In Circular no. 82 of 22 September 2023, the Italian National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’) provided practice notes on the incentive to postpone retirement, introduced by Article 1, paragraph 286, of Italian Law no. 197 of 29 December 2022, (hereinafter, also the “2023 Budget Law”) for employees who meet the conditions to access “flexible early retirement” (so-called “Quota 103”). These conditions require that the employee is at least 62 and has a minimum contribution period of 41 years. The implementation procedures for the incentive were established by decree of the Ministry of Labour and Social Policy of 21 March 2023 (hereinafter, “Implementing Decree”), published in the Italian Official Gazette no. 110 of 12 May 2023.
In particular, in its circular, the Entity provides the operating instructions for the use of the incentive for the postponement of retirement by employees enrolled in the Compulsory General Insurance (Assicurazione Generale Obbligatoria, “AGO”), or other substitute and exclusive forms thereof, who, having accrued the right to flexible early retirement, choose to continue their employment, waiving the contribution credit of their portion of social security contributions for disability, old age and surviving partners (invalidità, vecchiaia e superstiti), ‘IVS’ share to be paid by them.
The waiver of the contribution credit, which is the prerequisite for the application of the incentive in question, on the one hand, relieves the employer of the obligation to pay contributions to be paid by the employee, without prejudice to the employer’s obligation to pay contributions of the IVS share; on the other hand, it increases the worker’s salary, given that the amounts corresponding to the share of contributions to be paid by the employer – which the employer should have paid to the social security institution – are paid directly to the employee as remuneration, taxable for tax purposes but not for contribution purposes.
Waiver of contribution credit and workers’ eligibility for the incentive
The waiver of the contribution credit can be exercised by the employee only once during working life and not after obtaining a direct pension, nor after reaching the age requirement for the old-age pension – 67 years – nor, if lower, for the old-age pension provided for by the pension scheme to which he or she belongs.
The waiver only applies to contributions due for periods of work carried out from the date of the first effective date of the flexible early retirement, in the case of an application submitted before that date, or from the month following the month in which the application for waiver is submitted, if the same is submitted at the same time as or after the first effective date of the flexible early retirement.
In addition, the waiver, which applies to all employment relationships held by the employee may also be revoked, under Article 1, paragraph 6, of the Implementing Decree, only once during the course of the worker’s working life. In the event of revocation, it takes effect on the first day of the pay month following the date on which it is exercised.
The incentive in question applies to all employment relationships and only to the portion of IVS contributions payable by workers who, despite having met the requirements for access to flexible early retirement, choose to postpone retirement and continue to work.
From the point of view of qualifying for the incentive, an employee must meet all the following personal requirements:
Duration of the incentive and conditions for right to the exemption
The incentive in question ceases to have effect if one of the following situations occurs:
The incentive in question consists of the total reduction of the contribution due by the worker and, therefore, because it is not a recruitment incentive the general principles on employment incentives do not apply (Article 31, Italian Legislative Decree no. 150/2015). Furthermore, as the incentive applies only to the IVS portion payable by the worker and does not give rise to benefits for the employer, it is not subject to the employer holding a Certificate of Contributions’ Compliance (Documento Unico di Regolarità Contributiva, ‘DURC’) (Article 1, paragraph 1175, Italian Law no. 296/2006).
Effects on pension benefits
The periods during which the worker profits from the benefit in question reduce the rate of financing and calculation referred to in Article 1, paragraph 8, of Italian Law no. 335 of 8 August 1995, and therefore do not affect pensionable remuneration.
In that regard, the INPS states that the use of the benefit in question does not alter the determination of the amount of the pension portions calculated through the remuneration system, which are determined on the basis of pensionable remuneration.
On the other hand, with reference to the contributory pension portion the exemption affects the individual contribution amount, which will be determined by applying the employer’s calculation rate percentage to the taxable base, for the periods covered by the incentive.
Compatibility with State aid rules and coordination with other incentives
With reference to the European Community rules on State aid, the incentive in question is classified as a general intervention that does not give rise an advantage for specific companies or industry sectors or geographical areas of the national territory. Moreover, since the incentive in question applies only to the worker’s portion of the contribution, the measure does not fall within the concept of State aid, since it is a relief enjoyed by natural persons who do not fall within the definition of an undertaking and, therefore, does not affect the principle of competition. Therefore, the application of the above-mentioned relief measure is not subject to the authorisation of the European Commission and registration in the National State Aid Register.
Application for incentive and accreditation procedure
Workers who intend to take advantage of the incentive to postpone retirement must notify INPS, submitting a specific application for accreditation, following which the Entity will check compliance with the eligibility conditions for the incentive and that the worker meets the minimum pension requirements for access to flexible early retirement.
Subsequently, INPS will notify the worker of the outcome of the checks and, through the “Two-way communication” service, also notify the employer of the acceptance of his/her application, if any, who will then be responsible for complying with the formalities, i.e. not paying the contribution portion to be paid by the worker. If the incentive takes effect during periods for which contributions have already been paid, the employer must proceed with the UniEmens flow to recover the sums previously paid.