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POST-EMPLOYMENT OBLIGATIONS | 12 Months Ended
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Dec. 31, 2022
Post-employment Obligations |
POST-EMPLOYMENT OBLIGATIONS |
24. | POST-EMPLOYMENT OBLIGATIONS
Forluz Pension plan (a Supplementary retirement pension plan) CEMIG and its subsidiaries are sponsors of Forluz - Forluminas Social Security Foundation, a non-profit legal entity whose object is to provide its associates and participants and their dependents with a finance income to complement retirement and pension, in accordance with the pension plan that they are subscribed in. Forluz provides the following supplementary pension benefit plans available to its participants: Mixed Benefit Plan (‘Plan B’): This plan operates as a defined-contribution plan in the fund accumulation phase for retirement benefits for normal time of service, and as a defined-benefit plan for disability or death of participants still in active employment, and for receipt of benefits for time of contribution. The Sponsors match the basic monthly contributions of the participants. This is the only plan open for joining by new participants. The actuarial risks related to Plan B occur only as from the option for the lifetime benefit at the moment of the participant’s retirement. In this specific case the responsibility for the risk of insufficiency of reserves for coverage of the benefits (deficits) is in parity between sponsors and participants. Funded Benefit Plan (‘Plan A’): This plan includes all currently employed and assisted participants who opted to migrate from the Company’s previously sponsored defined benefit plan and are entitled to a benefit proportional to those balances. For participants who are still working, this benefit has been deferred to the retirement date. The benefit balances of Plan A have the characteristic of lifetime payment, and the responsibility for the risk of insufficiency of reserves to cover the benefits (deficits) is exclusively that of the sponsors. In addition to the Forluz pension plans, CEMIG, CEMIG GT and CEMIG D , contribute to a health and a dental plan for the active employees, retired employees and dependents, administered by CEMIG Saúde. Life insurance Until the end of the Collective Agreement in effect until October 2021, the Company made available coverage of 50% of the life insurance policy cost, with certain specific characteristics for retirees. However, as a result of the amendment in the Collective Work Agreement for 2021-2023, in relation to offer and payment of life insurance for the employees and former employees, the Company understood that the post-retirement benefit in question had been canceled in its entirety, and as a result wrote off the balance of the obligation, remeasured using the revised actuarial assumptions, recognized in the Statement of income and Shareholders’ equity, in the amounts of R$ 415 and R$ 59. On February 2, 2022 the Association of Retired Energy Workers and Pension Holders of CEMIG and its Subsidiaries (Associação dos Eletricitários Aposentados e Pensionistas da CEMIG e Subsidiárias - AEA/MG) filed an injunction ordering the Company to comply with and maintain in full the same terms relating to coverage of the life insurance premium as were previously practiced. However, on February 11, 2022, the Regional Employment Law Appeal Court of the 3rd Region refused this application, on the grounds that this had been validly decided in the collective agreement. Actuarial obligations and recognition in the financial statements On this Note the Company discloses its obligations and expenses incurred for purposes of the Retirement Plan, Health Plan, Dental Plan and the Life Insurance Plan in accordance with the terms of IAS 19 - Employee Benefits, and the independent actuarial opinion issued as of December 31, 2022. Agreement to cover the deficit on Forluz Pension Plan ‘A’ Forluz and the sponsors CEMIG, CEMIG GT and CEMIG D have signed a Debt Assumption Instrument to cover the deficit of Plan A for the years of 2015, 2016 and 2017. On September 30, 2022 the total amount payable by CEMIG and its subsidiaries as a result of the Plan A deficits was R$547 (R$539 on December 31, 2021 referring to the Plan A deficits of 2015, 2016 and 2017). The monthly