Statutory and regulatory framework

Primary laws and regulations

What are the main statutes and regulations relating to pensions and retirement plans?

The Social Security General System is a part of the Brazilian Social Security System, and unlike the healthcare system, it requires contributions or participation in the funding. The legal bases of the Social Security General System are:

  • the Brazilian Federal Constitution (article 201);
  • Law No. 8,212/91 (funding);
  • Law No. 8,213/91 (benefits); and
  • Decree 3,048/99 (which governs Laws No. 8,212/91 and 8,213/91).

The Social Security General System is maintained by the federal government, states, federal districts and some municipalities for civil servants. The legal provisions governing such regimes are based on article 40 of the Federal Constitution.

Private pensions and retirement plans are mainly regulated by article 202 of the Federal Constitution and by Supplementary Laws No. 108 and No. 109/2001.

Regulatory authorities

What are the primary regulatory authorities and how do they enforce the governing laws?

The Social Security National Institute, a federal independent agency, has the jurisdiction to implement governmental actions in the Social Security General System (the state pension system) regime and the duty to grant and maintain those benefits, as well as social security and healthcare.

The Brazilian Federal Revenue Office is the agency of the direct administration, which is subordinated to the Treasury, responsible for collecting and surveying the social security contributions that fund pensions, levied on the remunerations paid to insured employees and to individual taxpayers.

Under the Private Pension System, the Social Security Bureau, with the intermediation of the Supplementary Pension Management Council and the Supplementary Pension National Superintendency (PREVIC), regulate private and closed pension (non-profit organisations) entities.

Open pension entities are regulated by the Treasury, with the intermediation of the Private Insurance National Council and of the Private Insurance Superintendency (SUSEP).

Pension taxation

What is the framework for taxation of pensions?

The retirement pension paid by the Social Security General System is subject to income tax according to progressive rates. The progressive rates of the annual income tax for payments have not changed since 2016 and are the following:

  • zero per cent for up to 22,847,76 reais;
  • 7.5 per cent for 22,847,77 to 33,919,80 reais;
  • 15 per cent for 33,919,81 to 45,012,60 reais;
  • 22.5 per cent for 45,012,61 to 55,976,16 reais; and
  • 27.5 per cent for more than 55,976,16 reais.

Contributions made by a company to pension plans are not considered employees’ compensation and, therefore, no withholding income tax or social security contributions are levied on them. Also, a company’s contributions to pension plans can be deducted from the calculation base of its income tax, up to a limit of 20 per cent of the total compensation paid to employees.

Private pension benefits are also subject to withholding income tax according to progressive rates. Alternatively, pensioners can opt to be taxed by the regressive taxation system. Under the regressive system the income tax rate starts at 35 per cent and is reduced according to the length of the investment, reaching 10 per cent for investments longer than 10 years. The income tax payment is paid when the benefit is paid. This system is recommended for long-term investments, since the longer the contributions are invested, the lower the income tax rate will be. The rates are as follows:

  • for investments lasting up to two years: 35 per cent;
  • for investments lasting two to four years: 30 per cent;
  • for investments lasting four to six years: 25 per cent;
  • for investments lasting six to eight years: 20 per cent;
  • for investments lasting eight to 10 years: 15 per cent; and
  • for investments lasting more than 10 years: 10 per cent.

Individuals who contribute to private pension plans can deduct the amount of their contributions from the calculation base of their income tax, up to a limit of 12 per cent of their total annual earnings.

State pension provisions


What is the state pension system?

The Social Security General System is, in reality, social security insurance. All employees performing paid activities must be registered with the Social Security General System, except when it is an optional condition. When paying the social security contribution, the person is classified as a ‘covered employee’ and is guaranteed social security coverage.

The Public Social Security is a sharing system based on the principle of solidarity: in this case, joint liability between generations, namely, those who contribute today are not those currently receiving social security benefits. The income transferred by the Social Security General System is used to replace the income of the covered employee, when the employee is no longer able to work, due to illness, disability, old age, death or involuntary unemployment, or even during maternity leave and imprisonment.

Pension calculation

How is the state pension calculated and what factors may cause the pension to be enhanced or reduced?

For the social security benefits granted at the age of retirement (urban) and retirement for length of service, when the employee meets the requirements relating to age and contribution period, such benefits are calculated taking into account the average of the highest contribution salaries since July 1994 up to the application filing date, applying the social security factor.

The social security factor is calculated based on age, life expectancy and the length of time the covered employee contributed up to retirement.


Is the state pension designed to provide a certain level of replacement income to workers who have worked continuously until retirement age?

