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Extraordinary income support allowance

Publication: 09/03/2022

Extraordinary allowances are income support benefits borne by employers who are recipients of Solidarity Funds, as referred to in Italian Legislative Decree no. 148 of 14 September 2015. They are granted via company or territorial agreements as a supplement, from the first effective date (early or old age) pension, to permanent workers who meet the age and/or contribution requirements within 5 or 7 years (depending on the sector’s Solidarity Fund) of the termination date of the employment relationship.

The extraordinary allowances are intended for employees of companies that are involved in restructuring or reorganisation processes and who are recipients of the Ordinary Credit Solidarity Fund, Co-operative Credit, Tax Authorities, Poste Italiane, Italian State Railways, or insurance and assistance companies, as well as for the autonomous province of Trentino.

The main characteristics of each Fund are as follows:

  • Solidarity Fund for professional training and re-training, for employment and income support for personnel employed by credit institutions (Inter-ministerial Regulation no. 83486 of 28 July 2014, INPS Circular no. 90 of 06 May 2015). The economic benefit is financed by the employer and paid up to the start of the pension for employees (including managers) of regular credit companies that meet pension requirements - whichever is met first out of early retirement and old-age pensions - within a maximum period of 5 years from the date of termination of the employment relationship. Inter-ministerial Regulation no. 97220 of 23 September 2016 increased the aforementioned maximum duration from 5 to 7 years for the two-year period 2016/2017 (announcement no. 5100 of 16 December 2016).
    Inter-ministerial Regulation no. 98998 of 03 April 2017, in implementation of the provision contained in Article 1, paragraph 234 of Budget Law no. 232 of 2017, provided for the extension of the maximum duration for the years 2018 and 2019 as well (announcement no. 3267 of 09 August 2017).
    For the disbursement period of the extraordinary allowance, the employer is required to pay a related contribution, which is used for acquiring the right to early or old-age pension and for determining their amount, to the competent compulsory social security pension scheme with which they are registered.
    The financing of the extraordinary allowances beginning during the three-year period 2017 – 2019 is ultimately governed by Law no. 232 of 11 December 2016 (cf. announcement no. 3267 of 09 August 2017 and announcement no. 4622 of 11 December 2018).
  • Solidarity Fund for the support of employability, employment and income of co-operative credit personnel (Inter-ministerial Regulation no. 82761 of 20 June 2014, INPS Circular no. 104 of 21 May 2015). The economic benefit is financed by the employer and paid up to the start of the pension for employees (including managers) of co-operative credit companies that meet pension requirements - whichever is met first out of early retirement and old-age pensions - within a maximum period of 5 years from the date of termination of the employment relationship. Inter-ministerial Regulation no. 98998 of 03 April 2017, in implementation of the provision of Article 1, paragraph 234 of Budget Law no. 232 of 2017, increased the aforementioned maximum duration from 5 years to 7 until 2019 (announcement no. 3267 of 09 August 2017).
    For the disbursement period of the extraordinary allowance, the employer is obliged to pay a related contribution, which is used for acquiring the right to early or old-age pension and for determining their amount, to the competent compulsory social security pension scheme with which they are registered.
    The financing of extraordinary allowances beginning during the three-year period 2017 – 2019 is ultimately governed by Law no. 232 of 11 December 2016 (cf. announcement no. 3267 of 09 August 2017 and announcement no. 4622 of 11 December 2018).
  • Solidarity Fund for income support for employment and for professional training and re-training for personnel responsible for collecting taxes (Inter-ministerial Regulation no. 95439 of 18 April 2016, INPS Circular no. 6 of 11 January 2017 and announcement no. 1134 of 14 March 2018).
    The economic benefit is financed by the employer (cf. announcement no. 513 of 06 February 2019) and paid up to the start of the pension for employees (including managers) of companies in the tax sector that meet pension requirements - whichever is met first out of early retirement and old-age pensions - within a maximum period of 5 years from the date of termination of the employment relationship.
    For the disbursement period of the extraordinary allowance, the employer is required to pay a related contribution, which is used for acquiring the right to early or old-age pension and for determining their amount, to the competent compulsory social security pension scheme with which they are registered.
  • Solidarity Fund for income support for employment and for professional training and re-training for personnel of the Post Italiane Group (Inter-ministerial Regulation no. 78642 of 24 January 2014, INPS Circular no. 95 of 13 May 2015). The economic benefit is financed by the employer and paid up to the start of the pension for employees of the Poste Italiane SpA group that meet pension requirements - whichever is met first out of early retirement and old-age pensions - within a maximum period of 5 years from the date of termination of the employment relationship.
    For the disbursement period of the extraordinary benefit, the employer is obliged to pay a related contribution, which is used for acquiring the right to early or old-age pension and for determining their amount, to the competent compulsory social security scheme with which they are registered.
  • Fund for the pursuit of active policies for income and employment support for personnel of the Companies of the Italian State Railways Group (Inter-ministerial Regulation no. 99296 of 18 May 2017, INPS Circular no. 107 of 09 November 2018).
    The cited decree provides two types of extraordinary allowance: the extraordinary allowance and the extraordinary solidarity allowance. The extraordinary allowance is financed by the employer, while the extraordinary solidarity allowance, granted with a view to generational replacement, is financed by a specific provision, as shown in the Fund’s final balance sheet for 2015.
    The funding of extraordinary allowances beginning in 2019 is ultimately governed by Law no. 232 of 11 December 2016 (cf. announcement no. 4622 of 11 December 2016).
    The two types of allowance are paid up until the start of the pension for employees of companies in the Italian State Railways Group, as identified by the decree of the specific program agreement, that meet pension requirements - whichever is met first out of early retirement and old-age pensions - within a maximum period of 5 years from the date of termination of the employment relationship.
    For the disbursement period of the extraordinary allowance, the employer is obliged to pay a related contribution, which is used for acquiring the right to early or old-age pension and for determining their amount, to the competent compulsory social security pension scheme with which they are registered.
  • Inter-sectoral Solidarity Fund for income support for employment and for professional training and re-training for personnel employed by insurance and assistance companies (Inter-ministerial Regulation no. 78459 of 17 January 2014, INPS Circular no. 56 of 10 March 2015).
    The economic benefit is financed by the employer and paid up to the start of the pension for employees of insurance credit companies that meet pension requirements - whichever is met first out of early retirement and old-age pensions - within a maximum period of 5 years from the date of termination of the employment relationship.
    For the disbursement period of the extraordinary allowance, the employer is required to pay a related contribution, which is used for acquiring the right to early or old-age pension and for determining their amount, to the competent compulsory social security pension scheme with which they are registered.
  • Inter-sectoral Territorial Solidarity Fund for the Autonomous Province of Trento (Inter-ministerial Regulation no. 96077 of 01 June 2016, INPS Circular no. 62 of 16 March 2017). The economic benefit is financed by employers who employ at least 75% of their personnel in companies located in the province of Trento, and is paid up to the start of the pension for employees that meet pension requirements - whichever is met first out of early retirement and old-age pensions - within a maximum period of 5 years from the date of termination of the employment relationship.
    For the disbursement period of the extraordinary allowance, the employer is required to pay a related contribution, which is used for acquiring the right to early or old-age pension and for determining their amount, to the competent compulsory social security pension scheme with which they are registered.

