New pension regulations in Brazil allow — but do not require — employer sponsors of supplemental retirement plans administered by so-called closed pension entities (similar to trusteed funds in the U.S. and U.K.) to establish procedures for automatically enrolling new employees into the plan. Separate new tax legislation gives participants in supplemental retirement plans more flexibility in selecting the tax treatment of their retirement benefits.
Resolution CNPC 60/24, approved on February 7, 2024, by the National Complementary Pension Council (CNPC), states that employers may elect to automatically enroll new employees into the company’s closed retirement plan upon starting work, provided employer contributions equal at least 20% of the value of employee contributions. The resolution is effective March 1, 2024; if the employer elects automatic enrollment, plan rules must be amended accordingly.
The resolution also states that:
Amendments to law No. 11,053/2004, enacted on January 11, 2024, give participants in supplemental account-based pension plans more flexibility by allowing them to select one of two options for the treatment of their retirement benefits for tax purposes up to the date of first receipt of the benefits. Under the previous rules, participants had to make a choice at the time of enrollment (by the last business day of the month following entry in the plan). The change applies to accumulated entitlements in plans administered by private pension funds, insurance companies or individual retirement funds (Brazilian FAPIs).
More specifically:
Around half of companies surveyed by WTW provide supplemental retirement benefits to employees. Companies with retirement plans set up via closed entities (54% of surveyed plans) should review the new regulations and consider whether they want to amend their plan rules to allow for automatic enrollment. While the new legislation concerning the choice of tax regime for retirement benefits does not impact employers directly, the change may result in higher after-tax pension benefits for some participants, and companies should ensure their employees are informed about the new rule.