COVID-19 Mortality: Impact on benefits for retirees in a state pension plan

Abstract

This article sought to analyze the impacts of mortality by COVID-19 pandemic on the retirement benefits and pensions of retirees in a Special Social Security System. The study addresses a gap in the literature regarding the impact of COVID-19 on the social security obligations of retirees in the Brazilian public sector, specifically within the system. For the financial equilibrium of a pension plan, it is evident that the impact of the pandemic on the actuarial “mortality” assumption must be considered, given its influence on pension obligations related to the payment of retirement benefits and pensions. The change in mortality tables, in scenarios where COVID-19 is not considered a cause of death, resulted in an average increase of 4.66% in the present value of future benefits (PVFB) and 4.64% in the mathematical provision (MP) for retirement benefits, as well as an average reduction of 3.58% in the NPB and 3.64% in the MP for death pensions between 2020 and 2022. Using the multiple-decrement model, mortality tables were constructed, including (Scenario 1) and excluding deaths from COVID-19 (Scenario 2). The probabilities of death derived from these tables were applied in the calculation of the plan’s actuarial liabilities for retired civil servants (retirement benefits and pensions) under the system. Next, VPBF and PM results for benefits granted during the pandemic period (2020–2022) were compared across the different scenarios. When COVID-19 was excluded as a cause of death, the probabilities of death and pension liabilities were lower in all the years analyzed. The study of mortality by specific causes, though still recent, contributes to actuarial work by quantifying its impact through the application of the results to a real-world database of a Special Social Security System.