amortizations, calculated by the constant installments system (Price Table), will be paid up to 2031 for the 2015 and 2016 deficits, in the amount of R$364, and up to 2033 for the 2017 deficit, in the amount of R$184. Remuneratory interest applicable to the outstanding balance is 6% p.y., plus the effect of the IPCA. If the plan reaches actuarial surplus before the full period of amortization of the debt, the Company will not be required to pay the remaining installments and the contract will be extinguished. Restricted deposits made to Forluz Resolution of the 2019 deficit In December 2020, in accordance with the applicable legislation, Forluz proposed to CEMIG a new Debt Assumption Instrument to be signed, if approved, by Forluz, CEMIG, CEMIG GT and CEMIG D, in accordance with the plan to cover the deficit of Plan A, which occurred in 2019. The total amount to be paid by the Company to cover the deficit, without considering joint contribution, is R$160, through 166 monthly installments. The remuneration interest rate over the outstanding balance is 6% per year, plus the effect of the IPCA. If the plan reaches actuarial balance before the full period of amortization of the debt, the Company will not be required to pay the remaining installments and the contract will be extinguished. The Company recognized the legal obligation in relation to the deficit of Plan A corresponding to 50% of the minimum amount, and, thus, obeying the contribution parity rule, made payments in the amount of R$17 in consignment (R$7 on December 31, 2021), to remain at the disposal of Forluz to be redeemed at an account with an official bank. Due to the refusal by Forluz to receive this amount, on May 26, 2021 the Company proposed an Action of Consignment in Payment, which is in its initial pleading phase. Due to the Debt Assumption Instrument not being signed for coverage of the minimum amount proposed in the plan for solution of the Plan A actuarial deficit for 2019, and the refusal of the payments in consignment made by the Company, on April 27, 2021 Forluz filed legal action against sponsors CEMIG, CEMIG GT and CEMIG D, applying for approval and confirmation of the request to ensure compliance with the contracting of the debt for coverage of the deficit of Plan A, in the amount of R$160, for the 2019 fiscal year. In May 2022 the first instance of the Employment Law Appeal Court of Minas Gerais gave a decision in favor of Forluz, and against the Company’s requests - but in this dispute appeal lies to hire instances. As a result, the Company, based on the assessments of its specialists, has opted to maintain its assessment of the chances of loss in the action as ‘possible’. Resolution of the 2020 deficit On March 31, 2022, in view of the divergences mentioned in the previous item, payment in consignation of the 2020 deficit of Plan A has begun, with deposit of the first tranche, limited to 50% of the amounts specified in the Plan proposed by Forluz, in obedience to the constitutional rule of parity of contribution. Forluz appealed, exercising its procedural right, on April 18, 2022. The amount deposited by the Company, on December 31, 2022, was R$11, which will be held in escrow, available to Forluz, by an official bank. The total amount to be paid by the Company arising from the deficit ascertained in Plan A, without considering parity, is R$252, in 158 monthly payments, with remuneratory interest of 6% per year on the outstanding balance, plus inflation as measured by the IPCA-IBGE (Expanded National Consumer Price index). If the plan reaches actuarial balance before the full period of amortization of the contract, the Company is dispensed from payment of the remaining installments and the contract is extinguished. Debt with the pension fund (Forluz) On December 31, 2022, the Company recognized an obligation for past actuarial deficits relating to the pension fund in the amount of R$251 on December 31, 2022 (R$385 on December 31, 2021). This amount has been recognized as an obligation payable by CEMIG and its subsidiaries, and will be amortized until June of 2024, through monthly installments calculated by the system of constant installments (known as the ‘Price’ table) and adjusted by the IPCA (Expanded National Customer Price) inflation index (published by the Brazilian Geography and Statistics Institute - IBGE) plus 6% per year. The Company is required to pay this debt even if Forluz has a surplus, thus, the Company maintain recorded the debt in full, and record the effects of monetary updating and interest in finance income (expenses) in the statement of income. Actuarial information