Yes, pension benefits paid by the Social Security General System replace part of the salary received by the individual during his or her life. The highest amount that can be paid as monthly pension benefit is 5,839.45 reais.

Current fiscal climate

Is the state pension system under pressure to reduce benefits or otherwise change its current structure in any way on account of current fiscal realities?

Yes, there is currently a project called Social Security Reform that aims to reduce benefits by changing the current structure regarding the eligibility rules for pension benefits (such as increasing the employee’s age and length of time in work required before retirement). There are relevant political interests involved and many different versions of the Reform under discussion in the National Congress. Any actual change in our system will demand significant political alignment and therefore we believe that this Reform will still be subject to many discussions before its approval.

Occupational pension schemes


What are the main types of private pensions and retirement plans that are provided to a broad base of employees?

Pension plans may be managed by open or closed-end private pension plan entities. Open-end private pension entities are usually managed by joint stock companies operated for profit, usually insurance companies or banks, that offer individual or collective plans. These can be accessed by anyone.

Closed-end private pension entities offer social security benefits to organised groups (such as employees of a sponsor employer or member associations representing certain worker’s categories or sectors), through an employment bond or association.

The main types of private pensions and retirement plans are as follows:

  • Defined benefit: the planned benefit value or level is established, and the cost is actuarially determined to guarantee its granting and maintenance.
  • Defined contribution: the planned benefit value is permanently adjusted to balance the account in favour of the participants, taking the net result of the receipt of benefits and amounts allocated into account.
  • Variable contribution: the planned benefit combines the features of defined benefit and defined contribution plans.

What restrictions or prohibitions limit an employer’s ability to exclude certain employees from participation in broad-based retirement plans?

Decree No. 3,048 of 5 March 1999 expressly determines that companies will not pay social security contributions on amounts paid to employees resulting from an open or closed-end private pension fund, provided that such plan is available for all employees and senior managers of the company.

Also, Supplementary Law No. 109 of 29 May 2001, which provides for the open-end or closed-end private pension regime, establishes that the Private Pension System is operated by private pension entities, the primary purpose of which is to institute and handle pension plans in addition to the General Social Security System.

Within this context, private pension plans must, effectively, be intended as a savings mechanism targeted at the accumulation of resources for payment of future benefits, especially in furtherance of the participants’ retirement pay.

A private pension plan is allowed to impose non-discriminatory conditions for admission and dismissal of employees from it.

Can plans require employees to work for a specified period to participate in the plan or become vested in benefits they have accrued?

Based on article 202 of the Federal Constitution, a private pension plan has a contractual nature. The contractual nature allows the parties (sponsors, principals, participants or beneficiaries, and the pension funds), according to their interests, to freely design the characteristics of the plan. However, pension plans in Brazil must operate in a non-discriminatory manner towards employees; thus, if some employees are excluded from the pension plans or if there is a limitation of participation of any kind, employees or authorities may challenge these rules.

Pension plans usually require that employees work for a minimum period to receive pension benefits.

Overseas employees

What are the considerations regarding employees working permanently and temporarily overseas? Are they eligible to join or remain in a plan regulated in your jurisdiction?

There are two arrangements related to individuals working abroad:

Maintainance of the employment contract

The employment contract in Brazil continues for the duration of the employee’s time working abroad.

The employee continues to contribute to the Brazilian public pension system and usually remains in the private pension plan.

Termination of the employment contract

The employment contract is terminated under Brazilian laws, with all severance pay owed being settled.

The employee ceases contributing to the Brazilian public pension system and is usually no longer part of a private pension plan.

This arrangement is only advisable when the employee is not expected to return to Brazil to work for the company.


Do employer and employees share in the financing of the benefits and are the benefits funded in a trust or other secure vehicle?

The benefit plan must set out that the benefits should be funded by contributions made by sponsors and participants, individually or jointly, according to each plan’s regulation.

The funds remain under administration of the private pension entity, and under the regulation and supervision of the public authorities.

What rules apply to the level at which benefits are funded and what is the process for an employer to determine how much to fund a defined benefit pension plan annually?

According to article 22 of Supplementary Law No. 109, at the end of each fiscal year (which coincides with the calendar year) closed-end private pension entities must draw up accounting statements and actuarial valuations of each benefit plan (defined benefit, defined contribution and variable contribution), per legal entity or legally qualified professional, and the outcome should be forwarded to the regulatory and overseeing body, participants and beneficiaries.

