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21 Employees benefits | 12 Months Ended
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Dec. 31, 2020
Employees Benefits |
Employees benefits |
21 | Employees benefits
(a) Health plan – Medical Assistance Since August 1, 2019, the new health plans managed by Fundação CESP (VIVEST), which replaced the previous health plans managed by SABESPREV, have been in effect. Benefits are now paid after the event, free of choice, sponsored by contributions of SABESP and the employees is as follows: Company: 7.79% (December 31, 2019 – 9.3%) on average, of gross payroll, totaling R$ 212,681 in 2019 (R$ 237,898 in 2019). (b) Pension plan liabilities The Company has Post-Employment Benefit Plans in the following modalities: Defined Benefit (BD) – G1 (i) and G0 (ii); Defined Contribution (CD) – Sabesprev Mais (iii) and VIVEST (iv). The reconciliation of costs and expenses with such plans is shown in item (v). Statements of defined benefit plans Summary of pension obligations – Liabilities
| December 31, 2020 | December 31, 2019
| G1 Plan | G0 Plan | Total | G1 Plan | G0 Plan | Total
Present value of the defined benefit obligations | (3,112,980) | (2,549,541) | (5,662,521) | (3,067,094) | (3,046,255) | (6,113,349)
Fair value of the plan’s assets | 2,793,927 | - | 2,793,927 | 2,752,417 | - | 2,752,417
Total pension plan liabilities (deficit) | (319,053) | (2,549,541) | (2,868,594) | (314,677) | (3,046,255) | (3,360,932)
Changes in Liabilities
| December 31, 2020 | December 31, 2019
| G1 Plan | G0 Plan | Total | G1 Plan | G0 Plan | Total
Plan’s liabilities |  |  |  |  |  |
Defined benefit obligation, beginning of the year | (3,067,094) | (3,046,255) | (6,113,349) | (2,532,338) | (2,606,107) | (5,138,445)
Current service cost | (40,404) | - | (40,404) | (47,001) | (227,367) | (274,368)
Interest costs | (208,485) | (206,262) | (414,747) | (224,429) | - | (224,429)
Actuarial (gains)/losses recorded as other comprehensive income | 64,637 | 521,331 | 585,968 | (392,876) | (397,597) | (790,473)
Benefits paid | 138,366 | 181,645 | 320,011 | 129,550 | 184,816 | 314,366
Defined benefit obligation, end of the year | (3,112,980) | (2,549,541) | (5,662,521) | (3,067,094) | (3,046,255) | (6,113,349)
Plan’s assets |  |  |  |  |  |
Fair value of the plan’s assets, beginning of the year | 2,752,417 | - | 2,752,417 | 2,168,436 | - | 2,168,436
Expected return of the plan’s assets | 187,317 | - | 187,317 | 192,965 | - | 192,965
Company’s contributions | 36,010 | - | 36,010 | 36,968 | - | 36,968
Participant’s contributions | 36,608 | - | 36,608 | 38,391 | - | 38,391
Benefits paid | (138,366) | - | (138,366) | (129,549) | - | (129,549)
Actuarial gains/(losses) recorded as other comprehensive income | (80,059) | - | (80,059) | 445,206 | - | 445,206
Fair value of the plan’s assets, end of the year | 2,793,927 | - | 2,793,927 | 2,752,417 | - | 2,752,417
Total pension plan liabilities (deficit) | (319,053) | (2,549,541) | (2,868,594) | (314,677) | (3,046,255) | (3,360,932)
Changes in equity - Other comprehensive income Pursuant to IAS19, the Company recognizes gains/(losses), from changes in actuarial assumptions under equity, such as equity valuation adjustments, as shown below:
| December 31, 2020 | December 31, 2019 | December 31, 2018
| G1 Plan | G0 Plan | Total | G1 Plan | G0 Plan | Total | G1 Plan | G0 Plan | Total
