Social security in Brazil
Social security in Brazil has its origins in the 1824 Constitution, through a 'public aid' system supported by private initiatives, such as the Santa Casa de Misericórdia. Social security, along with public health and social assistance, forms part of the broader social welfare system. The Instituto Nacional do Seguro Social, responsible for managing social security benefits, was established by Decree No. 99,350 on June 27, 1990. The INSS resulted from the merger of the Instituto de Administração Financeira da Previdência e Assistência Social, founded in 1977, and the Instituto Nacional de Previdência Social, created in 1966.
Operation
The Brazilian social security system is an integral component of the country's social welfare program. Companies contribute 20% of the monthly remuneration paid to employees under employment contracts and to independent contractors. Of this amount, they deduct between 8% and 11% from workers’ salaries. Civil servants contribute between 11% and 14% of their salary, with the government contributing an equal percentage as the employer.Additionally, companies contribute to other areas of the social welfare program, such as health and social assistance, through social contributions. These include: Contribuição para Financiamento da Seguridade Social, proportional to gross revenue; Programa de Integração Social, proportional to company revenue; and Contribuição Social sobre o Lucro Líquido, proportional to the company's net profit. The funds collected from these social contributions are earmarked exclusively for social security and cannot be diverted for other uses. Notably, it is important to note that while these contributions support health and social assistance, the primary funding for social security itself comes from the deductions from employee salaries and employer payroll contributions.
According to the 1988 Constitution, the budgets of the federal government, the states, the Federal District, and the municipalities must include funds for social security.
Brazil's social security system operates under a solidarity welfare model, where current workers’ contributions fund existing beneficiaries. In this model, the working generation funds the benefits of retirees, who in turn will be supported by the next generation of workers. This system has faced challenges due to demographic shifts, particularly the significant increase in the elderly population. The imbalance between contributions and benefits has led to claims of a deficit in the social security system, which has necessitated the reallocation of resources from other areas, such as health and social assistance, to cover the shortfall. As life expectancy rises, the number of inactive individuals outpaces the number of active workers. This demographic imbalance has prompted calls for reform to address the government’s fiscal challenges, necessitating systemic changes. The high costs of social security have contributed to inflation and low economic growth, prompting the need for reforms. Over the past 30 years, Brazil has undergone three major social security reforms.
The Brazilian social security system consists of two main public schemes: Regimes Próprios de Previdência Social for tenured civil servants and are set up by the federal government, states, Federal District and municipalities, and Regime Geral de Previdência Social for private sector and other workers. Participation in these public welfare systems is mandatory for all citizens who are employed. In addition to the public schemes, Brazil also offers private or complementary social security options.
History
Background
In 1795, the Plano de Benefícios dos Órfãos e Viúvas dos Oficiais da Marinha was established to support dependents of deceased naval officers. Later, in 1808, the Mount of Piety of the Personal Guard of King John VI was created, followed by the General Mount of Piety of State Employees in 1835.In 1821, Prince Pedro de Alcântara decreed pensions for masters and teachers after thirty years of service, with an additional allowance of one-quarter of their income for continued work. By 1888, postal workers’ retirement rights were formally regulated. The 1891 Constitution extended pension rights to civil servants in cases of disability, although it did not cover other categories of workers.
Early 20th century
Law No. 3.724/1919 established accident insurance in Brazil, requiring employers to compensate for work-related accidents.Brazil’s social security system originated with the Eloy Chaves Law of 1923, which created the Caixas de Aposentadorias e Pensões for railroad workers, funded by companies, employees and railroad fares. The law also permitted CAPs for other worker categories, such as dockers and seafarers and telegraph and radio-telegraph service employees. However, although the CAPs operated on a capitalization basis, they suffered from structural weaknesses, including limited contributors, questionable demographic assumptions, and frequent benefit fraud.
In 1930, President Getúlio Vargas suspended CAP pensions for six months and initiated a restructuring that replaced the CAPs with the Institutos de Aposentadoria e Pensões, which were national authorities under federal government control. The new system organized affiliations by professional categories rather than by individual companies.
Subsequent institutes established under this system included:
- 1933 - IAPM - Instituto de Aposentadoria e Pensões dos Marítimos ;
- 1934 - IAPC - Instituto de Aposentadoria e Pensões dos Comerciários ;
- 1934 - IAPB - Bankers' Pension and Retirement Institute ;
- 1936 - IAPI - Instituto de Aposentadoria e Pensões dos Bancários ;
- 1938 - IPASE - Instituto de Aposentadoria e Pensões dos Industriários ;
- 1938 - IAPETC - Instituto de Pensões e Assistência dos Servidores do Estado ;
- 1939 - IAPOE - Instituto de Aposentadoria e Pensões dos Empregados em Transportes e Cargas ;
- 1945 - ISS - Instituto de Serviços Sociais do Brasil ;
- 1945 - IAPETEC - Decree-Law No. 7,720, of July 9, 1945, incorporated the Instituto dos Empregados em Transportes e Cargas da Estiva and renamed it Instituto de Aposentadoria e Pensões dos Estivadores e Transportes de Cargas;
- 1953 - CAPFESP - Caixa de Aposentadoria e Pensões dos Ferroviários e Empregados em Serviços Públicos ;
- 1960 - IAPFESP - Instituto de Aposentadoria e Pensões dos Ferroviários e Empregados em Serviços Públicos.
The remaining CAPs were consolidated into a national fund through Decree No. 34.596/1953. Subsequently, Law No. 3.807/1960, known as the Organic Law of Social Security, unified the social security legislation, streamlining the system.
In 1964, a commission was established to reform the social security system, leading to the merger of all the IAPs into the Instituto Nacional do Seguro Social. This transformation was formalized by Eloah Bosny through Article 1 of Decree-Law No. 72 of 1966.
The Complementary Law 11/1971 introduced the Fundo de Assistência ao Trabalhador Rural, which extended social security rights to rural workers. In 1974, the Empresa de Tecnologia e Informações da Previdência was founded. In 1977, the Sistema Nacional de Previdência e Assistência Social was established. SINPAS comprised the following entities:
- Instituto de Administração Financeira da Previdência e Assistência Social ;
- Instituto Nacional de Assistência Médica da Previdência Social ;
- Legião Brasileira de Assistência ;
- Fundação de Bem-Estar do Menor ;
- Central de Medicamentos ;
- Empresa de Processamento de Dados da Previdência Social ;
- Instituto Nacional da Previdência Social.
1988 Constitution
The 1988 Brazilian Constitution established a comprehensive social security system, encompassing health, welfare, and social assistance. This system covers various benefits, including pensions, sickness benefits, child allowances, maternity pay, and prison allowances, and is supported by the Sistema Único de Saúde, among other workers' rights. Article 195 of the Constitution outlines the financing of social security: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:Since the Constitution's enactment, the Brazilian social security system has predominantly utilized a distribution model. However, persistent issues related to system deficits have been noted over the years. Since 1988, there have been three proposed constitutional amendments aimed at reforming the pension system. According to the 2021 Global Retirement Index by French investor Natixis, Brazil was ranked 43rd out of 44 countries assessed.
I - employers, levied on payroll, turnover and profit;
II - from workers;
III - on revenue from betting contests.
In 1990, SINPAS was abolished. Law 8.029/1990 created the Instituto Nacional do Seguro Social, 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 Planos de Benefícios da Previdência Social, repealing the CLPS. Law 8.212/1991 established the Plano de Custeio. Social assistance is now regulated by Law 8.742/1993, known as the Organic Law on Social Assistance - LOAS.