Based on the actuarial valuation, it is possible to assess the actuarial condition of the benefit plan and the regular and additional contributions that should be made by the employer.

Level of benefits

What are customary levels of benefits provided to employees participating in private plans?

The levels of benefits are widely variable according to the type of plan previously described, such as defined benefit, defined contribution and variable contribution. The customary benefits are:

  • normal retirement;
  • early retirement;
  • deferred retirement;
  • postponed benefit due to termination of employment relationship;
  • disability retirement;
  • survivor’s pension;
  • quittance;
  • minimum benefit; and
  • annual bonus.
Pension escalation

Are there statutory provisions for the increase of pensions in payment and the revaluation of deferred pensions?

Pension plans are subject to periodic actuarial valuations to check whether there are sufficient reserves for payment of benefits, in which the benefits that are being paid and those to be paid are taken into account.

In closed-end private pension plans, in the event of an actuarial deficiency, the entity will be required to make an immediate adjustment as follows:

  • an increase of the contribution amount;
  • the creation of an additional contribution; or
  • a reduction in the amount of benefits to be paid.
Death benefits

What pre-retirement death benefits are customarily provided to employees’ beneficiaries and are there any mandatory rules with respect to death benefits?

Depending on the provisions of the regulation of the benefit plan, the following situations are possible:

  • If the contract provides for a monthly annuity for life, the amount will be paid exclusively to the annuitant during his or her lifetime. That is, if the annuitant dies, neither the beneficiary nor the heirs will receive private pension investments.
  • If the contract provides for a temporary monthly annuity, the benefit is paid exclusively to the annuitant for a contracted period of time and ceases upon the annuitant’s death or upon the expiration of the contracted period (whichever occurs first).
  • In the case of a monthly annuity for life with a minimum guaranteed period, if the annuitant dies before the expiration of such minimum guaranteed period, the beneficiaries will be entitled to the benefit for the remaining guaranteed period. If no beneficiaries are appointed, or if those appointed have died before the annuitant, the benefit will be paid to the lawful heirs of the annuitant for the remaining minimum period. On the other hand, if the annuitant dies after the minimum period, the entity will no longer be required to pay the benefits.
  • If there is a monthly annuity benefit for life, reversible to an appointed beneficiary, in which the payment is made to the annuitant while he or she is alive. Should the annuitant die, the percentage of the amount established will revert to the appointed beneficiary. If the beneficiary dies before the annuitant or during the payout period, the reverted benefit will end.

When can employees retire and receive their full plan benefits? How does early retirement affect benefit calculations?

Each statute of the pension plan regulates the conditions that must be in place for retirement and payment of the plan benefits, including the calculation applicable for situations when early retirement occurs.

Early distribution and loans

Are plans permitted to allow distributions or loans of all or some of the plan benefits to members that are still employed?

As a general rule, loans and distributions are not allowed by the pension plan in favour of the beneficiaries, although there are exceptions. Payments are usually made when the beneficiary is eligible for any of the benefits established in the pension plan statute.

Change of employer or pension scheme

Is the sufficiency of retirement benefits affected greatly if employees change employer while they are accruing benefits?

When moving to a new job, or simply leaving a current one, a beneficiary is allowed to transfer the amount accrued to a new pension plan (portability), once certain requirements are met. The rules of the new pension plan will become applicable.

Alternatively, they may continue in the same pension plan as a self-sponsor, which will guarantee the maintenance of the same benefits. How the benefits are affected depends on the decision made by the beneficiary and the rules of the new pension plan in the case of portability.

In what circumstances may members transfer their benefits to another pension scheme?

Whenever the employment relationship is terminated, the beneficiary is eligible for transference of the accrued amounts to a new pension plan, according to the portability rules.

Investment management

Who is responsible for the investment of plan funds and the sufficiency of investment returns?

Private pension plans’ funds are generally managed by a bank or insurer in open-ended pension plans (those available for any person) and by a specialised manager hired by the company in closed-end pension plans, which normally submit relevant decisions to a group of selected employees of the company (which are part of the deliberative and fiscal council).

At least one-third of the selected employees have to be participants in the pension plan. These members of the group must have previous experience in certain areas, such as finance, business, accounting, law, management or auditing, and unblemished reputations.

Reduction in force

Can plan benefits be enhanced for certain groups of employees in connection with a voluntary or involuntary reduction in workforce programme?

Not applicable.

Executive-only plans

Are non-broad-based (eg, executive-only) plans permitted and what types of benefits do they typically provide?

Pension plans not offered to all employees of a company (non-broad based) could lead to the disregarding of tax, labour and social security exemptions granted by the law in Brazil. Thus, they are usually not recommended.

