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19. EMPLOYEES BENEFITS | 12 Months Ended
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Dec. 31, 2020
Disclosure of information about defined benefit plans [abstract] |
EMPLOYEES BENEFITS |
19. | EMPLOYEES BENEFITS
19.1. | Supplementary pension plans
The Company is the sponsor of the following pension plans for its employees and executives: i) Plan II – Variable Contribution with Defined Benefit option – closed for admissions; ii) Plan III – Defined Contribution – open for admissions; and iii) FAF Plan – Defined Benefit - closed for admissions. These plans are managed by BRF Previdência, a closed supplementary pension entity, of non-economic and non-profit nature, and through its Deliberative Board, is responsible for defining pension objectives and policies, as well as establishing fundamental guidelines aa well as organization, operation and management rules. The Deliberative Board is composed of representatives from the sponsor and participants, in the proportion of 2/3 and 1/3 respectively.
19.1.1. | Defined benefit plans
The Plan II is a variable contribution plan structured as defined contribution during the accumulation of mathematic provisions and at the benefit grant date the beneficiary may choose to convert the accumulated balance in a lifetime monthly income (defined benefit). The main related actuarial risks are (i) survival rates above the mortality tables and (ii) actual return on equity below the actual discount rate. The FAF (Fundação Attílio Francisco Xavier Fontana) Plan aims to complement the benefit paid by the Brazilian Social Security (“INSS – Instituto Nacional de Seguridade Social”). The benefit is calculated based on the income of the participant and the amounts vary according to the type of the retirement, the length of the service and other criteria defined by the plan. The main actuarial risks related are: (i) survival rates above the mortality tables, (ii) turnover lower than expected, (iii) salary growth higher than expected, (iv) actual return on equity below the actual discount rate, (v) changes to the rules of social security, and (vi) actual family composition of the retired employee or executive different than the established assumption. The actuarial calculations of the plans managed by BRF Previdência are prepared annually by independent specialists and reviewed by Management, according to the rules in force. In the case of a deficit in the plans results, the sponsor, the participants and the beneficiaries, must support the plan according to the proportion of their contributions. The economic benefit presented as an asset considers only the portion of the surplus that is actually recoverable. The recovery of the surplus on the plans is through reductions in future contributions.
19.1.2. | Defined contribution plan
The Plan III is a defined contribution plan, in which the contributions are known and the benefit depends directly on the contributions made by participants and sponsors, on the contribution time and on the returns obtained through the investment of the contributions. The contributions made by the Company in the year ended on December 31, 2020 amounted R$21,706 (R$21,100 for the year ended on December 31, 2019). On December 31, 2020, the plan had 39,064 (thirty-nine thousand and sixty-four) participants (37,637 participants as of December 31, 2019). When the participants of the plans II and III terminate the employment relationship with the sponsor, the unused balance of the contributions made by the sponsor forms a surplus fund that may be used to compensate future contributions of the sponsor.