Actuarial gains/(losses) on obligations | 64,637 | 521,331 | 585,968 | (392,876) | (397,597) | (790,473) | (114,188) | (10,783) | (124,971)
Actuarial gains/(losses) recorded as other comprehensive income | (80,059) | - | (80,059) | 445,206 | - | 445,206 | 113,869 | - | 113,869
Total gains/(losses) | (15,422) | 521,331 | 505,909 | 52,330 | (397,597) | (345,267) | (319) | (10,783) | (11,102)
Deferred income tax and social contribution | 5,243 | - | 5,243 | (17,792) | - | (17,792) | 108 | - | 108
Equity valuation adjustments | (10,179) | 521,331 | 511,152 | 34,538 | (397,597) | (363,059) | (211) | (10,783) | (10,994)
The amounts recognized in the year are as follows:
| December 31, 2020 | December 31, 2019 | December 31, 2018
| G1 Plan | G0 Plan | Total | G1 Plan | G0 Plan | Total | G1 Plan | G0 Plan | Total
Cost of service, net | 4,608 | - | 4,608 | 8,609 | 227,367 | 235,976 | (22,431) | 232,248 | 209,817
Interest cost rates | 208,485 | 206,262 | 414,747 | 224,429 | - | 224,429 | 213,201 | - | 213,201
Expected return on the plan’s assets | (187,317) | - | (187,317) | (192,965) | - | (192,965) | (179,449) | - | (179,449)
Amount received from State of São Paulo (undisputed) | - | (95,452) | (95,452) | - | (97,300) | (97,300) | - | (96,282) | (96,282)
Total expenses | 25,776 | 110,810 | 136,586 | 40,073 | 130,067 | 170,140 | 11,321 | 135,966 | 147,287
Obligations’ maturity:
| December 31, 2020
| G1 Plan | G0 Plan
Payment of benefits expected in 2021 | 177,347 | 169,178
Payment of benefits expected in 2022 | 172,477 | 167,263
Payment of benefits expected in 2023 | 167,906 | 164,426
Payment of benefits expected in 2024 | 162,648 | 160,721
Payment of benefits expected in 2025 or after | 2,432,602 | 1,887,953
Total | 3,112,980 | 2,549,541
Duration | 11.88 years | 9.40 years
Actuarial assumptions:
| December 31, 2020 | December 31, 2019 | December 31, 2018
| G1 Plan | G0 Plan | G1 Plan | G0 Plan | G1 Plan | G0 Plan
Discount rate – actual rate (NTN-B) | 3.44% p.a. | 3.07% p.a. | 3.37% p.a. | 3.36% p.a. | 4.91% p.a. | 4.84% p.a.
Inflation rate | 3.25% p.a. | 3.25% p.a. | 3.5% p.a. | 3.5% p.a. | 4.01% p.a. | 4.01% p.a.
Nominal rate of salary growth | 5.32% p.a. | 5.32% p.a | 5.57% p.a. | 5.57% p.a | 6.09% p.a. | 6.09% p.a
Mortality table | AT-2000 | AT-2000 | AT-2000 | AT-2000 | AT-2000 | AT-2000
Sensitivity analysis Sensitivity analysis of the defined benefit pension plan as of December 31, 2020 regarding the changes in the main assumptions are:
|  | Impact on the present value of the defined benefit obligations
Assumptions | Change in the assumption | G1 | G0
Discount rate | Increase of 1.0% | Decrease of R$ 322,111 | Decrease of R$ 214,482
Decrease of 1.0% | Increase of R$ 388,571 | Increase of R$ 249,611
Life expectation | Increase of 1 year | Increase of R$ 83,576 | Increase of R$ 135,263
Decrease of 1 year | Decrease of R$ 75,824 | Decrease of R$ 118,909
Wage growth rate | Increase of 1.0% | Increase of R$ 29,598 | Increase of R$ 310,103
Decrease of 1.0% | Decrease of R$ 25,173 | Decrease of R$ 271,853
(i) | G1 Plan
Managed by Sabesprev, the defined benefit plan (“G1 Plan”), closed to new adhesions since July 2010, receives similar contributions established in a plan of subsidy of actuarial study of Sabesprev, as follows:
| • | 0.99% of the portion of the salary of participation up to 20 salaries; and
| • | 8.39% of the surplus, if any, of the portion of the salary of participation over 20 salaries.
