FGTS Modalities & Changes

Understanding FGTS Modalities and Changes to Anniversary Withdrawal in Brazil

The Fundo de Garantia do Tempo de Serviço (FGTS), or Severance Pay Fund, is a right of all Brazilian workers with formal employment. This fund operates as a financial reserve formed by monthly deposits made by employers on behalf of their employees. Currently, FGTS has two main modalities: severance withdrawal and anniversary withdrawal.

Severance Withdrawal: Severance withdrawal is the traditional modality of FGTS, allowing the worker to withdraw the total balance of their account in specific situations such as termination without just cause, expiration of a fixed-term contract, retirement, among others. In this modality, withdrawal can be made in its entirety, following the criteria established by current legislation.

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Anniversary Withdrawal: On the other hand, anniversary withdrawal is an optional modality that allows the worker to withdraw part of the balance of their FGTS account annually, in the month of their birthday, plus an additional percentage. With this modality, the worker can choose to receive a portion of their account balance every year, according to a withdrawal table published by Caixa Econômica Federal.

In 2020, the federal government announced some changes to the FGTS anniversary withdrawal, aiming to make this modality more attractive and flexible for workers. One of the main changes was the expansion of the withdrawal limit for those with account balances of up to R$ 500.00, allowing the full withdrawal of these accounts.

Additionally, a new withdrawal range was established for accounts with balances between R$ 500.01 and R$ 1,000.00, with the possibility of withdrawing smaller percentages compared to the upper ranges. These changes aim to provide workers with greater freedom in managing their resources, allowing access to part of the FGTS balance in a more flexible manner.

It is important to note that by opting for anniversary withdrawal, the worker forfeits the right to total withdrawal in the event of termination without just cause, maintaining only the right to a 40% fine on the FGTS balance. Therefore, before opting for anniversary withdrawal, it is essential to assess one’s financial conditions and long-term goals.

The FGTS Anniversary Withdrawal may be terminated soon, leading beneficiaries to seek strategies to anticipate and redeem the available funds. The Ministry of Labor has indicated the end of this withdrawal modality due to disagreement with its rules and proposed adjustments to its operation. The National Congress will soon receive a bill to terminate the FGTS Anniversary Withdrawal, motivated by the two-year waiting period to return to this modality after the annual withdrawal. The goal is to ensure workers’ access to FGTS funds more flexibly.

In summary, FGTS offers Brazilian workers different withdrawal modalities, each with its own characteristics and conditions. Severance withdrawal is more traditional and allows access to the total balance in certain situations, while anniversary withdrawal provides an alternative for partial withdrawal of the balance annually, subject to the new rules established by the government. The choice between modalities should be made carefully, taking into account the individual needs and goals of each worker.