The norm regarding recalculation the disability pension if the disability group is changed is incompatible with the Satversme
On 11 December 2014 the Constitutional Court has passed a judgement in Case No. 2014-05-01 “On the Compliance of Section 16(4) of the law “On State Pensions” (in the wording, which was in force from 7 January 1997 to 30 September 2013, and in the wording of 17 July 2013), insofar it applies to the formula for recalculating the disability pension if the disability group is changed, if the recipient of the disability pension prior to the change of the disability group had been an employee and had made social insurance contributions, with Article 91 and Article 109 of the Satversme of the Republic of Latvia.”
The Contested Norm
Section 16(4) of the Law “On State Pensions”, in the wording that was in force from 7 January 1997 until 30 September 2013, provided: “In the event that the disability group changes, the amount of the disability pension shall be recalculated from the day the repeated determination of disability in accordance to the procedures prescribed in this Section, taking into account the insured person’s individual and the maximum possible length of period of insurance and the average (updated) wage subject to insurance contributions as was taken into account in calculating (recalculating) the disability pension up until the day the disability group was changed. If the disability group is changed from a less severe to a more severe one, the recalculated disability pension benefit may not be less than the previously received amount of disability pension.”
Whereas the contested norm in the wording of 17 July 2013 envisages: “In the event that the disability group changes, the amount of Group I and Group II disability pension shall be recalculated from the day the repeated determination of disability in accordance to the procedures prescribed in this Section, taking into account the insured person’s individual and the maximum possible length of period of insurance and the average wage subject to insurance contributions as was taken into account in calculating (recalculating) the disability pension, and parts of recalculation of pension, which has been calculated in accordance with Section 24(5) of this Law. If the disability group is changed from a less severe to a more severe one or the more severe disability group, which was determined previously, is reinstated, then the recalculated disability pension benefit may not be less than the previously received amount of disability pension.”
The Norms of Higher Legal Force
Article 91 of the Satversme: “All human beings in Latvia shall be equal before the law and the courts. Human rights shall be realised without discrimination of any kind. “
Article 109 of the Satversme: “Everyone has the right to social security in old age, for work disability, for unemployment and in other cases as provided by law. “
The Facts
The case was initiated with regard to an application by the Administrative District Court. The Court is hearing a case regarding recalculation of disability pension in connection with changing the disability group.
The Court has indicated that the contested norm both in its current wording and in the wording that was in force until 30 September 2013 allows differential treatment of persons with disability, i.e., the formula for calculating pension differs, depending on the fact, whether the second group of disability was granted immediately or whether another disability group had been granted prior to it.
Court Findings and Ruling
On compatibility of the norm with the principle of equality
The Constitutional Court has concluded that in the case under review two groups of persons are to be compared. I.e., on the one hand, persons, like, for example, the applicant in the administrative case – socially insured employees, who continue working after they have been granted the 3rd disability group and make social contribution (inter alia, contributions for disability insurance) and who are later granted the 2nd disability group, – and, on the other hand, socially insured employees, who have made social contributions (inter alia, contributions for disability insurance) and who have been immediately granted the 2nd disability group.
The Constitutional Court recognised that the contested norm, in the wording that was in force from 7 January 1997 until 30 September 2013 and in the wording of 17 July 2013, envisaged differential treatment of comparable groups of persons.
The Constitutional Court concluded that the aim of the differential treatment included in the contested norm both in the wording that was in force from 7 January 1997 until 30 September 2013 and in the wording of 17 July 2013 was ensuring public welfare. I.e., in adopting the norm it was presumed that after disability was determined for a person his or her income and social contributions, if such were made, would decrease, therefore the norm protected those persons, whose income decreased.
After establishing the legitimate aim of the differential treatment, the Constitutional Court assessed its compatibility with the principle of proportionality. The Constitutional Court found that the application of the contested in the wording that was in force from 7 January 1997, in a situation like the one of the applicant in the administrative case, does not ensure that the amount of disability pension is not decreasing, since, in accordance with the contested norm, in recalculating the disability pensions for persons, whose disability group changes from a less severe to a more severe one, the social contributions made by these persons before the disability groups changes are not taken into account. The legislator has envisaged in the current wording of the contested norm that in recalculating disability pension the social contributions made by the particular person before the change of the disability group should be taken into account. However, the envisaged amount of social insurance contributions does not allow reaching the aim of the system of disability pensions.
The Constitutional Court recognised that the amount of disability pension recalculated due to the change of disability group should not be identical to the amount of disability pension for the first time determined for the person, for whom the 2nd disability group had been determined. However, the contested norm in the wording that is currently in force with regard to persons who after becoming disabled continue working and gain greater income compared to the one prior the disability, the social contributions made before the change of the disability group are not proportionally taken into consideration. Hence, the Constitutional Court recognised that the contested norm also in its wording of 17 July 2013 in instances that were similar to the case under review failed to reach its legitimate aim and that the differential treatment of comparable groups of persons could not be justified.
Thus, the Constitutional Court found that the contested norm (in both wordings) was incompatible with the first sentence of Article 91 of the Satversme.
On becoming invalid
The contested norm in the wording that was in force from 7 January 1997 until 30 September 2013 has already become invalid. Therefore the Constitutional Court in its Judgement did not rule on the date as of which it became invalid.
The Constitutional Court recognised that in order to ensure the compatibility of the contested norm in the wording of 17 July 2013 with the Satversme the Saeima must amend the law. The implementation of this task requires time; therefore the Constitutional Court rules that the Saeima must eliminate the incompatibility of the contested norm in the wording of 17 July 2013 with the Satversme by 1 July 2015.
Whereas with regard to the person, who had turned to the Administrative Court, as well as other persons, who in similar situation have started to protect their rights by using general legal remedies (for example, turned to the competent state institution or a court) the norm is recognised as being invalid as of the moment it was adopted.
The Judgement by the Constitutional Court is final and not subject to appeal. The Judgement has entered into force.
Linked case: 2014-05-01