Employee Benefits and Private Pension Plan

12 Months Ended

Dec. 31, 2022

Employee benefits and private pension plan

Employee Benefits and Private Pension Plan

21 Employee benefits and private pension plan

a. ULTRAPREV - Associação de Previdência Complementar

In February 2001, the Company’s Board of Directors approved the adoption of a defined contribution pension plan to be sponsored by the Company and its subsidiaries. Participating employees have been contributing to this plan, managed by Ultraprev - Associação de Previdência Complementar (“Ultraprev”), since August 2001. Each participating employee chooses his or her basic contribution to the plan, up to a limit of 11% of the employee’s reference salary, according to the rules of the plan. Each sponsoring company provides a matching contribution in an amount equivalent to each basic contribution. As participating employees retire, they may choose to receive either (i) a monthly sum ranging between 0.3% and 1.0% of their respective accumulated fund in Ultraprev or (ii) a fixed monthly amount, which will exhaust their respective accumulated fund over a period of 5 to 35 years. The Company and its subsidiaries do not take responsibility for guaranteeing amounts or the duration of the benefits received by the retired employee.

The balance of R$ 18,204 (R$ 19,831 as of December 31, 2021) regarding the reversal fund will be used to deduct normal sponsor contributions in a period of up to 89 months depending on the sponsor. The number of months is estimated according to the current amount being deducted from the contributions of the sponsor with the highest balance.

In 2022, the subsidiaries contributed with R$ 16,368 to Ultraprev (R$ 16,120 in 2021 and R$ 17,186 in 2020).

The total number of participating employees as of December 31, 2022 was 4,097 active participants and 286 retired participants (4,381 active participants and 387 retired participants as of December 31, 2021). In addition, Ultraprev had 23 former employees receiving benefits under the rules of a previous plan whose reserves are fully constituted.

b. Post-employment benefits

The subsidiaries recognized a provision for post-employment benefits mainly related to seniority bonus, payment of Government Severance Indemnity Fund (“FGTS”), and health, dental care, and life insurance plan for eligible retirees.

The amounts related to such benefits are based on a valuation conducted by an independent actuary and reviewed by Management as of December 31, 2022.

	12/31/2022	12/31/2021
Health and dental care plan (1)	164,428	159,867
Indemnification of FGTS	36,357	38,617
Seniority bonus	2,156	5,570
Life insurance (1)	12,615	11,665
Total	215,556	215,719
Current	21,809	21,082
Non-current	193,747	194,637

(1) Applicable to IPP, Tropical and Iconic.

Changes in the present value of the post-employment benefit obligation occurred as follows:

	12/31/2022		12/31/2021
Opening balance	215,719		284,724
Expense for the year of continuing operations	20,944		15,585
Expense (revenue) for the year of discontinued operations	494		2,951
Actuarial (gains) losses from changes in actuarial assumptions	(2,589	)	(58,954	)
Benefits paid directly by the Company and its subsidiaries	(19,012	)	(18,400	)
Exchange rates from post-employment benefits of foreign subsidiaries	-		217
Reclassification to liabilities held for sale (i)	-		(10,404	)
Closing balance	215,556		215,719

The total expense for each year is presented below:

	2022	2021		2020
Health and dental care plan	14,660	15,265		11,127
Indemnification of FGTS	4,766	4,409		6,199
Seniority bonus	563	(4,886	)	(6,821	)
Life insurance	955	797		1,117
Total	20,944	15,585		11,622

The main actuarial assumptions used are:

Economic factors	12/31/2022	12/31/2021
	% p.a.	% p.a.
Discount rate for the actuarial obligation at present value	9.97	8.93
Average projected salary growth rate	6.98	7.07
Inflation rate (long term)	3.50	3.25
Growth rate of medical services	7.64	7.38

Demographic factors

Mortality Table for the life insurance benefit - CSO-80

Mortality Table for other benefits – AT 2000 Basic decreased by 10%

Disability Mortality Table - RRB 1983 and RRB-1944

Disability Table – Weak light

Sensitivity analysis

The significant actuarial assumptions to determine the provision for post-employment benefits are: discount rate, salary growth and medical costs increases. The following sensitivity analyses as of December 31, 2022, as shown below, were determined based on possible changes of assumptions occurring at the reporting date of the financial statements, keeping all other assumptions constant.

Assumption	Change in assumptions	Decrease in liability	Change in assumptions	Increase in liability
Discount rate	increase by 1.0 p.p.	19,688	decrease by 1.0 p.p.	24,252
Wage growth rate	decrease by 1.0 p.p.	266	increase by 1.0 p.p.	477
Medical services growth rate	decrease by 1.0 p.p.	17,824	increase by 1.0 p.p.	21,847

The sensitivity analyses presented may not represent the real change in the post-employment benefit obligation, since it is unlikely that changes occur in just one assumption alone, considering that some of these assumptions may be correlated.

Inherent risks related to post-employment benefits

Discount rate risk: a long-term interest rate is used to calculate the present value of post-employment liabilities. A reduction in this interest rate will increase the corresponding liability.

Wage growth risk: the present value of the liability is calculated using as reference the wages of the plan participants, projected with the average nominal wage growth rate. An increase in the real wages of plan participants will increase the corresponding liability.

Medical costs growth risk: the present value of the liability is calculated using as a reference the medical cost by age based on actual healthcare expenses, projected based on the growth rate of medical services costs. An increase in the real medical costs will increase the corresponding liability.