How do the legal requirements for non-broad-based plans differ from the requirements that apply to broad-based plans?

Not applicable.

Unionised employees

How do retirement benefits provided to employees in a trade union differ from those provided to non-unionised employees?

In Brazil, all employees, regardless of being in a trade union or not, are represented by a trade union and a collective bargaining agreement. Consequently, unless the trade union has an optional private pension plan that can be offered to its members, there are no differences in relation to the retirement benefits.

Although it is not mandatory, the trade union could provide an associated pension plan to the employees it represents, the rules of which are established in law, such as the mandatory use of the definite contribution system. In that case, the assets of the pension plan must be segregated from those pertaining to the trade union itself and a specialised professional should be hired to manage the funds.

How do the legal requirements for trade-union-sponsored arrangements differ from the requirements that apply to other broad-based arrangements?

Not applicable.


Examination for compliance

What is the process for plan regulators to examine a plan for periodic legal compliance?

A pension plan should be audited by an independent accounting firm once a year to check the accuracy of its records and statements, and also whether it is observing corporate governance rules to preserve its solvency. Also, continuous risk assessment analysis of any potential liabilities that could affect the pension plan should be made during the year.


What sanctions will employers face if plans are not legally compliant?

Failure to comply with regulatory and compliance rules could result in a warning or temporary ‘suspension of work’ penalties. In more serious cases, it is also possible to apply a ‘prohibition to work’ penalty on the managers and a fine of between 2,000 reais and 1 million reais against the pension plan.

In certain circumstances, managers could also be held liable for civil damages and face criminal prosecution.


How can employers correct errors in plan documentation or administration in advance of a review by governing agencies?

PREVIC and SUSEP are the governmental agencies in charge of inspecting private pension plans in Brazil. Any errors can be voluntarily disclosed together with the settlement of an agreement with the agency in order to correct the mistakes or make the necessary adjustments to the plan.

Disclosure obligations

What disclosures must be provided to the authorities in connection with plan administration?

PREVIC and SUSEP have powers to inspect pension plans that are based in or run from Brazil and request any documents and information regarding the plan they may deem necessary to check compliance with the applicable law. In addition, managers should submit annual reports with relevant information about the plan and request prior approval before making relevant changes to its rules or structure.

What disclosures must be provided to plan participants?

At the beginning of the following year to which the information refers, an annual report must be provided to participants containing relevant financial information. Also, the management should give full notice of any amendments made on the plan statute. Moreover, participants must receive:

  • a certificate showing requirements to be admitted and maintained as a plan participant and requirements of eligibility, and the benefits calculation formula;
  • copies of the pension by-laws and rules of the pension plan; and
  • a brochure with simplified information on the characteristics of the plan.
Enforcement mechanisms

What means are available to plan participants to enforce their rights under pension and retirement plans?

The enforcement of any rights or rules by the participants can be made before the Brazilian judicial courts or, in certain cases, under the arbitration system. PREVIC has the authority to mediate disputes in specific cases through its Committee for Mediation, Conciliation and Arbitration.

Plan changes and termination

Rules and restrictions

What restrictions and requirements exist with respect to an employer’s changing the terms of a plan?

From the employment standpoint, as a general rule, less generous changes - even with the authorisation of the employees - are likely to be deemed null and void. However, as pensions are not considered employment benefits, according to the specific pension rules, it is possible to change, or terminate, pension plans if the accumulated and acquired rights are observed.

What restrictions and requirements exist with respect to an employer terminating a plan?

See question 33.

Insolvency protection

What protections are in place for plan benefits in the event of employer insolvency?

Laws and regulations provide minimum standards for financial and actuarial criteria that provide solvency to pension plans. Plans have to be periodically audited so that it is possible to determine the amount of contribution necessary for their solvency. In this sense, the supervision of PREVIC and SUSEP is a form of protection itself.

These regulatory bodies can also designate a special administrator with powers to intervene or provide for extrajudicial liquidation of a plan, if its liquidity and solvency can no longer be assured.

It is also possible to sue anyone who causes damage or loss to the plan or to its members.

In addition, a private pension entity can get insurance cover for risks owing to:

  • the disablement of participants;
  • the death of participants and pensioners;
  • the survival of pensioners; and
  • variances of biometric assumptions.
Business transfer

How are retirement benefits affected if the employer is acquired?

PREVIC must be informed of any corporate change. If the company that is the sponsor of the pension plan is still is still active after an acquisition, the pension plan should not be affected, since the entity that is sponsoring it will remain the same.

