Social security in Brazil

In 1795, the Benefit Plan for Orphans and Widows of Naval Officers was created with the aim of protecting the dependents of naval officers against the risk of death. In 1808, the Mount of Piety of the Personal Guard of King João VI was established and, in 1835, the General Mount of Piety of State Employees.[11]

In 1821, Prince Pedro de Alcântara decreed that masters and teachers who reached thirty years of service would be granted a pension, with an allowance of a quarter of their income for those who continued to work when they had completed their service. In 1888, the right to retirement for postal workers was regulated. The 1891 Constitution included pensions for civil servants in the case of disability, but did not include other categories of workers.[12][11]

Law No. 3.724/1919 established accident insurance, which made it compulsory for employers to pay compensation.[11]

Social security in Brazil developed with the Eloy Chaves Law of 1923, which created the Retirement and Pension Funds (CAPs) for railroad workers, financed by companies, employees and railroad fares. The law allowed for the creation of CAPs for other categories, such as dockers and seafarers (Law No. 5.129/1926) and the staff of telegraph and radio-telegraph service companies (Law No. 5.485/1928). The CAPs operated on a capitalization basis, but they were structurally fragile since they had a small number of contributors and followed demographic assumptions with dubious parameters; another weak aspect was the high number of frauds in the granting of benefits.[12][13][14]

In 1930, Brazilian president Getúlio Vargas suspended CAP pensions for six months and promoted a restructuring that ended up replacing them with Retirement and Pension Institutes (IAPs), which were national authorities centralized in the federal government. Affiliation began to be based on professional categories, unlike the CAP model, which was organized by company.[11]

Over the following years, the following institutes would emerge:

• 1933 - IAPM - Maritime Pension and Retirement Institute (Decree No. 22.872, of June 29, 1933);[15]
• 1934 - IAPC - Merchants' Retirement and Pension Institute (Decree No. 24.272, of May 21, 1934);[16]
• 1934 - IAPB - Bankers' Pension and Retirement Institute (Decree No. 24.615, of July 9, 1934);[17]
• 1936 - IAPI - Institute of Retirement and Pensions for Industrial Workers (Law No. 367, of December 31, 1936);[18]
• 1938 - IPASE - Pension and Assistance Institute for State Servants (Decree-Law No. 288 of February 23, 1938);[19]
• 1938 - IAPETC - Institute of Retirement and Pensions for Employees in Transport and Freight (Decree-Law No. 651, of August 26, 1938);[20]
• 1939 - IAPOE - Institute of Retirement and Pensions for Dock Workers (Decree-Law No. 1.355, of June 19, 1939);[21]
• 1945 - ISS - Institute of Social Services of Brazil (Decree No. 7.526, of May 7, 1945);[22]
• 1945 - IAPETEC - Decree-Law No. 7,720, of July 9, 1945, incorporated the Institute of Transport and Dockworkers and renamed it the Institute of Retirement and Pensions for Dockworkers and Cargo Transporters;[23]
• 1953 - CAPFESP - Retirement and Pension Fund for Railwaymen and Employees in Public Services (Decree no. 34.586, of November 12, 1953);[24]
• 1960 - IAPFESP - Institute of Retirement and Pensions for Railwaymen and Employees in Public Services (Law no. 3.807, of August 26, 1960, art. 176 - CAPFESP extinct).[25]

The 1934 Constitution established a triple form of funding, based on contributions from the employee, the employer and the state. The 1946 Constitution mentions social security, systematizing social protection rules against death, illness, disability and old age.[11]

The remaining CAPs were transformed into a National Fund by Decree 34.596/1953. Law No. 3.807/1960 (Organic Law of Social Security - LOPS) unified the social security legislation.[11]

In 1964, a commission was formed to reformulate the social security system, which culminated in the merger of all the IAPs into the INPS (National Social Security Institute), created by Eloah Bosny in 1966, by Article 1 of Decree-Law 72 of 1966.[26]

Complementary Law 11/1971 instituted FUNRURAL, guaranteeing rural workers access to social security rights. In 1974, Dataprev was founded. In 1977, the National Welfare and Social Assistance System (SINPAS) was established and was composed ofː[11]

• Institute for the Financial Administration of Social Security and Assistance (IAPAS);
• National Social Security Medical Assistance Institute (INAMPS);
• Brazilian Assistance Legion (LBA);
• Foundation for the Welfare of Minors (FUNABEM);
• Medicines Center (CEME);
• Social Security Data Processing Company (DATAPREV);
• National Social Security Institute (INPS);

The LOPS was replaced by the Consolidation of Social Security Laws (CLPS) in 1976.[11]

The 1988 Brazilian Constitution established Social Security, based on the Health, Welfare and Social Assistance tripod, covering pensions, sickness and child benefit, maternity pay, prison allowance, the Unified Health System, among other workers' rights. Article 195 of the document states:[6]

Art. 195. Social security shall be financed by society as a whole, directly and indirectly, under the terms of the law, through resources from the budgets of the Union, the States, the Federal District and the Municipalities, and from the following social contributions:

I - employers, levied on payroll, turnover and profit;

II - from workers;

III - on revenue from betting contests.