Schedule of consolidated actuarial information |  |  |  |
2022 | Pension plans and retirement supplement plans | Health plan | Dental plan | Total
Present value of obligations | 11,404 | 3,314 | 60 | 14,778
Fair value of plan assets | (9,198) | - | - | (9,198)
Initial net liabilities | 2,206 | 3,314 | 60 | 5,580
Adjustment to asset ceiling | 112 | - | - | 112
Net liabilities in the statement of financial position | 2,318 | 3,314 | 60 | 5,692
2021 | Pension plans and retirement supplement plans | Health plan | Dental plan | Total
Present value of obligations | 12,026 | 3,469 | 66 | 15,561
Fair value of plan assets | (9,378) | - | - | (9,378)
Initial net liabilities | 2,648 | 3,469 | 66 | 6,183
Adjustment to asset ceiling | 22 | - | - | 22
Net liabilities in the statement of financial position | 2,670 | 3,469 | 66 | 6,205
The asset ceiling is the present value of any economic benefits available in the form of restitutions coming from the plan or reductions in future contributions to the plan. The present value of the liabilities of the pension plan is adjusted to the asset ceiling, which corresponds to the surplus result of Plan B, which has a specific destination allocation under the regulations of the National Private Pension Plans Council (CNPC). The changes in the present value of the defined benefit obligation are as follows:
Schedule of changes in present value of defined benefit obligation |  |  |  |  |
| Pension plans and retirement supplement plans | Health plan | Dental plan | Life insurance | Total
Defined-benefit obligation on December 31, 2019 | 13,285 | 3,102 | 61 | 574 | 17,022
Cost of current service | 1 | 21 | 1 | 3 | 26
Interest on actuarial obligation | 887 | 215 | 4 | 41 | 1,147
Actuarial losses (gains): |  |  |  |  |
Due to changes in demographic assumptions | 135 | 395 | 4 | - | 534
Due to changes in financial assumptions | (375) | (152) | (4) | (34) | (565)
Due to adjustments based on experience | 289 | (119) | 1 | (23) | 148
Due to changes and adjustments | 49 | 124 | 1 | (57) | 117
Benefits paid | (914) | (143) | (3) | (10) | (1,070)
Defined-benefit obligation on December 31, 2020 | 13,308 | 3,319 | 64 | 551 | 17,242
Cost of current service | 2 | 21 | 1 | 3 | 27
Past service cost (1) | - | - | - | (415) | (415)
Interest on actuarial obligation | 883 | 232 | 5 | 39 | 1,159
Actuarial losses (gains): |  |  |  |  |
Due to changes in demographic assumptions | 378 | 122 | 1 | (15) | 486
Due to changes in financial assumptions | (2,393) | (252) | (5) | (127) | (2,777)
Due to adjustments based on experience | 828 | 200 | 3 | (26) | 1,005
Due to changes and adjustments | (1,187) | 70 | (1) | (168) | (1,286)
Benefits paid | (980) | (173) | (3) | (10) | (1,166)
Defined-benefit obligation on December 31, 2021 | 12,026 | 3,469 | 66 | - | 15,561
Cost of current service | 2 | 16 | - | - | 18
Past service cost (1) | (4) | - | - | - | (4)
Actuarial losses (gains): | 1,224 | 361 | 7 | - | 1,592
Actuarial losses (gains): |  |  |  |  |
Due to changes in demographic assumptions | (7) | (1) | - | - | (8)
Due to changes in financial assumptions | (857) | (305) | (6) | - | (1,168)
Due to adjustments based on experience | 106 | (20) | (3) | - | 83
Due to changes and adjustments | (758) | (326) | (9) | - | (1,093)
Benefits paid | (1,086) | (206) | (4) | - | (1,296)
Defined-benefit obligation on December 31, 2022 | 11,404 | 3,314 | 60 | - | 14,778
(1) | Due to the alterations made in the Collective Work Agreement for 2021-23, for offer and payment of life insurance for the employees and former employees, the Company understood that the post-retirement benefit in question had been entirely canceled, and as a result wrote down the balance of the obligation, remeasured using the revised actuarial assumptions.
(2) | Relating to the changes in the conditions of Plan B for requesting the Enhancement of Retirement for Length of Contribution, Special or Age - MAT (Melhoria de Aposentadoria por Tempo de Contribuição, Especial ou or Idade).
