On January 1, changes to the Czech Republic's social insurance system went into effect that raise the retirement age, increase the years of service required to obtain an old-age pension, increase the annual earnings contribution ceiling, and expand the definition of disability. According to the government, the changes are meant to stabilize the country's state-run, pay-as-you-go system. Specifically, the changes— 

- Raise gradually the retirement age to 65 by 2028 for men and for women without children. Women with children will be able to retire from ages 62 to 65, according to the number of children. Currently, the retirement age is 62 and 2 months for men and from 57 through 61 for women, according to the number of children. (Under a previous law, the retirement age was increasing gradually to 63 for men and for women without children and from 59 through 62 for women with children, depending on the number of children.)

- Increase gradually the number of years of covered employment required for an old-age pension from 25 to 35 years by 2019. In addition, starting in 2011, individuals who are 5 years older than the normal retirement age will be able to retire with 17 years of contributions (increasing by 1 year each year thereafter until reaching 20 years by 2014). Currently, men and women aged 65 or older can retire with at least 15 years of covered employment.

- Increase the maximum annual earnings for contribution calculation purposes for employees and employers from 48 to 72 times the national average monthly wage. For 2010, this ceiling is set at CZK1,707,048 (US$93,342), based on a national average monthly wage of CZK23,709 (US$1,296).

- Replace the old disability classification, which consisted of partial (33–65 percent loss of earning capacity) and total disability (66 percent or higher) categories, with one based on three levels of disability: 1st degree (35–49 percent), 2nd degree (50–69 percent), and 3rd degree (70 percent or higher). To qualify for disability benefits under the new law, individuals aged 38 or older must have been in covered employment for 10 of the last 20 years before the onset of disability; fewer years are required for individuals younger than age 38. (Previously, 5 years of covered employment was required for individuals aged 29 or older, with fewer years required if younger than age 29).

The Czech Republic's social insurance system covers all employed and self-employed persons and is financed by employee contributions of 6.5 percent of monthly covered earnings (28 percent for the self-employed) and employer contributions of 21.5 percent of monthly payroll.

This article was extracted from the United States Social Security Administration publication International Update, January 2010.

Source: Social Security Programs Throughout the World: Europe: 2008; "Convergence Programme of the Czech Republic," Ministry of Finance of the Czech Republic, November 2008; IBIS Compliance Alert, Czech Republic, November 30, 2009; "Zmeny v Duchodovem Pojisteni," Ceska Sprava Socialniho Zabezpeceni, December 2009; "Co Se Zmeni Duchodovem Pojisteni od 1.1.2010," Ceska Sprava Socialniho Zabezpeceni, December 11, 2009.

Implementation date: 01.01.2010