Workers lost more than 88 percent of their purchasing power
Solidariedade questiona uso da TR na correção do FGTS, alegando perdas inflacionárias superiores a 88% entre 1999-2013. Relator Barroso propõe correção pela taxa da poupança, mas sem retroatividade; AGU alerta risco operacional e impacto fiscal de R$ 661 bilhões.
- Supreme Court resumes FGTS correction case on October 18, 2023
- Solidariedade party claims workers lost 88% purchasing power (1999-2013) under TR indexing
- Potential fiscal impact: 661 billion reais; FGTS cash reserves: 118 billion reais
- Justice Barroso proposes switching to savings account rate but without retroactive application
O STF retoma em 18 de outubro julgamento que pode mudar a correção do FGTS, com potencial impacto de R$ 661 bilhões nos cofres públicos e efeitos diretos nos trabalhadores.
Brazil's Supreme Court will resume a case on October 18 that could reshape how the government adjusts the value of workers' FGTS savings accounts—a decision that carries implications for millions of formal employees and a potential fiscal impact exceeding 660 billion reais.
The case centers on a technical but consequential question: which index should be used to correct the monetary value of FGTS deposits? The FGTS, formally the Severance Indemnity Fund for Employees, is a mandatory savings account that employers contribute to on behalf of workers, meant to provide a financial cushion in case of job loss or other hardship. For decades, the government has used the TR—a reference rate tied to bank financing costs—to adjust these balances. The political party Solidariedade argues this method has systematically eroded workers' savings by failing to keep pace with actual inflation.
According to research presented by the party, workers who deposited money between 1999 and 2013 lost more than 88 percent of their purchasing power under the TR correction method. This is not a marginal complaint. The party is asking the court not only to change the correction formula going forward but to apply the change retroactively, recalculating all past deposits using an inflation-based index instead. They propose using the same rate applied to savings accounts—currently 0.5 percent plus the TR—as the new standard.
The court's rapporteur, Justice Luís Roberto Barroso, who also serves as president of the Supreme Court, has signaled a middle position. He supports switching to the savings account rate but opposes retroactivity. Under his proposal, workers would benefit from better adjustments on future deposits, but the court would not revisit decades of accumulated losses. Justice André Mendonça has already aligned with this view. The case stalled in April when Justice Nunes Marques requested additional time to study the matter; he finally released it in August.
The government's legal office, the AGU, has warned the court of a potential catastrophe. The office estimates that retroactive correction would cost the public treasury 661 billion reais—a sum that dwarfs the FGTS's current cash reserves of 118 billion reais. The Union would need to inject an additional 543 billion reais to cover the difference. The AGU has also raised an operational concern: the FGTS itself could become insolvent if forced to honor such a massive liability.
What hangs in the balance is not abstract. Millions of Brazilian workers with formal employment contracts have money sitting in these accounts, money they may need for emergencies, home purchases, or retirement. The court's decision will determine whether they receive compensation for decades of inflation-eroded savings or whether the correction formula simply improves from this point forward. The October 18 hearing will not necessarily produce a final ruling that day—Supreme Court cases often require multiple sessions—but it will mark the moment when the justices begin to seriously weigh the competing claims: workers' financial security against the state's fiscal capacity.
Notable Quotes
The FGTS faces operational risk and could cease functioning if forced to honor retroactive corrections— AGU (Advocacia-Geral da União)
The Hearth Conversation Another angle on the story
Why does the choice of an inflation index matter so much for FGTS accounts?
Because over time, small differences in how you adjust for inflation compound into enormous gaps. If your money grows at 0.5 percent a year but inflation is 5 percent, you're losing real purchasing power every single year. Over 14 years, that becomes 88 percent of your money's value.
So Solidariedade is saying workers have been systematically cheated?
That's their argument, yes. They're saying the TR was chosen because it's lower than actual inflation, and that benefited the government and banks at workers' expense. Whether that was intentional or just a technical choice that happened to work out that way is part of what the court has to decide.
What's Barroso's concern with going backward?
He's trying to balance two things. He seems to agree the current method is unfair, but he's worried about the fiscal shock. If you suddenly owe 661 billion reais to workers, that money has to come from somewhere—taxes, cuts to other programs, or new debt. That's a real constraint.
But doesn't that mean workers pay the price for a system they didn't design?
Exactly. That's the tension the court is sitting with. Either workers absorb the loss from the past, or taxpayers do. There's no neutral choice here.
Could the FGTS actually run out of money?
According to the government, yes. They have 118 billion in the fund but would owe 661 billion if the court rules retroactively. That's not a sustainable position. The fund would need a massive government bailout just to stay open.
So what happens on October 18?
The justices will hear arguments and begin deliberating. It might take weeks or months to reach a final decision. But that date is when the real conversation starts—when they have to choose between compensating workers and protecting the state's finances.