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EMPLOYEES BENEFITS PLANS
 12 Months Ended
Dec. 31, 2021
EMPLOYEES BENEFITS PLANS

19.EMPLOYEES BENEFITS PLANS
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 December 31, 2021 amounted R$24,258 (R$21,706 for the year ended December 31, 2020). On December 31, 2021, the plan had 40,553 participants (39,064 participants as of December 31, 2020).

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
  12.31.21   12.31.20   12.31.21   12.31.20
Composition of actuarial assets and liabilities              
Present value of actuarial liabilities        3,340,497          3,377,234              23,981              23,256
Fair value of assets      (3,547,727)        (3,553,215)             (22,298)             (24,170)
(Surplus) Deficit         (207,230)           (175,981)                1,683                 (914)
Irrecoverable surplus - (asset ceiling)          207,230            175,981                       -                   167
Net actuarial (assets) liabilities                     -                       -                1,683                 (747)
               
Rollforward of irrecoverable surplus              
Beginning balance of irrecoverable surplus          175,981            359,672                   167                6,777
Interest on irrecoverable surplus            13,181              26,184                     12                   476
Changes in irrecoverable surplus during the year            18,068           (209,875)                 (179)               (7,086)
Ending balance of irrecoverable surplus          207,230            175,981                       -                   167
               
Rollforward of present value of actuarial liabilities              
Beginning balance of the present value of liabilities        3,377,234          3,412,120              23,256              19,550
Interest on actuarial obligations          246,073            242,746                1,627                1,324
Current service cost            26,741              42,106                       -                       -
Past service cost - plan changes                     -               (4,223)                       -                       -
Benefit paid         (169,962)           (154,096)               (1,712)               (1,612)
Actuarial losses - experience          325,778            148,984                4,278                5,273
Actuarial losses - hypothesis         (465,367)           (310,403)               (3,468)               (1,279)
Ending balance of actuarial liabilities        3,340,497          3,377,234              23,981              23,256
               
Rollforward of the fair value of the assets              
Beginning balance of the fair value of plan assets      (3,553,215)        (3,771,792)             (24,170)             (29,580)
Interest income on assets plan         (259,254)           (268,930)               (1,694)               (2,028)
Benefit paid          169,962            154,096                1,712                1,612
Return on assets higher (lower) than projection            94,780            333,411                1,854                5,826
Ending Balance of the fair value of the assets      (3,547,727)        (3,553,215)             (22,298)             (24,170)
               
Rollforward of comprehensive income              
Beginning balance            37,883              28,172               (2,734)                1,213
Reversion to accumulated losses           (37,883)             (28,172)                2,734               (1,213)
Actuarial gains (losses)          139,589            161,419                 (810)               (3,994)
Return on assets higher (lower) than projection           (94,780)           (333,411)               (1,854)               (5,826)
Changes on irrecoverable surplus           (18,068)            209,875                   179                7,086
Ending balance of comprehensive income            26,741              37,883               (2,485)               (2,734)
               
Costs recognized in statement of income              
Current service costs           (26,741)             (42,106)                       -                       -
Interest on actuarial obligations         (246,073)           (242,746)               (1,627)               (1,324)
Projected return on assets          259,254            268,930                1,694                2,028
Interest on irrecoverable surplus           (13,181)             (26,184)                   (12)                 (476)
Past service cost - plan changes                     -                4,223                       -                       -
Costs recognized in statement of income           (26,741)             (37,883)                     55                   228
               
Estimated costs for the next year              
Costs of defined benefit           (23,190)             (26,741)                 (146)                     54
Estimated costs for the next year           (23,190)             (26,741)                 (146)                     54

 

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
  12.31.21   12.31.20   12.31.21   12.31.20
Actuarial assumptions              
Economic hypothesis              
Discount rate 8.76%   7.49%   8.68%   7.25%
Inflation rate 3.25%   3.25%   3.25%   3.25%
Wage growth rate 4.34%   3.49%   N/A   N/A
Demographic hypothesis              
Mortality schedule AT-2000 smoothed by 10%   AT-2000 smoothed by 10%   AT-2000 smoothed by 10%   AT-2000 smoothed by 10%
Mortality schedule - Disabled CSO-58   RRB-1983   CSO-58   RRB-1983
Demographic data              
   Number of active participants 6,054   6,495                       -                          -   
   Number of beneficiary participants assisted  7,565   7,206   52   51

