RIO DE JANEIRO - After more than an 18-month hiatus, social security reform is again on the legislative front burner in Brazil, following the Senate's recent first-round passage of a proposed social security amendment.
In a 59-12 vote, the Senate rewrote and passed an amendment that reduces government payouts more than an earlier amendment, passed by the Chamber of Deputies in 1996, would have.
Still, the rewritten amendment must win second-round passage in the Senate, which is likely this month, and then be returned again to the lower house for two votes. The entire legislative process is expected to stretch into 1998.
The key social security reform - included in both the original Chamber-passed amendment and the rewritten Senate-passed one - continues to link government social security payouts to age and length of contribution, not to the number of years worked, as is now the case. Currently, to be eligible for full social security payments, men can retire after 35 years of work and women can retire after 30 years.
The new Senate amendment says that to qualify for full payments, men have to be 60 years old and must have contributed for 35 years and women must be 55 years old and must have contributed for 30 years. These eligibility requirements are a hybrid of those in the 1996 amendment approved by the Chamber of Deputies. In that plan, eligible men in the private sector had to be 65 years old and had to make contributions for 35 years, while women had to be 60 years old and had to contribute for 30 years. In the public sector, eligible men had to be 55, with 35 years of contributions and women had to be 50 years old, with 30 years of contributions.
But the most important change in the Senate amendment, in terms of curbing those payouts, is one which reduces social security benefits for public-sector workers. Under the Senate's plan, public-sector employees earning more than 1,200 Brazilian reals (U.S. $1,100) a month - the bill's benefit ceiling for private-sector workers - will only receive a percentage of their last salary. Although that percentage will be later fixed by enabling legislation, it is likely to be up to 70% of their last salary (depending on the salary). Thus, only public-sector workers earning up to R$1,200/month receive their full last salary back as benefits.
(The Chamber-passed amendment, like the current social security law, said public-sector employees will receive benefits equal to their last salary, no matter what that salary.)
Marlene Reiner, a senior consultant with the Sao Paulo subsidiary of Towers, Perrin, said that because the new Senate-passed social security amendment reduces the benefit of public sector workers who earn more than R$1,200, it will somewhat aid the government's attempt to reduce its payouts. However, it won't solve the government's main social security headache: the social security program remains financially in red ink.
Leda Cristina Prates Vicenzetto, the superintendent of the legal department of the Association of Brazilian Pension Funds, agreed the new Senate amendment would, more than the Chamber version, reduce the government's social security payouts.
But to her, both bills are a vast improvement over the current system. As she pointed out, both versions link social security payouts to the length of contribution and age, not to the number of years worked. This change would be key to reducing the government's social security payouts in future years.
