Today, after the second and final voting round, Brazil’s Senate has approved the “Social Security Pension Reform” bill’s main text, which will amend Brazil’s Federal Constitution.
In summary, the relevant changes made by Social Security Pension Reform” bill are the following:
- Retirement minimum age: For urban workers, the minimum age is of 62 years for women and 65 years for men. For rural workers, the current rule still applies.
- Worker’s minimum pension contribution time: The ‘minimum age’ should be combined with the ‘minimum contribution time’ – the so-called “grace period” – which will be of (i) 15 years for all women and for men already in the labor market; and (ii) 20 years for men who will still enter the job market.
- Calculation of social security benefit: The amount of the retirement benefit will be 60% of the average salary plus 2% per year of contribution that exceeds the minimum time, limited to 100%.To receive the full benefit, a woman must contribute for 35 years and a man for 40 years.
- Progressive rate: As from February 2020, the rate of social security contribution will be progressive for both private and public workers. In the ‘General Pension Regime’, the progressive rate will vary from 7.5% to 14% (with effective rate of 7.5% to 11.68%), depending on the employee’s salary range. In the ‘Specific Pension Regime’, the progressive rate will vary from 7.5% to 22% (with effective rate of 7.5% to 16.79%), depending on the salary range of the public servant.Limitation of benefits (threshold value): The beneficiary will receive 100% of the highest value benefit, plus a percentage of the sum of the other benefits, which may vary between 10% and 80%.
- Early / Special Retirement: The early/special retirement of workers exposed to harmful agents will follow the “points system”, considering (i) the age, (ii) the contribution time, and (ii) the time exposure to those agents. In case of high risk of worker exposure, the sum should be 66 points, plus 15 years of exposure. In case of medium risk of worker exposure, the sum should be 76 points and 20 years of exposure. In case of low risk of worker exposure, the sum should be 86 points and 25 years of non-neutralized / attenuated exposure to harmful agents.
- Transition Rules: The “Social Security Pension Reform” provides for 5 transition rules, with certain rules applying exclusively to private sector workers already in the labor market and other rules in common for all, as follows:
Rule 01: points system (public and private sectors);
Rule 02: contribution time + progressive minimum age (private sector only);
Rule 03: minimum age (private sector only)
Rule 04: contribution time with a 50% toll (private sector only); and
Rule 05: contribution time with a 100% toll (public and private sectors).
The transition rules will be valid for up to 14 years, and the beneficiary is allowed to opt for the most advantageous rule.
It is important to clarify that there are different rules applicable for teachers, federal police, prison guards, legislative, etc.; in addition to the specific pension regime applicable for state and municipal servants.
Currently, the “Social Security Pension Reform” bill’s awaits to be enacted by the National Congress, which is expected to happen soon, although there is no certain date.
The Social Security Taxation will be addressed on the “Tax Reform”.
Please let us know should you need any further clarification, as well as to discuss about the possible impacts of such reform.
This e-alert is a general review of the subjects discussed above and does not constitute a legal opinion or legal consult.