The MP 889 brings changes to the FGTS

In the extra edition of the Official Gazette, Provisional Measure (“MP”) 889was published on July 24 amending the legislation of the Employee’s Severance Fund (“FGTS”), Social Integration Programs and Public Servant Fund (“PIS/Pasep”), and the Workers Fund (“FAT”).

The new rules for release of the withdrawal of values from active and inactive FGTS and PIS/PASEP accounts brought by MP are measures aimed at improving the economy and positively impacting Gross Domestic Product (“GDP”).

Among other important changes promoted by this Provisional Measure, we highlight the following points:

Immediate Withdrawal

People with active or inactive FGTS account may withdraw up to BRL 500.00 between September 2019 and March 31, 2020.

Withdrawals should be made in accordance with the service schedule, criteria and form established by the Caixa Econômica Federal (“CEF”). For those with Caixa savings account, the FGTS will be automatically transferred to the holder's account. Account holders who do not wish to withdraw the amount should inform the bank.

Those who do not hold account at CEF and intend to withdraw values up to BRL 100.00 may go to lottery shops. Those who have a Cartão do Cidadão will be able to cash out at CEF's ATMs. For other cases, going to a CEF branch for withdrawal will be required.

Birthday-withdrawal

The birthday-withdrawal modality of the existing values in active FGTS accounts was created with MP 889. Workers will remain entitled to withdrawal by termination, but may opt for the birthday-withdrawal.

With this new modality, workers will be able to annually withdraw a percentage from the FGTS balance in the month of their birthday, according to the chart in the MP 889 annex. The greater the FGTS balance, the greater shall be the amount allowed for withdrawal.

From 2020, the worker will have to choose whether to keep in this option or in the withdrawal mode. However, it is noteworthy that if you opt for the birthday-withdrawal, that is, to annually withdraw a portion of the FGTS, the worker will no longer have the possibility of receiving the fund in case of termination without a cause and termination by mutual agreement.

The first option for the birthday-withdrawal can be made at any time and will be immediately effective. Therefore, if the employee decides to return to the withdrawal at termination, the 24-month grace period must be waited.

Note: For termination without a cause, the employee who opts for the birthday-withdrawal will also be entitled to the withdrawal of the 40% as termination penalty.

Loan

In the form of birthday withdrawal, the employee will be allowed to dispose of the balance referring to annual withdrawals to a financial institution. This will allow the employee to advance a loan from the amount you have to receive in annual installments with interest charges. However, this new line of credit will still need to be regulated by the FGTS Board of Trustees.

Remuneration of the FGTS accounts

The remuneration of FGTS accounts will continue to yield 3% per year, plus the Referential Rate (TR), but there will be full distribution of fund income to all participants (currently, 50% of this amount is passed on).

Penalties

MP 889 provides that the employer is required to prepare payroll and state the FGTS values data and other information of interest of the Ministry of Economy, through digital bookkeeping system, in the form, on deadline and under the conditions established by regulation of the Curator Council.

The penalty applicable to employers due to inaccuracies in providing this information related to the FGTS now varies from BRL 100.00 to BRL 300.00, per injured worker.

For purposes of calculation and entry, the FGTS directly paid to the employee will not be settled, and the conversion of FGTS deposits into compensatory indemnity is prohibited.

The MP also provides for the possibility of an ex-officio assessment by the relevant authority, either of the main or accessory obligations, whenever the omission, inaccuracy, fraud or evasion of the FGTS occurs.

PIS/Pasep

MP 889 establishes that the full withdrawal of their balance is available to any individual PIS/Pasep account holder from Aug-19-2019, with no deadline for this.

In the event of the death of the PIS/Pasep account holder, dependents and successors will have access to the fund. In the case of successors, it will be possible to make the withdrawal even if the assets sharing is under inventory process, simply by submitting a statement attesting in writing the withdrawal authorization and stating that there are no other known dependents or successors.

FAT

The Ministry of Economy is to regulate the criteria and conditions for the return the funds invested in special deposits to FAT, as well as the conditions for use and replenishment of the minimum liquidity reserve of the support fund.