Changes in the fair values of the plan assets are as follows:
Schedule of changes in the fair value of plan assets |
| Pension plans and retirement supplement plans
Fair value of the plan assets on December 31, 2019 | 10,366
Return on investments | 757
Contributions from employer | 211
Benefits paid | (914)
Fair value of the plan assets on December 31, 2020 | 10,420
Return on investments | (298)
Contributions from employer | 236
Benefits paid | (980)
Fair value of the plan assets on December 31, 2021 | 9,378
Return on investments | 633
Contributions from employer | 272
Benefits paid | (1,085)
Fair value of the plan assets on December 31, 2022 | 9,198
Changes in net liabilities were as follows:
Schedule of changes in net liabilities |  |  |  |  |
| Pension plans and retirement supplement plans | Health plan | Dental plan | Life insurance | Total
Net liabilities at December 31, 2019 | 2,972 | 3,102 | 61 | 574 | 6,709
Expense recognized in Statement of income | 206 | 236 | 5 | 44 | 491
Contributions paid | (211) | (143) | (3) | (10) | (367)
Actuarial losses (gains) | (58) | 124 | 1 | (57) | 10
Net liabilities at December 31, 2020 | 2,909 | 3,319 | 64 | 551 | 6,843
Expense recognized in Statement of income | 200 | 253 | 6 | 42 | 501
Past service cost | - | - | - | (415) | (415)
Contributions paid | (236) | (173) | (3) | (10) | (422)
Actuarial losses (gains) | (203) | 70 | (1) | (168) | (302)
Net liabilities at December 31, 2021 | 2,670 | 3,469 | 66 | - | 6,205
Expense recognized in Statement of income | 285 | 378 | 7 | - | 670
Past service cost | (4) | - | - | - | (4)
Contributions paid | (272) | (206) | (4) | - | (482)
Actuarial losses (gains) | (361) | (327) | (8) | - | (696)
Net liabilities at December 31, 2022 | 2,318 | 3,314 | 61 | - | 5,692
|  |  |  | 2022 | 2021
Current liabilities |  |  |  | 388 | 347
Non-current liabilities |  |  |  | 5,304 | 5,858
Amounts recorded as current liabilities refer to contributions to be made by CEMIG and its subsidiaries in the next 12 months for the amortization of the actuarial liabilities. The amounts reported as ‘Expense recognized in the Statement of income’ refer to the costs of post-employment obligations, that include the past service cost arising from the cancellation of the post-retirement life insurance obligation, totaling R$626 (R$16 on December 31, 2021), plus the finance expenses and monetary updating on the debt with Forluz, in the amounts of R$40 (R$70 on December 31, 2021). The amounts recognized in 2022, 2021 and 2020 statement of income are as follows:
Schedule of income statement |  |  |  |
2022 | Pension plans and retirement supplement plans | Health plan | Dental plan | Total
Current service cost | 2 | 16 | - | 18
Past service cost | (4) | - | - | (4)
Interest on the actuarial obligation | 1,224 | 361 | 7 | 1,592
Expected return on the assets of the Plan | (941) | - | - | (941)
Expense in 2022 | 281 | 377 | 7 | 665
2021 | Pension plans and retirement supplement plans | Health plan | Dental plan | Life insurance | Total
Current service cost | 2 | 21 | 1 | 3 | 27
Past service cost (1) | - | - | - | (415) | (415)
Interest on the actuarial obligation | 883 | 232 | 5 | 39 | 1,159
Expected return on the assets of the Plan | (685) | - | - | - | (685)
Expense in 2021 | 200 | 253 | 6 | (373) | 86
2020 | Pension plans and retirement supplement plans | Health plan | Dental plan | Life insurance | Total
Current service cost | 1 | 21 | 1 | 3 | 26
Interest on the actuarial obligation | 887 | 215 | 4 | 41 | 1,147
Expected return on the assets of the Plan | (682) | - | - | - | (682)
Expense in 2020 | 206 | 236 | 5 | 44 | 491
The independent actuary’s estimation for the expense to be recognized for 2023 is as follows:
Schedule of independent actuaries estimate for the expense amount |  |  |  |
| Pension plans and retirement supplement plans | Health plan | Dental plan | Total
Current service cost | - | 14 | - | 14
Interest on the actuarial obligation | 1,276 | 379 | 7 | 1,662
Expected return on the assets of the Plan | (1,004) | - | - | (1,004)
Estimated total expense in 2023 as per actuarial report | 272 | 393 | 7 | 672
The expectation for payment of benefits for 2023 is as follows:
Schedule of expectation for payment of benefits |  |  |  |
| Pension plans and retirement supplement plans - Forluz | Health plan | Dental plan | Total
Estimated payment of benefits | 1,119 | 220 | 4 | 1,343
The Company CEMIG GT and CEMIG D have expectation of making contributions to the pension plan in 2023 of R$246 for amortization of the deficit of Plan A, and R$86 for the Defined Contribution Plan (recorded directly in the Statement of income for the year). Below is a sensitivity analysis of the liabilities effect of changes in the main actuarial assumptions used to determine the defined-benefit obligation on December 31, 2022:
Schedule of assumptions |  |  |  |
Effects on the defined-benefit obligation | Pension plans and retirement supplement plans | Health plan | Dental plan | Total