19.1.3. | Rollforward of defined benefit and variable contribution
The assets and actuarial liabilities, as well as the movement of the related rights and obligations are presented below:
| FAF |  | Plan II
| 12.31.20 |  | 12.31.19 |  | 12.31.20 |  | 12.31.19
Composition of actuarial assets and liabilities |  |  |  |  |  |  |
Present value of actuarial liabilities | 3,377,234 |  | 3,412,120 |  | 23,256 |  | 19,550
Fair value of assets | (3,553,215) |  | (3,771,792) |  | (24,170) |  | (29,580)
(Surplus) Deficit | (175,981) |  | (359,672) |  | (914) |  | (10,030)
Irrecoverable surplus - (asset ceiling) | 175,981 |  | 359,672 |  | 167 |  | 6,777
Net actuarial (assets) liabilities | - |  | - |  | (747) |  | (3,253)
Rollforward of irrecoverable surplus |  |  |  |  |  |  |
Beginning balance of irrecoverable surplus | 359,672 |  | 695,367 |  | 6,777 |  | 8,502
Interest on irrecoverable surplus | 26,184 |  | 64,113 |  | 476 |  | 782
Changes in irrecoverable surplus during the year | (209,875) |  | (399,808) |  | (7,086) |  | (2,507)
Ending balance of irrecoverable surplus | 175,981 |  | 359,672 |  | 167 |  | 6,777
Rollforward of present value of actuarial liabilities |  |  |  |  |  |  |
Beginning balance of the present value of liabilities | 3,412,120 |  | 2,498,564 |  | 19,550 |  | 17,447
Interest on actuarial obligations | 242,746 |  | 223,848 |  | 1,324 |  | 1,544
Current service cost | 42,106 |  | 28,172 |  | - |  | -
Past service cost - plan changes | (4,223) |  | - |  | - |  | -
Benefit paid | (154,096) |  | (142,390) |  | (1,612) |  | (1,353)
Actuarial losses - experience | 148,984 |  | 85,002 |  | 5,273 |  | (1,176)
Actuarial losses - hypothesis | (310,403) |  | 718,924 |  | (1,279) |  | 3,088
Ending balance of actuarial liabilities | 3,377,234 |  | 3,412,120 |  | 23,256 |  | 19,550
Rollforward of the fair value of the assets |  |  |  |  |  |  |
Beginning balance of the fair value of plan assets | (3,771,792) |  | (3,193,931) |  | (29,580) |  | (27,819)
Interest income on assets plan | (268,930) |  | (287,961) |  | (2,028) |  | (2,497)
Benefit paid | 154,096 |  | 142,390 |  | 1,612 |  | 1,353
Return on assets higher (lower) than projection | 333,411 |  | (432,290) |  | 5,826 |  | (617)
Ending Balance of the fair value of the assets | (3,553,215) |  | (3,771,792) |  | (24,170) |  | (29,580)
Rollforward of comprehensive income |  |  |  |  |  |  |
Beginning balance | 28,172 |  | 27,972 |  | 1,213 |  | (567)
Reversion to accumulated losses | (28,172) |  | (27,972) |  | (1,213) |  | 567
Actuarial gains (losses) | 161,419 |  | (803,925) |  | (3,994) |  | (1,911)
Return on assets higher (lower) than projection | (333,411) |  | 432,289 |  | (5,826) |  | 617
Changes on irrecoverable surplus | 209,875 |  | 399,808 |  | 7,086 |  | 2,507
Ending balance of comprehensive income | 37,883 |  | 28,172 |  | (2,734) |  | 1,213
Costs recognized in statement of income |  |  |  |  |  |  |
Current service costs | (42,106) |  | (28,172) |  | - |  | -
Interest on actuarial obligations | (242,746) |  | (223,848) |  | (1,324) |  | (1,544)
Projected return on assets | 268,930 |  | 287,961 |  | 2,028 |  | 2,497
Interest on irrecoverable surplus | (26,184) |  | (64,113) |  | (476) |  | (782)
Past service cost - plan changes | 4,223 |  | - |  | - |  | -
Costs recognized in statement of income | (37,883) |  | (28,172) |  | 228 |  | 171
Estimated costs for the next year |  |  |  |  |  |  |
Costs of defined benefit | (26,741) |  | (42,106) |  | 54 |  | 228
Estimated costs for the next year | (26,741) |  | (42,106) |  | 54 |  | 228
19.1.4. | Actuarial assumptions and demographic data
The main actuarial assumptions and demographic data used in the actuarial calculations are presented below:
| FAF |  | Plan II
| 12.31.20 |  | 12.31.19 |  | 12.31.20 |  | 12.31.19
Actuarial assumptions |  |  |  |  |  |  |
Economic hypothesis |  |  |  |  |  |  |