 

19.1.5.The composition of the investment portfolios

 

The composition of the investment portfolios is presented below:

    FAF   Plan II
    12.31.21   12.31.20   12.31.21   12.31.20
Composition of the fund's portfolio                                
Fixed income        2,308,861   65.1%      2,330,909   65.6%       19,386   86.9%     22,382   92.6%
Variable income           517,259   14.6%        579,174   16.3%         1,106   5.0%          870   3.6%
Real estate           334,905   9.4%        358,875   10.1%             20   0.1%            -           -
Structured investments           321,779   9.1%        262,938   7.4%         1,527   6.8%          918   3.8%
Foreign            45,411   1.3%                 -   -            259   1.2%            -   -
Transactions with participants            19,512   0.5%          21,319   0.6%              -            -            -    -
         3,547,727   100.0%      3,553,215   100.0%       22,298   100.0%     24,170   100.0%
% of nominal return on assets   7.49%       7.49%       7.25%       7.25%    

 

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
2022          214,310                1,937
2023          218,072                1,923
2024          217,778                1,908
2025          217,939                1,889
2026          218,487                1,869
2027 to 2031        1,115,111                8,914
Weighted average duration - in years              11.93                  9.69

 

 

19.1.7.Sensitivity analysis of the defined benefit plan - FAF
    Assumptions utilized   Variation of (+1%)   Variation of (-1%)
Relevant assumptions     Average rate   Actuarial liabilities   Average rate   Actuarial liabilities
Benefit plan - FAF                    
Discount rate   8.76%   9.76%              2,996,161   7.76%              3,759,792
Wage growth rate   4.34%   5.34%              3,409,740   3.34%              3,282,485

 

19.2.Employee benefits: description and characteristics of benefits and associated risks

   
  Liabilities
  12.31.21   12.31.20
Medical assistance          195,345            185,802
F.G.T.S. Penalty (1)            53,881            282,229
Award for length of service            98,474            108,908
Other          204,885            199,616
           552,585            776,555
       
Current            54,354            125,230
Non-current          498,231            651,325
(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 consolidated 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 may, in certain cases, enter into a mutual agreement granting the payment of the benefit equivalent to the 20% 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 8 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)
    12.31.21   12.31.20   12.31.21   12.31.20   12.31.21   12.31.20   12.31.21   12.31.20
Composition of actuarial liabilities                                
Present value of actuarial liabilities         195,345         185,802           53,881         282,229           98,474         108,908         203,202         199,616
Net actuarial liabilities         195,345         185,802           53,881         282,229           98,474         108,908         203,202         199,616
                                 
Rollforward of present value of actuarial liabilities                                
Beginning balance of present value of actuarial liabilities         185,802         187,274         282,229         247,485         108,908         103,284         199,616         151,431
Interest on actuarial liabilities           13,694           13,586           15,711           13,993             6,656             6,275           10,377             8,883
Current service costs                    -                    -           14,833           12,718             6,319             5,741           23,375           23,174
Past service costs (2)           40,800                    -        (135,180)                    -                    -                    -           15,847                    -
Benefits paid directly by the Company           (9,008)           (7,122)           (6,173)           (4,225)          (15,163)          (13,887)          (19,739)          (18,902)
Business combination (note 1.2)             2,081                    -                    -                    -                    -                    -                286                    -
Actuarial (gains) losses - experience           (6,892)             1,167                991           14,725           10,853           10,759             9,289           10,548
Actuarial (gains) losses - demographic hypothesis           (6,403)           13,462          (91,531)           10,195           (7,125)             5,717          (13,165)             1,535
Actuarial losses - economic hypothesis          (24,729)          (22,565)          (26,999)          (12,662)          (11,974)           (8,981)          (11,396)             4,778
Actuarial (gains) losses - exchange variation                    -                    -                    -                    -                    -                    -          (11,288)           18,169
Ending balance of liabilities         195,345         185,802           53,881         282,229           98,474         108,908         203,202         199,616
                                 