Reduction of one year in the mortality table | 247 | 53 | 1 | 301
Increase of one year in the mortality table | (251) | (54) | (1) | (306)
Reduction of 1% in the discount rate | 982 | 418 | 7 | 1,407
In the presentation of the sensitivity analysis, the present value of the defined-benefit obligation was calculated using the Projected Unit Credit method, the same method used to calculate the defined-benefit obligation recognized in the Statement of financial position. The average maturity periods of the obligations of the benefit plans, in years, are as follows:
Schedule of average periods of the obligations under the benefit plans |  |  |
Pension plans and retirement supplement plans | Health plan | Dental plan
Plan A | Plan B
873 | 10.83 | 12.79 | 12.37
The main categories plan’s assets, as a percentage of total plan’s assets are as follows:
Schedule of principal categories percentage of plan assets |  |
| 2022 | 2021
Shares | 6.45% | 7.77%
Fixed income securities | 76.89% | 73.95%
Real estate property | 4.89% | 5.04%
Others | 11.77% | 13.24%
Total | 100.00% | 100.00%
The following assets measured at fair value, are related to the Company and are not considered plan assets. According to the requirement of the standards, the amount are presented for information purpose:
Schedule of measured at fair value |  |
| 2022 | 2021
Non-convertible debentures issued by the Company | 137 | 302
Shares issued by the Company | 3 | 277
Real estate properties of the Foundation, occupied by the Company | 270 | -
| 410 | 579
This table provides the main actuarial assumptions:
Schedule of actuarial assumptions |  |  |  |  |
| 2022 | 2021
| Pension plans and retirement supplement plans | Health plan and Dental plan | Pension plans and retirement supplement plans | Health plan and Dental plan | Life insurance
Annual discount rate for present value of the actuarial obligation | 11.73% | 11.83% | 10.60% | 10.75% | 10.73%
Annual expected return on plan assets | 11.73% | Not applicable | 10.60% | Not applicable | Not applicable
Long-term annual inflation rate | 5.31% | 5.31% | 5.03% | 5.03% | 5.03%
Estimated future annual salary increases | 5.31% | Not applicable | 5.03% | Not applicable | 6.29%
General mortality table | AT-2000 S10% by sex | AT-2000 M&F S10% D20% | AT-2000 S10% by sex | AT-2000 M&F S10% D20% | AT-2000 M&F S10% D20%
Disability table | Not applicable | Álvaro Vindas increase of 30% | Not applicable | Tasa 1927 increase of 100% | Tasa 1927 increase of 100%
Disabled mortality table | AT-83 IAM Male | MI-85 Female | AT-83 IAM Male | MI-85 Female | MI-85 Female
Real growth of contributions above inflation | - | 1% | - | 1% | -
| 2020
Pension plans and retirement supplement plans | Health plan and Dental plan | Life insurance
Annual discount rate for present value of the actuarial obligation | 6.83% | 7.14% | 7.25%
Annual expected return on plan assets | 6.83% | Not applicable | Not applicable
Long-term annual inflation rate | 3.32% | 3.32% | 3.32%
Estimated future annual salary increases | 3.32% | Not applicable | 4.56%
General mortality table | AT-2000 M S10% D10% | AT-2000 M S10% D20% | AT-2000 M S10% D20%
Disability table | Not applicable | Álvaro Vindas D30% | Álvaro Vindas D30%
Disabled mortality table | AT-49 M | MI-85 F | MI-85 F
Real growth of contributions above inflation (1) | - | 1% | -
The Company has not made changes in the methods used to calculate its post-employment obligations for the years ended December 31, 2022 and 2021. Accounting policy In the case of retirement obligations, the liability recognized in the balance sheet with respect to defined benefit pension plans is the greater of the debt agreed with the foundation for amortization of actuarial obligations and the present value of the actuarial obligation, calculated by means of an actuarial report, less the fair value of the plan's assets. The actuarial valuation involves the use of assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates, and future increases in retirement and pension benefits. All assumptions are reviewed at each base date. Expenses related to the debt agreed upon with the pension trust fund were recorded in finance income (expenses), because they represent financial interest and inflation adjustment. Other expenses related to the pension fund were recorded as operating expenses. Actuarial gains and losses arising as a result of changes in actuarial assumptions are recognized in other comprehensive income and shall not be reclassified to statement of income in a subsequent period. The past service cost, due change or withdrawal of the defined benefit plan, and the gain or loss on settlement of obligations, are determined by remeasurement of the net present value of the obligation, using the revised actuarial assumptions, and is recognized directly in the Statement of income for the year in which the change, withdrawal or settlement is made.

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