Discount rate | 7.49% |  | 7.28% |  | 7.25% |  | 7.02%
Inflation rate | 3.25% |  | 3.80% |  | 3.25% |  | 3.80%
Wage growth rate | 3.49% |  | 4.47% |  | N/A |  | N/A
Demographic hypothesis |  |  |  |  |  |  |
Schedule of mortality | AT-2000 smoothed by 10% |  | AT-2000 |  | AT-2000 smoothed by 10% |  | AT-2000
Schedule of disabled mortality | CSO-58 |  | RRB-1983 |  | CSO-58 |  | RRB-1983
Demographic data |  |  |  |  |  |  |
Number of active participants | 6,495 |  | 6,796 |  | - |  | -
Number of beneficiary participants assisted | 7,206 |  | 6,834 |  | 51 |  | 51
19.1.5. | The composition of the investment portfolios
The composition of the investment portfolios is presented below:
|  | FAF |  | Plan II
|  | 12.31.20 |  | 12.31.19 |  | 12.31.20 |  | 12.31.19
Composition of the fund's portfolio |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed income |  | 2,330,909 |  | 65.6% |  | 2,542,188 |  | 67.4% |  | 22,382 |  | 92.6% |  | 28,396 |  | 96.0%
Variable income |  | 579,174 |  | 16.3% |  | 524,279 |  | 13.9% |  | 870 |  | 3.6% |  | 444 |  | 1.5%
Real estate |  | 358,875 |  | 10.1% |  | 369,636 |  | 9.8% |  | - |  | - |  | - |  | -
Structured investments |  | 262,938 |  | 7.4% |  | 313,059 |  | 8.3% |  | 918 |  | 3.8% |  | 740 |  | 2.5%
Transactions with participants |  | 21,319 |  | 0.6% |  | 22,630 |  | 0.6% |  | - |  | - |  | - |  | -
|  | 3,553,215 |  | 100.0% |  | 3,771,792 |  | 100.0% |  | 24,170 |  | 100.0% |  | 29,580 |  | 100.0%
% of nominal return on assets |  | 7.49% |  |  |  | 9.36% |  |  |  | 7.25% |  |  |  | 7.50% |  |
19.1.6. | Expected benefit payments and average term of payments
The following amounts represent the expected benefit payments for future periods and the average duration of the plan’s obligations:
| FAF |  | Plan II
2021 | 183,771 |  | 1,617
2022 | 194,992 |  | 1,658
2023 | 204,958 |  | 1,700
2024 | 211,397 |  | 1,740
2025 | 218,510 |  | 1,778
2026 to 2030 | 1,219,130 |  | 9,380
Weighted average duration - in years | 13.50 |  | 9.78
19.1.7. | Sensitivity analysis of the defined benefit plan - FAF
The quantitative sensitivity analysis regarding the relevant assumptions of defined benefit plan – FAF on December 31, 2020 is presented below:
|  | Assumptions utilized |  | Variation of (+1%) |  | Variation of (-1%)
Relevant assumptions |  |  | Average rate |  | Actuarial liabilities (1) |  | Average rate |  | Actuarial liabilities
Benefit plan - FAF |  |  |  |  |  |  |  |  |  |
Discount rate |  | 7.49% |  | 8.49% |  | 2,992,764 |  | 6.49% |  | 3,852,966
Wage growth rate |  | 3.49% |  | 4.49% |  | 3,451,715 |  | 2.49% |  | 3,314,607
19.2. | Employee benefits: description and characteristics of benefits and associated risks
| Liabilities
| 12.31.20 |  | 12.31.19
Medical assistance | 185,802 |  | 187,274
F.G.T.S. Penalty (1) | 282,229 |  | 247,485
Award for length of service | 108,908 |  | 103,284
Other | 199,616 |  | 151,431
| 776,555 |  | 689,474
Current | 125,230 |  | 95,919
Non-current | 651,325 |  | 593,555
| (1) | FGTS – Government Severance Indemnity Fund for Employees
The Company has the policy to offer the following post-employment and other employee benefits plans in addition to the pension plans, which are measured by actuarial calculation and recognized in the financial statement:
19.2.1. | Medical plan
The Company offers a medical plan with fixed contribution to the retired employees according to the Law No. 9,656/98. It is ensured to the retired employee that has contributed to the health plan during the employment relationship for at least 10 years, the right of maintenance as beneficiary, on the same conditions of coverage existing when the employment contract was in force. The main related actuarial risks are (i) survival rates above the mortality tables, (ii) turnover lower than expected and (iii) medical costs growth higher than expected.
