Savings Fund and Employees’ Savings and Loan Associations

December 16, 2011
Savings Fund and Employees’ Savings and Loan Associations

In practice, it is very common to confuse a savings fund with an employees’ savings and loan association. Consequently, it is important to clarify the differences that exist between such figures from a labor perspective. The savings fund is an optional benefit not provided by the Federal Labor Law. Therefore, it is not mandatory for employers, since it was created as a form of social welfare to encourage employees to create a habit of saving and an additional benefit for the provision of their services, and a benefit for employers since it is deductible if they comply with certain requirements provided by the Social Security Law and the Income Tax Law and its regulations. For the formation of a savings fund, it is necessary to create a “plan” and/or “bylaws” which establish its objectives, to whom it applies, beneficiaries, the amounts to be paid by the employees and the employer, the procedure to follow in order to receive a distribution of the funds, when it will be paid out, and how it will be administered, etc. On the other hand, an employee savings and loan association is an association formed by the employees of a company, without any intervention or obligation by the company, the purpose of which is to save and/or grant credits or loans to the employees who formed it, with low interest rates using the economic contributions made to such savings and loan association by the employees. Since the purpose of employee savings and loan associations is to provide economic assistance to their members, their formation and operation is not regulated by any law or regulation. As a result, members of the association must create regulations or bylaws containing the rules so that such association may operate. In this case, and unlike savings funds, the company operates only as an intermediary retainer and informant with respect to employee contributions. Even though employee savings and loan associations are not regulated by any legal provisions, the association should comply with the requirements established by the Federal Labor Law and the Income Tax Law for its proper operation.

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