The active participants as of December 31, 2020 totaled 3,512 (3,758 as of December 31, 2019), while inactive participants were 7,580 (7,399 as of December 31, 2019). The contributions of the Company and participants of the G1 Plan in 2020 were R$ 36,009 (R$ 36,968 in 2019) and R$ 36,608 (R$ 38,391 in 2019), respectively. Of this amount, the Company and the participants’ payments corresponding to the actuarial deficit of the G1 pension plan totaled R$ 26,326 and R$ 26,895, respectively, in 2020. Estimated expenses for the comig year
| 2021
Cost of services, net | 2,226
Interest costs | 205,707
Net profitability on financial assets | (184,687)
Expenditures to be recognized by the employer | 23,246
Plan’s assets The plan’s investment policies and strategies are aim at getting consistent returns and reduce the risks associated to the utilization of financial assets available on the Capital Markets through diversification, considering factors, such as the liquidity needs and the long-term nature of the plan liability, types and availability of financial instruments in the local and international markets, general economic conditions and forecasts as well as requirements under the law. The plan's asset allocation management strategies are determined with the support of reports and analysis prepared by Sabesprev and independent financial advisors:
| December 31, 2020 | % | December 31, 2019 | %
Total fixed income | 1,811,164 | 64.8 | 1,795,554 | 65.2
Total equities | 311,958 | 11.2 | 301,707 | 11.0
Total structured investments | 575,943 | 20.6 | 630,933 | 22.9
Other | 94,862 | 3.4 | 24,223 | 0.9
Fair value of the plan’s assets | 2,793,927 | 100 | 2,752,417 | 100
Restrictions with respect to asset portfolio investments, in the case of federal government securities: i) instruments securitized by the National Treasury will not be permitted; ii) derivative instruments must be used for hedge. Restrictions with respect to asset portfolio investments, in the case of variable-income securities for internal management, are as follows: i) day-trade operations will not be permitted; ii) sale of uncovered share is prohibited; iii) swap operations without guarantee are prohibited iv) leverage will not be permitted, i.e., operations with derivatives representing leverage of asset or selling short, such operations cannot result in losses higher than invested amounts. As of December 31, 2020, Sabesprev did not have financial assets issued by the Company in its own portfolio; however, said assets could have been part of the investment fund portfolio invested by the Foundation. The real estate held in the portfolio is not used by the Company. (ii) G0 Plan Pursuant to State Law 4,819/1958, employees who started providing services prior to May 1974 and retired as an employee of the Company acquired a legal right to receive supplemental pension payments, which rights are referred as "G0 Plan ". The Company pays these supplemental benefits on behalf of the State of São Paulo and makes claims for reimbursements from the State Government, which are recorded as accounts receivable from related parties, limited to the amounts considered virtually certain that will be reimbursed by the State of São Paulo. The number of active participants of Plan - Go as of December 31, 2020 and 2019 was 10. The number of beneficiaries, retirees and survivors as of December 31, 2020 was 1,862 (1,960 as of December 31, 2019). Estimated expenses for 2021
| 2021
Interest cost rate | 158,214
Expense to be recognized | 158,214
(iii) Sabesprev Mais Plan As of December 31, 2020, this Defined Contribution Plan administered by Sabesprev had 9,587 active and assisted participants (9,774 as of December 31, 2019). With respect to the Sabesprev Mais plan, the contributions from the sponsor represent 100% over the total basic contribution from the participants. (iv) VIVEST Since December 31, 2019, the Sabesprev Mais Plan has not been accepting any new adhesions and, since January 1, 2020, new employees have the option to enroll in Fundação CESP’s Defined Contribution Plan (VIVEST), as well as those who did not enroll in the Sabesprev Mais Plan. As of December 31, 2020, it had 24 participants. (v) Reconciliation of expenses with pension obligations
| December 31, 2020 | December 31, 2019 | December 31, 2018
G1 Plan | 25,776 | 40,073 | 11,321
G0 Plan | 110,810 | 130,067 | 135,966
Sabesprev Mais Plan | 21,700 | 22,461 | 20,761
VIVEST Plan | 58 | - | -
Subtotal | 158,344 | 192,601 | 168,048
Expenses capitalized in assets | (4,904) | (6,022) | (5,214)
Other | 5,841 | 8,040 | 7,592
Pension plan obligations (Note 29) | 159,281 | 194,619 | 170,426
(c) Profit sharing The profit sharing program was implemented in accordance with an agreement with the labor union. Payment corresponds to up to one-month salary for each employee, depending on performance of goals reached from January to December, and should be paid in April of the subsequent year. From January to December 2020 and 2019, R$ 90,980 and R$ 93,486, respectively, were accrued under “Salaries, payroll charges and social contributions”, in current liabilities.

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