“REFORM” OF THE UNITED STATES AND BRAZILIAN RETIREMENT SYSTEMS FOR FEDERAL EMPLOYEES

Abstract

Recently, Brazil made changes to its retirement system as it concerned public sector workers, changes which in certain ways were similar to those which occurred for most federal workers in the United States somewhat over a quarter of a century ago. Broadly speaking it involved the conversion of a purely pay-as-you-go defined benefit plans to a hybrid of a reduced pay-as-you-go defined benefit plan with a funded defined contribution plan. In theUnited States, the latter is called the Thrift Savings Plan which now has over 4.5 million participants and nearly $400 billion in assets.

This paper offers a brief history of the origins of the U.S. system up until the changes in question were made, what were among the major factors or considerations which appear to have spurred the changes, a little bit about the constituencies which seem to have driven or resisted change as the case may be, the modifications that were envisioned, and expectations as to the difference that was expected to be wrought from those alterations. It canvases the differences between the then “old” and the “new” systems in relation to what was ostensibly sought to be achieved. It then draws on what is a surprisingly thin literature to describe the outcomes of the changes more than 25 years later with an eye to hoped-for or anticipated results at the outset. We then detail important elements of the new Brazilian system – which is at an early stage – with an eye to similarities and differences between it and the one we have described with a focus on how the outcomes of the system in theU.S.might bear on thinking inBrazilas it moves forward with its own. We conclude briefly with thoughts on the nature and merits of further pursuing the comparison and inquiry.