From São Paulo, SP.
The Senate Committee on Economic Matters is expected to vote in the coming month of August, after the Congress Recess, a new law proposed by the Brazilian government creating the “National Supervisory Agency for Private Pensions” namely PREVIC - Superintendência Nacional de Previdência Complementar, reporting to the Social Security Ministry.
The new supervisory agency role will be to oversee the activities of the Pension Funds that are known in Brazil as “Closed Private Pension Entities” (similar to the US Trustee Funds). Currently the SPC - Secretaria de Previdência Complementar, a structure under the same Social Security Ministry, supervises these funds.
Differently from what happens today with the SPC, the new agency shall be financially and administratively autonomous from the government. The main revenue source of the new agency will be a supervisory tax to be charged from Pension Funds – the so called TAFIC - Taxa de Fiscalização e Controle da Previdência Complementar.
The TAFIC is expected to be charged quarterly according to 17 value cohorts, ranging from R$ 15 to R$ 2.2 million (US$ 8 to US$ 1.2 million), depending on the total assets managed by each retirement plan.
The minimum R$ 15 tax will apply for retirement plans which assets total R$ 5 million (US$ 2.6 million) while plans holding assets over R$ 60 million (US$ 31.5 million) will have to pay the maximum R$ 2.2 million tax.
The new agency’s annual budget of R$ 29 million (US$ 15.2 million) will count with some other revenue sources such as money coming from penalties applied over non-compliant pension fund, federal budget, contracts and agreements with third parties, among other.
The law proposal contemplates the new agency with 200 public employees, around 33 functions to be filled by employees transferred from within the current government structure and some 385 auditors to be transferred from the Internal Revenue Service.
Over the years, the supervision of pension funds has experienced an increase in complexity and sophistication, requiring a wider, more professional and consequently more expensive structure. The cost of all that structure is falling on the sponsoring companies’ shoulders since it is a market practice in Brazil for private companies to fully pay the administrative costs of its retirement plans.
As a result, the small and sometimes medium-sized pension funds are being terminated and its retirement plans transferred to less costly financial vehicles such as the “Multi-Sponsored Pension Funds” (sponsored by Banks) and “Open Private Pension Entities” (Insurance Companies specialized in administering retirement plans).
To learn more, drop me a line or call me. I can be contacted by phone (+55 11 9624 0952) or email (eder@nkl2.com.br) and will be more than happy to help.
Best regards,
Eder
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