Regulatory changes referred to in Decree-Law no. 4 of 28 January 2019

Decree-Law no. 4 of 28 January 2019, containing “Urgent provisions for citizenship and pension income”, made changes to the access to pension provision by introducing, among other things, the “Quota 100” early retirement pension in Article 14, identifying the contribution requirements in order to qualify for early retirement in Article 15, and providing the possibility of granting a extraordinary allowance in Article 22, as referred to in Italian Legislative Decree no. 148 of 14 September 2015, including for the purpose of obtaining the “Quota 100” early retirement pension (cf. Circular no. 10 of 29 January 2019).

Pursuant to Article 4 of the cited Article 22, for the Solidarity Funds’ extraordinary income support allowance referred to in Italian Legislative Decree no. 148 of 14 September 2015, which takes effect after 01 January 2019, employers must provide for the payment of the above benefits to workers until the start of their pension. This is in addition to the payment of the relevant contribution, where provided for in the institutional agreements, until the requirements for such benefit have been met.

The extraordinary allowances, which take effect on or before 01 January 2019, continue to be paid out up to the expected deadline in accordance with the rules in force at the time of termination of employment, without prejudice to the policy holder’s right to submit a claim for an early retirement pension based on the contribution requirements referred to in Article 15 of Decree-Law no. 4/2019.

Article 14, paragraph 1, allows individuals to access the “Quota 100” early retirement pension if their 62-year personal data requirements and 38-year contribution requirements have been met in the period between 01 January 2019 and 31 December 2021. These provisions shall not apply to extraordinary allowances that have already been paid out.