Otherwise, if the sponsor company of the plan no longer exists, the new entity has to adhere to the pension plan as its sponsor and maintain the plan’s conditions.

If the company does not adhere to the plan as its sponsor, it may be understood that the employment bond is terminated and participants can opt for the deferred proportional benefit, to transfer funds to another pension plan (portability) or to act as a self-sponsor of the plan.


Upon plan termination, how can any surplus amounts be utilised?

The surplus that constituted the contingency reserve (up to 25 per cent of the mathematical reserve, once made to assure the payment of benefits) will be given to the participants and the pensioners, proportional to their individual mathematical reserves. The surplus amount that is over the contingency reserve (such as that constituted in a special reserve) will be distributed among participants, pensioners and sponsors proportionally to their contributions to the plan in the period of the constitution of the reserve.

Fiduciary responsibilities

Applicable fiduciaries

Which persons and entities are ‘fiduciaries’?

Assuming that ‘fiduciaries’ generally refer to those who act on behalf of others, almost every kind of person related to the administration of a pension plan can be considered a fiduciary. For example, fiduciaries can be directors, agents with powers of management, counsellors or members of statutory boards of the private pension entity; those who represent sponsors, participants and pensioners; and technical service providers, such as independent auditors and actuaries.

Fiduciary duties

What duties apply to fiduciaries?

Fiduciaries have to comply with their duties. It is important to establish corporate governance rules, since fiduciaries represent the interests of the pension entity, sponsors, participants or pensioners. Also, fiduciaries have to seek to ensure the long-term sustainability of the pension plan and work towards the best execution of the objectives of the pension entity.

To better achieve this goal, officers and counsellors must have a certain technical level of knowledge in order to be qualified for their job. In this sense, laws and regulations provide that members of councils of pension entities must have proven experience in financial, administrative, accounting, legal, supervision or auditing activities; must have a good reputation; and must not have been penalised criminally or administratively for any breach of the pension legislation or as a public servant.

The pension entity must adopt procedures for the certification, eligibility and qualification of those who occupy any position in the entity, and must prove to regulatory bodies that these procedures have been adopted.

Breach of duties

What are the consequences of fiduciaries’ failing to discharge their duties?

The following penalties can be applied:

  • the issuing of a formal notice;
  • the suspension of the right to work or act on behalf of the pension entity for up to 180 days;
  • the disqualification of having a position or function in a private pension entity, insurance company, financial institution or in the public sphere from two to 10 years; and
  • the imposition of a fine of between 6,000 and 3 million reais.

Fiduciaries can also be held civilly or criminally responsible, or both, for damages caused to private pension entities or sponsors, participants and pensioners (in a worst-case scenario).

Legal developments and trends

Legal challenges

Have there been legal challenges when certain types of plans are converted to different types of plan?

Yes. Participants and pensioners can sue the pension entity if they believe that, owing to changes in plans, there is a violation of acquired or accumulated rights, benefit suppression or a violation of the pension contract.

There is a divergence over the jurisdiction of civil courts and labour courts for this kind of litigation. The civil courts’ jurisdiction has prevailed.

Have there been legal challenges to other aspects of plan design and administration?

Yes. Any kind of change that, from the participants’ or pensioners’ standpoint, may result in a harmful change in their previous status can give rise to litigation. Extinction of plans and the need for supplementing a pension benefit owing to monetary correction indices are relevant examples.

Future prospects

How will funding shortfalls, changing worker demographics and future legislation be likely to affect private pensions in the future?

Past pension plans usually assured participants and pensioners a fixed pension benefit or profitability corresponding to monetary correction and high interest indexes such as 6 per cent (that could reach, in certain years, a 12 per cent rate of profitability). These criteria are considered too high or difficult to follow now, due to present economic conditions and also considering that, because of demographic ageing, benefits have to be paid for longer periods. Therefore, current pension plans no longer tend to assure a ‘defined benefit’ to participants but rather determine that sponsors and participants have to pay a ‘defined contribution’ and that the future pension benefit will be calculated according to the individual mathematical provision of the participants.

Update and trends

Hot topics

Are there any current developments or trends that should be noted?

Besides the planned Social Security Reform, new projects and ideas concerning the private pension system in Brazil have been mentioned by the Ministry of Economy appointed by the recently elected President. One of projects the Ministry has addressed is the merger of PREVIC and SUSEP, claiming that it would result in a more efficient supervision activity of the pension fund market. No official plan or bill of law has been provided yet.