The government has adopted a draft act on cancelling old liabilities owed to ZUS
The Council of Ministers has adopted a draft act that could be a breakthrough for thousands of individuals and business owners with arrears owed to the Social Insurance Institution (ZUS). The new rules, prepared by the Ministry of Family, Labour and Social Policy, provide for the cancellation by operation of law of liabilities relating to social security contributions that arose before 1 January 1999 - that is, before the reform of the social insurance system.
The draft is part of a broader package of government deregulation measures aimed at simplifying the rules and reducing administrative costs. Enforcement proceedings to date in respect of these liabilities have proved extremely inefficient and have generated costs disproportionately high in relation to the amounts recovered.
What matters most for debtors is that the cancellation will happen automatically, without any need to submit an application. People covered by the changes will not have to go through any individual procedure at ZUS. There is, however, an important exception that may affect people approaching retirement age - we cover it later in this article.
Why the government decided on cancellation - a cost-benefit analysis
The government's decision to cancel old liabilities owed to ZUS is not accidental. The draft is backed by hard financial data that clearly shows there is no economic justification for continuing enforcement. According to the official estimates presented in the government's announcement, pursuing these liabilities for another 10 years would cost the state budget around PLN 135 million, while the expected recoveries would amount to only around PLN 13.9 million.
This means that for every złoty recovered from debtors, the state would have to spend almost ten złoty on enforcement proceedings. This disproportion clearly argues in favour of bringing the proceedings to an end. The government also stressed that in many cases the payments made by debtors did not significantly reduce the principal amount of the debt, because they were applied first to default interest and enforcement costs.
From a legal and social perspective, we are therefore dealing with a situation in which continuing enforcement is not only unprofitable for the State Treasury but also burdensome for the debtors themselves - often people whose financial situation has not allowed them to repay obligations dating back more than a quarter of a century.
What exactly will be cancelled and what the legal consequences will be
The scope of the cancellation provided for in the draft act is broad and covers more than just the principal amount of the debt. Under the draft, the following liabilities will be cancelled together:
- The principal amount of the debt arising from social security contributions that arose before 1 January 1999
- Default interest accrued on the overdue contributions
- Additional charges relating to late payment of obligations
- Costs of the reminder notice sent to debtors
- Enforcement costs incurred in the course of proceedings
Of particular importance from the standpoint of property law, once the liabilities are cancelled, the security for the debt will also lapse, such as a compulsory mortgage placed on the debtor's real estate or a pledge over their movable property. This means real relief for the assets of indebted persons and the ability to freely dispose of property that has so far been encumbered.
All pending enforcement proceedings concerning the liabilities covered by the act will be discontinued. ZUS will be required to pass information about the cancelled liabilities to the relevant bodies - including enforcement authorities, insolvency administrators, courts and persons conducting restructuring proceedings. As a result, the whole process will be carried out comprehensively and will not require any individual action from debtors.
How ZUS will notify you of the cancellation and where to check your status
The Social Insurance Institution has provided for two channels for informing debtors that their liabilities have been cancelled. The main communication tool will be the ZUS Electronic Services Platform (PUE ZUS) - an online service that allows matters to be handled with ZUS online. Information about the cancellation will be sent directly to the user's individual profile in this system.
People who do not have a PUE ZUS account will not be left out of the information process. They will receive a notification at the last correspondence address registered with ZUS. It is therefore worth making sure now that your address details held by ZUS are up to date - this will avoid important correspondence being sent to an outdated address.
In addition, anyone covered by the cancellation will be able to request a certificate confirming the cancellation of the liabilities. Such a document may prove useful in many situations - for example when applying for a loan, in court proceedings or in dealings with business counterparties.
An important exception - when it may be worth opting out of the cancellation
Although the cancellation of old liabilities owed to ZUS appears clearly beneficial, the legislator has provided for the possibility of opting out of the cancellation for people for whom keeping these liabilities may have significant legal implications. This applies in particular to situations connected with determining future pension entitlements or calculating the initial capital.
The opt-out mechanism works as follows: after receiving a notification from ZUS about the cancellation of the liabilities, a person who wishes to keep the debt will have 30 days to submit an opt-out. This is a relatively short deadline, so it is worth analysing your situation now and assessing whether the cancellation is beneficial in your case. The period will run from the date the notification is received, and missing it will mean the liabilities are finally cancelled.
When may opting out be justified? Above all when the period in which contributions were paid before 1999 affects the amount of your future pension or your entitlement to benefits. In such cases, keeping the liabilities - and possibly paying them off - may result in a higher pension. However, each case requires an individual legal analysis, as it depends on many factors, such as length of service, level of earnings and type of insurance.
When the new rules will come into force and how to prepare
Under the draft act, the new rules on cancelling old liabilities owed to ZUS are to enter into force on the first day of the month following the expiry of 5 months from the date the act is published in the Journal of Laws (Dziennik Ustaw). This means that from the moment the act is published, debtors will have several months to prepare for the changes.
During this time it is worth taking several key preparatory steps:
- Check your PUE ZUS account - make sure you have an active profile and up-to-date contact details.
- Verify the status of your liabilities - establish whether you have arrears relating to contributions from before 1 January 1999.
- Analyse the impact of the cancellation on your future benefits - especially if you are approaching retirement age.
- Consult a lawyer - if you have doubts about opting out of the cancellation or about the effect of the changes on your legal position.
- Update your correspondence address with ZUS - to make sure you receive the notification of cancellation.
Please remember that the draft act still has to go through the full legislative process - including work in the Sejm and the Senate and the President's signature. The final shape of the rules may therefore be subject to some modifications during the parliamentary process.
Need an individual legal analysis? Contact us
The cancellation of old liabilities owed to ZUS is a change that will affect many individuals and business owners. Although in most cases it will be beneficial, the decision whether to opt out of the cancellation requires careful legal analysis that takes into account each debtor's individual situation - in particular in the context of future pension entitlements and initial capital.
If you have arrears owed to ZUS from before 1999 and are unsure how the new rules will affect your situation, we invite you to contact our firm. Our specialists will help you assess whether the cancellation is beneficial in your case, or whether it is worth considering opting out within the statutory 30-day period. Do not wait until the last minute - consult us about your case today.
Have a question about this?
The first consultation is free - let us talk about your situation.
