The Supreme Court of Justice of Panama has definitively closed the legal debate surrounding a controversial pension deduction. In a ruling issued on September 9, 2025, the full court decided that a law requiring retirees to contribute 6.75 percent of their pensions to the social security system is constitutional. This decision solidifies a key funding mechanism for the nation’s public health and pension provider.
The court’s unanimous verdict responds to a lawsuit filed by lawyer Martin Jesus Molina Rivera. He had petitioned the high court to declare the deduction unconstitutional, arguing it violated both domestic law and international labor standards. His case specifically challenged Article 84, Section 11 of Law 462, which reformed the organic law of the Social Security Fund earlier this year.
International Treaties and Legal Arguments
Molina Rivera’s central argument hinged on Panama’s international obligations. He contended that the state, by applying the withholding, disregarded the Old-Age Pensions Convention of the International Labour Organization and other international norms that prohibit cuts to pension benefits. He asserted that Panama must adhere to these standards as part of its duties under international law.
The Office of the Attorney General, led by Grettel Villalaz de Allen since January, presented a counterargument that the court ultimately adopted. That government body opined that the international instruments cited by the plaintiff do not legally bind Panama. Officials explained that the 1935 Convention on the Preservation of Migrants’ Pension Rights was never actually ratified by the country. They also noted that a 1967 recommendation on old-age benefits lacks binding legal force. The Attorney General’s office consequently advised the full court to maintain the current norm.
“The basic concept of the challenged norm, which is to have as part of the resources of the Social Security Fund a quota to be paid by pensioners and retirees and from special retirement funds, is not a new concept or imposition. That provision entered the legal system two years after the creation of the Social Security Fund,” the court document states. [Translated from Spanish]
Justice Maria Eugenia Lopez Arias, the court’s president, authored the ruling and secured the support of all her fellow magistrates. Their decision emphasizes that the 6.75 percent quota did not originate with the recent legislative reform. The justices framed it instead as part of the historical income structure of the Social Security Fund (Panama) since its creation.
A Historical Contribution for System Solvency
The court’s ruling provides a detailed historical justification for the deduction. It recalls that when Panama established the CSS in 1941, the system already contemplated mandatory contributions. This specific fee began in 1943 at a rate of 4 percent. It then increased gradually over the decades, finally reaching the current 6.75 percent level in 1975. That percentage has remained unchanged for half a century.
Magistrates affirmed the institution critically needs this capital to operate and cover the wide array of risks it administers. These include illness, maternity, disability, old age, and death. The court determined the deduction constitutes a necessary and long-standing mechanism for financing the fund’s operations. It also explicitly dismissed the idea that unratified international conventions could invalidate an internal obligation that has accompanied the system from its origins.
The full court concluded that the challenged article contradicts neither Article 4 of the Constitution nor any other provision of the nation’s charter. It reiterated that the withholding does not eliminate existing benefits or suppress resources essential for the system’s long-term sustainability. This ruling represents one of several unsuccessful legal attempts to dismantle Law 462, which reformed the Social Security Fund’s foundational law in March of this year. The legal challenges to the seguro social system have now reached a definitive endpoint with this high court decision.
“By virtue of the considerations set forth, the full Court of Supreme Justice, administering justice in the name of the Republic and by authority of the law, declares that numeral 11 of article 84 of Law 462 of March 18, 2025, which modifies, adds and repeals articles of Law 51 of 2005, which reforms the Organic Law of the Social Security Fund and dictates other provisions, is not unconstitutional,” reads the ruling published in the Official Gazette 30238 on Wednesday, November 12. [Translated from Spanish]
This final judgment from the corte suprema provides legal certainty for both the government and the hundreds of thousands of retirees affected by the policy. It effectively ends the prospect of a judicial reversal of the pension deduction, cementing it as a permanent feature of Panama’s social security landscape for the foreseeable future. The decision underscores the judiciary’s role in interpreting the constitutionality of social welfare financing mechanisms.