On July 8, 2025, the National Insurance Superintendency (“SSN”) issued Resolution 347/2025 (the “Resolution”), establishing guidelines for Employment Termination Insurance, modernizing the labor termination framework within the scope of Collective Labor Agreements.
The Employment Termination Insurance system is an optional alternative regime that may replace severance pay for seniority, as well as any other indemnity items calculated based on that indemnity, through early capitalization mechanisms, subject to the terms of collective bargaining. It may be offered as a group life insurance with savings or as a group retirement insurance.
The Resolution introduces a scheme that contemplates the existence of several accounts associated with each policy, regulating their operation as follows:
- Special account per employee: Funded by the employer’s contributions as premiums corresponding to each worker. This account does not grant immediate rights to the employee, as the funds are automatically transferred to the insured’s individual account only when labor termination or another qualifying event provided in the collective agreement occurs.
- Individual account of the insured: Receives the funds transferred from the special account once the triggering event for the benefit has occurred. It may also receive voluntary contributions from the worker, if the policy allows. The balance of this account remains at the insured’s free disposal.
- Collective account: Gathers funds that have not been transferred to individual accounts and possible additional employer contributions, which may be allocated to the payment of future premiums.
The policy must clearly detail the mechanisms for crediting and debiting funds in each account, the composition of the fluctuation fund, and the procedure for transferring funds to the insured’s individual account.
If the possibility of recovering employer contributions in cases such as terminations without a triggering event or excess contributions is not provided, this limitation must be expressly stated at the time of contracting the insurance and have the company’s written acceptance.
The policy may be transferred to other insurers by the employer without this implying the automatic conversion of special accounts into individual accounts.
Coverage and Conditions:
The Resolution requires precise definitions of the causes of termination that enable payment of the benefit, as well as the insured sums and requirements for their collection. In the event of the insured’s death, the beneficiaries will be the legal heirs established by the Labor Contract Law.
Other regulated issues:
- Early termination of the policy is restricted during the first 12 months.
- There is an obligation to provide clear and periodic information to the insured.
- Insured persons are guaranteed participation in at least 70% of the gross return of the fund.
- Insurers will be liable only up to the maximum coverage amount provided by the policy.
Insurers wishing to offer this type of Employment Termination Insurance must submit their plan to the SSN in accordance with the General Regulation of Insurance Activity, following the procedures already established for life and retirement insurance.
The Resolution came into effect on July 10, 2025.