19.2.2. | F.G.T.S. penalty by dismissal on retirement
As settled by the Regional Labor Court (“TRT”) on April 20, 2007, retirement does not affect the employment contract between the Company and its employees. However, when the employee is retired through INSS and is dismissed from the Company, the Company has the practice to terminate their employment contracts, granting the payment of the benefit equivalent to the 40% penalty on the F.G.T.S. balance. The main related actuarial risks are: (i) survival rates above the mortality tables, (ii) turnover lower than expected and (iii) salary growth higher than expected.
19.2.3. | Award for length of service
The Company has the policy to reward active employees that attain at least 10 years of services rendered and subsequently every 5 years, with an additional remuneration. The main related actuarial risks rare (i) survival rates above the mortality tables, (ii) turnover lower than expected and (iii) salary growth higher than expected.
19.2.4. | Other – Brazil
| i. | Retirement compensation
On retirement, employees with more than 10 years of services rendered to the Company are eligible for additional compensation. The main actuarial related risks are (i) survival rates above the mortality tables, (ii) turnover lower than expected and (iii) salary growth higher than expected.
| ii. | Life insurance
The Company offers life insurance benefits to the employees who, at the time of their termination, are retired and during the employment contract opted for the insurance, with the period of benefit varying from 2 to 3 years. The main related actuarial risks are (i) survival rates above the mortality tables, (ii) turnover lower than expected and (iii) salary growth higher than expected.
19.2.5. | Other – Foreign entities
The Company has a liability recorded for defined benefit plans to certain subsidiaries located in Turkey, Saudi Arabia, Qatar and United Arab Emirates, related to end of service payments when certain conditions are met, which varies based on the labor laws for each country. The main related actuarial risks are: (i) survival rates above the mortality tables, (ii) turnover lower than expected and (iii) salary growth higher than expected.
19.2.6. | Rollforward of actuarial liabilities
The rollforward of actuarial liabilities related to other benefits, which was prepared based on actuarial report reviewed by the Management, are as follows:
|  | Medical plan |  | F.G.T.S. penalty |  | Award for length of service |  | Other (1)
|  | 12.31.20 |  | 12.31.19 |  | 12.31.20 |  | 12.31.19 |  | 12.31.20 |  | 12.31.19 |  | 12.31.20 |  | 12.31.19
Composition of actuarial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Present value of actuarial liabilities |  | 185,802 |  | 187,274 |  | 282,229 |  | 247,485 |  | 108,908 |  | 103,284 |  | 199,616 |  | 151,431
Net actuarial liabilities |  | 185,802 |  | 187,274 |  | 282,229 |  | 247,485 |  | 108,908 |  | 103,284 |  | 199,616 |  | 151,431
Rollforward of present value of actuarial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance of present value of actuarial liabilities |  | 187,274 |  | 149,046 |  | 247,485 |  | 167,588 |  | 103,284 |  | 55,134 |  | 151,431 |  | 96,384
Interest on actuarial liabilities |  | 13,586 |  | 13,503 |  | 13,993 |  | 11,840 |  | 6,275 |  | 4,366 |  | 8,883 |  | 4,260
