Pension Sustainability and Institutional Innovation: Proposal for a Competitive System for Short-Term Benefits

Abstract

This study proposes an innovative financing model for temporary disability benefits in Brazil, integrating the General Social Security Regime (RGPS) with private sector participation under a competitive framework. Grounded in Constitutional Amendment No. 103/2019, the model addresses the sustainability challenges of the PAYG system, exacerbated by population aging and the expansion of informality. Through econometric analysis, the study demonstrates that adopting a mixed system—where the private sector covers short-term benefits in measurable-risk sectors while the National Social Security Institute (INSS) acts as a reinsurer—can generate annual savings of several billion reais. The model's pillars include dynamic sector-based pricing mechanisms, risk transfer strategies, and governance supported by distributed ledger technologies. The findings suggest that the proposal aligns with the constitutional principles of social security, offering a legally viable solution for fiscal balance without compromising protective coverage, provided it is regulated by a complementary law that ensures beneficiary safeguards and objective criteria for private sector involvement.