Exemption from municipalities could increase INSS deficit – 02/05/2024 – Market

Exemption from municipalities could increase INSS deficit – 02/05/2024 – Market

Congress’s willingness to cut the contribution rate of city halls to the INSS (National Social Security Institute) raised an alert within the Luiz Inácio Lula da Silva (PT) government about the risk of mass migration from municipalities that currently maintain their own insurance regimes. Pension.

Any transfer of municipal employees to the general regime could deepen the INSS deficit, which in 2023 closed at R$311.3 billion — or R$283.6 billion, discounting the extraordinary payment of court orders held back from previous years.

The fear exists because Congress approved a law that reduces the employer contribution from 20% to 8% for municipalities with up to 156,200 inhabitants. The measure was vetoed by Lula, but was reinstated by parliamentarians.

Subsequently, the government issued an MP (provisional measure) to revoke the benefit, considered unconstitutional by the Executive’s legal department. The initiative, however, faces resistance from deputies and senators and is still the subject of negotiations.

Just with the city halls that currently collect for the INSS, the impact is R$4 billion per year. But the exemption could create a situation of high disparity with the 2,118 city halls that have their own regimes and are responsible for keeping them in balance.

In these municipalities, the normal employer tax rate varies between 11% and 31%, with an average of 16.5%. However, the actuarial deficit — technical jargon for the data that signals the lack of sufficient money to cover the payment of benefits in the future — forces around half of the city halls to pay supplementary rates ranging from 0.1% to 153.7 % on the sheet (on average, 18.5%).

In the assessment of the MPS (Ministry of Social Security), the cut in the INSS rate for municipalities could intensify the search by mayors for migration to the general regime as a way of obtaining short-term relief on cash. This movement had already been taking place last year, amid the financial difficulties of municipalities.

Although in the short term migration may increase INSS revenues, in the future the gap will be greater with the payment of more pensions.

“Even before the National Congress’ decision, we spent the whole of last year meeting mayors to find out if there would be Refis [refinanciamento de dívidas] extended, 240 months, others wanting to do the math if it would be worth migrating to the RGPS”, he told Sheet the secretary of the General Social Security Regime, Adroaldo da Cunha Portal.

The CNM (National Confederation of Municipalities) stated that the government’s argument is a “maneuver” to postpone the discussion of city halls’ social security contributions while proposing an intermediate charging model, based on per capita income, population level or wealth — all rejected by the entity.

According to a preliminary assessment by the government, 1,950 municipalities with their own Social Security systems (91% of the total) are maintained by cities with up to 156.2 thousand inhabitants and could benefit from the reduced INSS rate in the event of migration.

Any transfer would not exempt them from commitments, such as paying the INSS everything that has already been collected for that group of insured people (the so-called social security compensation) or paying for benefits already granted by the own regime.

But technicians recognize that these obligations would only have an impact on municipalities’ cash flow in the medium and long term. In other words, regime change could be attractive to mayors interested in getting out of a pressure situation and getting a short-term breather.

On this horizon, migration would, in fact, bring relief. In addition to reducing the normal rate to the 8% approved by the Legislature, city halls could reduce or even eliminate supplementary charges. The money would be free to pay for other public policies.

What worries the federal government is that someone will need to pay this bill in the future. INSS collections would be lower for an increasingly larger amount of obligations. The sharp imbalance in Social Security accounts would require an even greater fiscal effort from the Union.

The change would also have relevant repercussions for municipal employees.

In the case of an employee who has worked his entire life for the city hall and never contributed to the INSS, regime migration would place him under the definitive rule for retirement approved in the Social Security reform — that is, a minimum age of 62 for women and 65 for women. for men, without the right to transition.

The large number of implications led the Secretariat for the Own and Complementary Regime, linked to the MPS, to draw up a booklet to raise awareness among city halls about the “time bomb” that would be the extinction of current funds. Such a decision would be irrevocable, as the reform prohibited the creation of new local systems.

For the CNM, the payment of compensation and the repercussions on the lives of civil servants would be enough reasons to discourage migration.

“There is no real chance of the municipality doing this. The government is, once again, maneuvering for something favorable to it and delaying aid to the municipalities”, said the entity’s president, Paulo Ziulkoski.

Even without migration, the government assesses that the lower employer rate in the INSS could encourage temporary hiring (linked to the general regime) to the detriment of public competitions (whose employees would enter the specific regime).


The RGPS secretary stated that the exemption of city halls, although it is a legitimate demand from municipalities, is an example of how Congress is increasingly sensitive to demands from groups for benefits within the scope of Social Security.

The ministry monitors the progress of proposals that could grant privileges to certain categories.

One of the projects, approved in May 2023 in the Senate, intends to extend the right to special retirement to municipal guards and other categories. Another initiative proposes an annual bonus (14th salary) for INSS retirees and pensioners.

There is also a PEC (proposed amendment to the Constitution) that creates a special pension for community health workers.

In the pension system, if a group can pay less or retire earlier, this means higher costs and lower revenue in the future, generating pressure for new reforms.

“The concern always expressed in the secretariat’s technical notes is to warn of the risk of granting special rules differentiated for specific categories. This has an actuarial impact on Social Security that is always worrying”, stated Portal.

“As governments with a more fiscalist bias decide to reform Social Security, the cut ends up coming to those who had an adequate actuarial calculation and contributed over 35 years,” he said.

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