Current service costs |  | - |  | - |  | 12,718 |  | 6,471 |  | 5,741 |  | 2,574 |  | 23,174 |  | 22,237
Past service costs - plan change² |  | - |  | - |  | - |  | (61,871) |  | - |  | - |  | - |  | -
Benefits paid directly by the Company |  | (7,122) |  | (4,262) |  | (4,225) |  | (10,791) |  | (13,887) |  | (14,056) |  | (18,902) |  | (9,268)
Actuarial (gains) losses - experience |  | 1,167 |  | (7,235) |  | 14,725 |  | 7,897 |  | 10,759 |  | 11,142 |  | 10,548 |  | 10,462
Actuarial (gains) losses - demographic hypothesis |  | 13,462 |  | - |  | 10,195 |  | 84,158 |  | 5,717 |  | 34,950 |  | 1,535 |  | 14,066
Actuarial losses - economic hypothesis |  | (22,565) |  | 36,222 |  | (12,662) |  | 42,193 |  | (8,981) |  | 9,174 |  | 4,778 |  | 13,290
Actuarial (gains) losses - exchange variation |  | - |  | - |  | - |  | - |  | - |  | - |  | 18,169 |  | -
Ending balance of liabilities |  | 185,802 |  | 187,274 |  | 282,229 |  | 247,485 |  | 108,908 |  | 103,284 |  | 199,616 |  | 151,431
Rollforward of the fair value of the assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefits paid directly by the Company |  | 7,122 |  | 4,262 |  | 4,225 |  | 10,791 |  | 13,887 |  | 14,055 |  | 18,902 |  | 9,268
Contributions of the sponsor |  | (7,122) |  | (4,262) |  | (4,225) |  | (10,791) |  | (13,887) |  | (14,055) |  | (18,902) |  | (9,268)
Ending Balance of the fair value of the assets |  | - |  | - |  | - |  | - |  | - |  | - |  | - |  | -
Rollforward of comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | (76,232) |  | (47,245) |  | (228,345) |  | (94,097) |  | - |  | - |  | (58,617) |  | (20,799)
Actuarial gains (losses) |  | 7,936 |  | (28,987) |  | (12,258) |  | (134,248) |  | - |  | - |  | (16,861) |  | (37,818)
Ending balance of comprehensive income |  | (68,296) |  | (76,232) |  | (240,603) |  | (228,345) |  | - |  | - |  | (75,478) |  | (58,617)
Costs recognized in statement of income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest on actuarial liabilities |  | (13,586) |  | (13,503) |  | (13,993) |  | (11,840) |  | (6,275) |  | (4,366) |  | (8,883) |  | (4,260)
Current service costs |  | - |  | - |  | (12,718) |  | (6,471) |  | (5,741) |  | (2,574) |  | (23,174) |  | (22,236)
Past service costs - plan change (2) |  | - |  | - |  | - |  | 61,871 |  | - |  | - |  | - |  | -
Immediate recognition of reduction |  | - |  | - |  | - |  | - |  | (7,495) |  | (55,266) |  | - |  | -
Cost recognized in statement of income |  | (13,586) |  | (13,503) |  | (26,711) |  | 43,560 |  | (19,511) |  | (62,206) |  | (32,057) |  | (26,496)
Estimated costs for the next year |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current service costs |  | - |  | - |  | (14,833) |  | (12,718) |  | (6,319) |  | (5,741) |  | (22,021) |  | (15,911)
Interest on actuarial liabilities |  | (13,975) |  | (13,586) |  | (15,711) |  | (13,993) |  | (6,656) |  | (6,275) |  | (11,217) |  | (8,201)
Estimated costs for the next year |  | (13,975) |  | (13,586) |  | (30,544) |  | (26,711) |  | (12,975) |  | (12,016) |  | (33,238) |  | (24,112)
(1) | Considers the retirement compensation and life insurance benefits.
(2) | Refers to a change in the legislation related to F.G.T.S. penalty. The Law Nº 13,932, of December 11, 2019, extinguished the social contribution due by the employer of 10%.