Conversely Article 22, paragraph 1, establishes that, as as the effective date of the aforementioned Decree-Law, the Solidarity Funds referred to in Italian Legislative Decree no. 148/2015 may also, beyond the purposes set out in Article 26, paragraph 9, provide a extraordinary income support allowance for workers who meet the “Quota 100” early retirement pension eligibility conditions in the 3-year period of 2019-2021.

Therefore, the bilateral Solidarity Funds may pay out an extraordinary income support allowance to workers who meet the requirements for the “Quota 100” early retirement pension by 31 December 2021. Since the aforementioned pension begins three months after the maturation of the requirements for the “Quota 100” pension, the extraordinary allowance must also be paid in the three months after pension entitlement has been granted, while the relevant contribution must be paid until the minimum requirements have been met, where stated in the agreements establishing it. Therefore, the extraordinary allowance in question may not be disbursed after 31 March 2022.

The granting of extraordinary allowances for accessing the “Quota 100” early retirement pension is subject to the existence of collective company or local agreements, subscribed to with the most nationally-representative trade unions. For the purposes of generational turnover, these agreements must determine the number of workers to be hired in place of those retiring. In order to be effective, the trade union agreements in question must be filed within 30 days of signing, in accordance with Article 14 of Italian Legislative Decree no. 151 of 14 September 2015.

Extraordinary allowances for accessing the “Quota 100” early retirement pension can be recognised by bilateral Solidarity Funds that have already been set up, or are in the process of being set up, which also provide for the concession of extraordinary income support allowances in their own founding decree.

START DATE AND DURATION

The extraordinary allowance is paid from the first day of the month following the one in which the employment relationship was terminated, regardless of the date on which the claim was submitted, with payment of the arrears due. There must be no interruption between the date on which the employment relationship is terminated and the date on which the extraordinary allowance begins.

The extraordinary allowance ceases to be paid on maturity and is not expected to automatically transform into a pension. Therefore, the individual concerned must submit their pension claim in due time.

WHAT AM I ENTITLED TO?

For the payment of the extraordinary allowance, the employer must provide for the monthly advance payment of the amount covering the benefit.

In general, the value of the extraordinary allowance is equal to the amount of the (early or old-age) pension benefit that would be due to the individual concerned upon termination of the employment relationship, with the addition of the period for which the company undertakes to pay the related contribution.

Where provided for in the decree establishing the Fund, the allowance may be paid, upon the worker’s request, as a lump sum.

The payment of the extraordinary allowance is paid, depending on the operating rules of each Fund, by 12 or 13 monthly payments.

The tax system for the extraordinary allowance paid in instalments is generally the same as regular taxation, with the exception of extraordinary allowances from the Regular Credit, the Co-operative Credit, or the Poste Italiane SpA. These allowances are subject to the system of separate taxation by using the TFR/TFS tax rate, pursuant to Article 19 of the TUIR [Income Tax Consolidation Act].

In general, the extraordinary allowance is incompatible with employed or self-employed work income - acquired throughout the period during which the allowances themselves are used - which derives from work carried out for those who conduct activities in competition with the esodante employer [the last employer before retirement, who deals with pensions].

During the period of these activities, the extraordinary allowance and the related contribution are suspended.

In the case of non-competitive work, it is possible to combine income deriving from the extraordinary allowance with income deriving from employment or self-employment, in accordance with the rules laid down by the Inter-ministerial Regulation of the sector’s Solidarity Fund.

The worker is required to inform both the employer who finances the extraordinary allowance and the Income Support Fund of the performance of the work activity through the competent INPS office. Otherwise, the worker loses the right to the benefit and must repay the sums unduly received, plus interest and capital appreciation, while the related contribution shall be cancelled.

The claim for an extraordinary allowance for early retirement cannot be accepted if the worker is in receipt of an invalidity pension or a regular disability allowance (or has submitted a claim for one).

How can I claim?

From 01 December 2016, for the Fund for the regular and co-operative credit sector, the claim for accessing the extraordinary allowance must be digitally submitted by the employer for each worker (announcement no. 4498 of 10 November 2016).

For all other Funds, for which the digital method is being implemented, the claim for eligibility to the extraordinary allowance for each worker must be submitted by the employer to the competent office referred to in announcements no. 4621 of 07 July 2015 and no. 5119 of 03 August 2015, without prejudice to the centralisation already provided for for the State Railways Group and the Poste Italiane Group.

The claim must be submitted by using the designated form from the website, and must be signed by both the worker and the company’s legal representative.