Chamber of Deputies passes new social security law for civil servants

Yesterday, the Chamber of Deputies approved the establishment of a social security fund for civil servants (“Fundação de Previdência Complementar dos Servidores Públicos Federais – Funpresp”). Although the bill can still be amended and has to be approved by the Senate, it passed by a vote of 318 to 134 and two abstentions, which is seen as a sign that it will eventually become law. The bill has been in Congress for 12 years and is controversial because it will mean a sharp reduction in retirement benefits for future government employees (it will not affect anyone presently in the government, only those who enter public service after final approval of the new system. As such, its full effect will only be felt in 30 years).

The main objective of the new fund is to reduce the government’s social security system deficit in the segment known as the special regime that covers only civil servants.

At the moment Brazil has two social security systems. The general regime (“INSS”) that covers the private sector makes an average monthly payment of slightly more than R$700 to 24 million beneficiaries and runs a deficit of R$35 billion annually. Then, there is the special regime for civil servants that makes average monthly payments of around R$6,000 to 950,000 retirees and has an annual deficit of R$60 billion.

Under the provisions of the Funpresp, it will no longer be possible for anyone  to obtain a retirement benefit payment of more than the INSS ceiling, which is currently R$3,916.20. Civil servants who want more will have to contribute to a complementary pension fund created by Funpresp especially for this purpose. The government will contribute up to 8.5% (of a civil servant’s salary) to the fund. As approved yesterday, Funpresp will consist of three different funds – one each for the executive, legislative and judiciary branches.

However, associations representing judges and government attorneys (“promotores,” “MP”) (“Ajufe” and “ANPR”) have expressed discontent with the Funpresp bill saying it was approved in a rush and not sufficiently debated. The organizations also dispute the existence of a social security special regime deficit in their areas and claim that any changes in their retirement benefits (“previdências”) can only be made by the Judiciary and the head of the government prosecutors (“Ministério Público – MP”).