19.2.7. | Actuarial assumptions and demographic data
The main actuarial assumptions and demographic data used in the actuarial calculations are summarized below:
|  | Medical plan |  | F.G.T.S. penalty |  | Other (1)
Actuarial assumptions |  | 12.31.20 |  | 12.31.19 |  | 12.31.20 |  | 12.31.19 |  | 12.31.20 |  | 12.31.19
Economic hypothesis |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  | 7.68% |  | 7.39% |  | 6.51% |  | 6.07% |  | 6.51% |  | 6.07%
Inflation rate |  | 3.25% |  | 3.80% |  | 3.25% |  | 3.80% |  | 3.25% |  | 3.80%
Medical inflation |  | 6.35% |  | 6.91% |  | N/A |  | N/A |  | N/A |  | N/A
Wage growth rate |  | N/A |  | N/A |  | 3.25% |  | 4.02% |  | 3.25% |  | 4.02%
F.G.T.S. balance growth |  | N/A |  | N/A |  | 3.80% |  | 3.90% |  | N/A |  | N/A
Demographic hypothesis |  |  |  |  |  |  |  |  |  |  |  |
Schedule of mortality |  | AT-2000 smoothed by 10% |  | AT-2000 |  | AT-2000 smoothed by 10% |  | AT-2000 |  |  |  |
Schedule of disabled |  | N/A |  | N/A |  | RRB-44 |  | RRB-44 |  |  |  |
Schedule of turnover - BRF's historical |  | 2,020 |  | 2,019 |  | 2,020 |  | 2,019 |  |  |  |
Demoraphic data |  |  |  |  |  |  |  |  |  |  |  |
Number of active participants |  | 1,245 |  | 1,115 |  | 93,245 |  | 86,849 |  |  |  |
Number of assisted beneficiary participants |  | 559 |  | 572 |  | - |  | - |  |  |  |
| (1) | Includes retirement compensation and life insurance benefits.
19.2.8. | Expected benefit payments and average duration of obligations
The following amounts represent the expected benefit payments for future years (10 years), from the obligation of benefits granted and the average duration of the plan obligations:
Payments |  | Medical plan |  | F.G.T.S. penalty |  | Award for length of service |  | Other |  | Total
2021 |  | 7,675 |  | 81,789 |  | 13,329 |  | 22,335 |  | 125,128
2022 |  | 8,282 |  | 14,552 |  | 8,855 |  | 13,480 |  | 45,169
2023 |  | 8,940 |  | 18,353 |  | 10,970 |  | 15,556 |  | 53,819
2024 |  | 9,665 |  | 19,815 |  | 13,952 |  | 16,936 |  | 60,368
2025 |  | 10,439 |  | 21,916 |  | 12,553 |  | 18,603 |  | 63,511
2026 to 2030 |  | 64,829 |  | 132,454 |  | 66,195 |  | 125,521 |  | 388,999
Weighted average duration - in years |  | 14.26 |  | 6.73 |  | 6.70 |  | 8.47 |  | 8.35
19.2.9. | Sensitivity analysis of post-employment plans
The Company prepared sensitivity analysis regarding the relevant assumptions of the plans as of December 31, 2020, as presented below:
|  | Assumptions utilized |  | (+) Variation |  | (-) Variation
Relevant assumptions |  |  | Average (%) |  | Actuarial liabilities |  | Average (%) |  | Actuarial liabilities
Medical plan |  |  |  |  |  |  |  |  |  |
Discount rate |  | 7.68% |  | 8.68% |  | 164,011 |  | 6.68% |  | 212,435
Medical inflation |  | 6.35% |  | 7.35% |  | 211,694 |  | 5.35% |  | 164,224
F.G.T.S. penalty |  |  |  |  |  |  |  |  |  |
Discount rate |  | 6.51% |  | 7.51% |  | 265,825 |  | 5.51% |  | 301,077
Wage growth rate |  | 3.25% |  | 4.25% |  | 286,139 |  | 2.25% |  | 278,672
Turnover |  | Historical |  | +3% |  | 233,001 |  | -3% |  | 356,695

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