The Federal Supreme Court has done well to resolve the dispute that still surrounds the thesis known as the “whole life review” in pension calculations. According to this thesis, anyone who contributed to Social Security before 1999 could have chosen between two rules, which rule was more useful when calculating the amount they would receive from the National Institute of Social Security. The Fund decided to apply only the transitional rule approved in this year’s social security reform, which only counts contributions made after July 1994, when the country achieved monetary stability through the Real Plan.
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The Universal Life Review stipulated that, if useful, the insured could calculate average contributions using all salaries, even those obtained before 1994. This hypothesis was upheld by the Supreme Court of Justice (STJ) in 2019 and upheld by the STF itself in 2022. However, in 2023, Minister Alexandre de Moraes, case rapporteur of the Supreme Court, suspended the processing of all processes in a subject. Until the appeals submitted by the government are decided.
At the time, the National Social Security Institute said the impact on Social Security accounts would be unbearable. In the extreme scenario, which combines retrospective and future payments to all those affected, the government was talking about up to R$480 billion, assuming 15 years of average survival for policyholders. The Federal Prosecutor’s Office estimated the additional monthly cost at R$2 billion (monthly pension payments this year amounted to about R$45 billion). The Brazilian Institute of Social Security Law (IBDP) disputed these figures. Based on the rules for claiming benefits, IBDP estimated that the new rules would affect only 383,000 beneficiaries, at a cost of R$1.5 billion over five years.
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Regardless of who was right, there would be a cost to the Treasury. With this in mind, in March 2024, when ruling on the ban introduced by INSS, the Supreme Court retreated from its previous understanding and considered one rule valid for those who had already contributed to Social Security before 1999: the transition imposed by that year’s reform, according to which entitlement must be calculated on the basis of 80% of the highest salaries earned throughout their career, excluding those before July 1994. In April of this year, the STF specified that there would be no refunds based on Thesis. Finally, this week the Court definitively canceled the “comprehensive review” and released the pending proceedings (there are about 140,000 proceedings being processed in the judiciary on this subject).
There is no doubt that the decision represents relief for Social Security accounts at a critical time. As the impact of the 2019 reform fades, it is already clear that the country will need a new reform to tighten pension rules. As Minister Cristiano Zanin argued in the decisive vote to abolish the Whole Life Review thesis, if the Constitution prohibits the use of different criteria for granting entitlement, it is illogical for the insured to be able to choose an account that is more beneficial to him.