, the reunification simply does not take place.
Free reconciliation
The reconciliation of contributions is noncharging, hence free, only in one case. This arises if the applicant is a civil servant and was formerly professionally active with a state agency, which has since been closed.
He, therefore, must have been relocated to another state agency, which has provided his Inps contributions.
Limitations on free reconciliation
As of Jan. 1, 2021, changes came into effect in relation to the requirements for access to noncompensatory reunification. In fact, a note dated 04/27/2020 from the Ministry of Labor and Social Policy introduced some changes to the Redemption and Reconciliation Regulations. These provide that:
- Free reconciliation for work periods prior to the year 2013 is possible if applicants have accrued at least 15 years of seniority of registration and contributions to Inarcassa;
- Specific parameters have been introduced for the calculation of the pension share with reference to periods unified through the contributory method. The purpose is to take into account higher charges resulting from the reversibility of survivor treatment.
Reconciliation of contributions: is it convenient?
Reconciliation of contributions is an onerous practice, which presupposes, therefore, certain expenses. However, it turns out to be convenient in specific situations.
Reconciliation of contributions can, for example, be advantageous for workers who collect rather high salaries at the end of their careers. The latter, in fact, will benefit from the calculation rules.
In addition, with accumulation and totalization, the reference retirement age is the highest among all managements. In contrast, in reconciliation, there is the possibility of choosing the fund where to apply. This implies the possibility of choosing the management according to the rules most convenient for the applicant.
Article translated from Italian