Since then, the Brazilian social security system has been characterized by a distribution method. However, problems relating to the system's deficit have been pointed out repeatedly over the years. Since the enactment of the 1988 Constitution, there have been three proposed constitutional amendments aimed at reforming the country's pension system. Out of 44 countries assessed by French investor Natixis in 2021, Brazil was ranked 43rd in the Global Retirement Index (GRI).[11][27]

In 1990, SIMPAS was abolished. Law 8.029/1990 created the National Social Security Institute (INSS), incorporating INPS and IAPAS. INAMPS, which operated alongside INPS, was abolished and its services began to be covered by SUS. Law 8.213/1991 established the Social Security Benefit Plans (PBPC), repealing the CLPS. Law 8.212/1991 established the Funding Plan. Social assistance is now regulated by Law 8.742/1993 (Organic Law on Social Assistance - LOAS).[12]

In 1998, the federal government changed the social security rules with the Proposed Amendment to the Constitution (PEC) No. 20, which stipulated a minimum age for retirement: 55 for women and 60 for men. Until then, retirement was valid for those who contributed for 25 to 30 years in the case of women, and 30 to 35 years in the case of men, but with no minimum age limit. The PEC also created the Social Security Factor, contained in Law 9.876/99, which amended provisions of Laws 8.212 and 8.213/91; as well as a transition rule for those already contributing to the system before the amendment was approved.[11]

PEC No. 40 aimed to determine the contribution criteria for inactive civil servants in the Union, states and municipalities, and to establish the basis for calculating retirement pensions. It abolishes the transitional rules for voluntary retirement, with the exception of the option to reduce the amount for each year of anticipation. Civil servants who have already retired, or who have the so-called acquired right (who meet the conditions to request retirement, but prefer to continue working), have been guaranteed full and equal benefits in the reform. The other civil servants, who have no vested rights but entered the service before the proposal was approved and enacted, can receive full benefits (retirement equal to their last active salary) and parity (the same adjustments as for active civil servants), but to do so they must meet five requirements: men must be 60 years old, have 35 years of contributions, 20 years of public service, 10 years of career and 5 years in their last position; women must be 55 years old and have 30 years of contributions, in addition to the other three requirements. If they fail to meet all the requirements, then their pensions will be calculated by the average of the salaries received throughout their working lives, which will result in a benefit that is necessarily lower than the last salary received while working (the highest ever received).[28][29]

Civil servants who join the public sector after the reform is enacted will never have full and equal pensions. For them, the reform provides for a cap of the same amount as that paid by the INSS as the maximum retirement amount in the private sector, currently R$7,507.49. Those who want to earn more will have to contribute to supplementary pension funds. However, as this cap was only regulated in 2013, it only came into force from that date - more specifically from March of that year - and only for federal civil servants (the obligation for states and municipalities, with their own pension schemes, to create their own supplementary pension schemes was only determined by the reform made in 2019, under the Bolsonaro government).[28][30]

This reform was contested years later, due to the circumstances of the mensalão scandal, in which it was questioned whether the approval of this PEC would be linked to the bribes received by the parliamentarians accused in this scandal.[31][32]

Henrique Meirelles, Minister of Finance in the Michel Temer government, responsible for the reform proposal.

At the end of 2016, the Michel Temer government sent a social security reform proposal to the National Congress, which was filed in the Chamber of Deputies as PEC 287/2016. It modified the retirement rules, due to the population's average life expectancy, the trend towards a reduction in the working-age population, among other aspects. PEC 287 proposed that everyone - except the military (who were not included in this proposal) - would have the same retirement rules: private sector workers, politicians and civil servants, including high-ranking civil servants from the Union, states and municipalities, would retire at 65 (men) and 62 (women), with the value of the benefit limited to the INSS cap (R$ 5531), as well as increasing the contribution time to 40 years for workers to receive a full pension (the maximum value of which, in 2017, is R$ 5,531.31). 531.31). The minimum contribution time to social security would increase by 67% for civil servants, from 15 to 25 years, but was kept at 15 years for private sector workers.[33][34][35]

In February 2018, the Michel Temer government officially announced that it was suspending the processing of PEC 287/2016, due to the fourteen-month impasse with parliamentarians and the bad repercussions of the government's idea to temporarily suspend the federal intervention in Rio de Janeiro in order to vote on and enact the reform, since the Constitution prevents changes to the text during periods of federal intercession.[36]

Performance of the National Anthem during the presentation of the 2nd phase of the New Social Security advertising campaign.

On February 20, President Jair Bolsonaro delivered to Congress the reform proposal drawn up by the Ministry of Economy team, headed by Paulo Guedes.[37][38][39] One of the fundamental points of the reform is the proposed transition from the current distribution system to a capitalization system. In the distribution system, workers who contribute to the social security system are actually paying for the retirement of those who are already retired. In the capitalization system, each worker will be responsible for contributing to their own pension, in a way, like a savings account, which would be managed by public and private entities of the worker's choice. Paulo Guedes has mirrored the Chilean pension model, in which the money is managed by private companies which, in turn, can invest in the financial market.[40][41]

The social security reform proposal was filed in the Chamber of Deputies as PEC 6/2019, approved in April of the same year in the Constitution and Justice and Citizenship Committee (CCJ), almost three months later in the Special Committee, and in July by the full Chamber, in the first round, and in August in the second round. In the Federal Senate, the proposal was definitively approved on October 23, 2019. Senator Tasso Jereissati was the rapporteur for the proposed constitutional amendment in the Senate's Constitution and Justice and Citizenship Committee. The text was promulgated as a Constitutional Amendment on November 12, 2019. The matter was the 103rd amendment to the 1988 Constitution.[42][43][44][45][46]

According to economists, public coffers are expected to save R$800 billion in the first 10 years after the proposal is enacted.[47][48]

• Jaguaribe, Helio (1990). Brasil: reforma ou caos (5 ed.). Rio de Janeiro: Paz e Terra.