Rollforward of the fair value of the assets                                
Benefits paid directly by the Company             9,008             7,122             6,173             4,225           15,163           13,887           19,739           18,902
Contributions of the sponsor           (9,008)           (7,122)           (6,173)           (4,225)          (15,163)          (13,887)          (19,739)          (18,902)
Ending Balance of the fair value of the assets                    -                    -                    -                    -                    -                    -                    -                    -
                                 
Rollforward of comprehensive income                                
Beginning balance          (72,744)          (80,680)        (110,903)          (98,645)                    -                    -        (102,324)          (87,709)
Actuarial gains (losses)           38,024             7,936         117,539          (12,258)                    -                    -           15,272          (16,861)
Exchange variation                     -                    -                    -                    -                    -                    -             3,002             2,246
Ending balance of comprehensive income          (34,720)          (72,744)             6,636        (110,903)                    -                    -          (84,050)        (102,324)
                                 
Costs recognized in statement of income                                
Interest on actuarial liabilities          (13,694)          (13,586)          (15,711)          (13,993)           (6,656)           (6,275)          (10,377)           (8,883)
Current service costs                    -                    -          (14,833)          (12,718)           (6,319)           (5,741)          (23,375)          (23,174)
Past service costs (2)          (40,800)                    -         135,180                    -                    -                    -          (15,847)                    -
Immediate recognition of reduction                    -                    -                    -                    -             8,246           (7,495)                    -                    -
Cost recognized in statement of income          (54,494)          (13,586)         104,636          (26,711)           (4,729)          (19,511)          (49,599)          (32,057)
                                 
Estimated costs for the next year                                
Current service costs              (551)                    -           (2,480)          (14,833)           (5,221)           (6,319)          (20,720)          (22,021)
Interest on actuarial liabilities          (16,805)          (13,975)           (4,071)          (15,711)           (7,997)           (6,656)          (12,646)          (11,217)
Estimated costs for the next year          (17,356)          (13,975)           (6,551)          (30,544)          (13,218)          (12,975)          (33,366)          (33,238)
(1)Considers the sum of the retirement compensation, life insurance benefits and compensation for time of service granted in certain subsidiaries of Company.
(2)Refers to addition of medical plan managed by BRF S.A. and change in the internal policy for FGTS penalty.

 

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   12.31.21   12.31.20   12.31.21   12.31.20   12.31.21   12.31.20
Economic hypothesis                        
Discount rate   8.75%   7.68%   8.62%   6.51%   7.11%   6.02%
Inflation rate   3.25%   3.25%   3.25%   3.25%   9.04%   6.39%
Medical inflation   6.35%   6.35%   N/A   N/A   N/A   N/A
Wage growth rate   N/A   N/A   3.25%   3.25%   9.04%   6.39%
F.G.T.S. balance growth   N/A   N/A   3.70%   3.80%   N/A   N/A
Demographic hypothesis                        
Mortality schedule    AT-2000 smoothed by 10%     AT-2000 smoothed by 10%     AT-2000 smoothed by 10%     AT-2000 smoothed by 10%         
Disability entry schedule    N/A     N/A     RRB-44     RRB-44         
Schedule of turnover - BRF's historical   2021   2020   2021   2020        
Demoraphic data                        
   Number of active participants               14,584                1,245               96,635               93,245        
   Number of assisted beneficiary participants                1,686                   559                     -                        -           

 

 

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
                     
2022   6,792   13,304   11,395   21,316   52,807
2023   7,350   3,783   11,819   15,067   38,019
2024   8,030   4,512   14,239   15,445   42,226
2025   8,735   4,656   12,416   15,688   41,495
2026   9,512   5,559   11,720   16,876   43,667
2027 to 2031   60,942   32,114   53,740   110,413   257,209
Weighted average duration - in years   16.41   6.12   5.59   8.53   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, 2021, as presented below:

    Assumptions utilized   (+) Variation   (-) Variation
Relevant assumptions     Average (%)   Actuarial liabilities    Average (%)   Actuarial liabilities 
Medical plan                    
Discount rate   8.75%   9.75%           166,929   7.75%           227,381
Medical inflation   6.35%   7.35%           226,983   5.35%           167,828
F.G.T.S. penalty                    
Discount rate   8.62%   9.62%             57,124   8.62%             51,015
Wage growth rate   3.25%   4.25%             54,466   2.25%             53,345
Turnover   Historical   +3%             44,883   -3%             66,993