This excerpt taken from the PBR 20-F filed May 22, 2009.
Pension and Health Care Plan
We sponsor a contributory defined benefit pension plan known as Petros, which covers 96.5% of our employees. The principal objective of Petros has been to supplement the social security pension benefits of our employees. Employees that participate in the plan make mandatory monthly contributions. Our historical funding policy has been to make annual contributions to the plan in the amount determined by actuarial appraisals. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future.
The table below shows the benefits paid, contributions made, and outstanding Petros liabilities for 2008, 2007 and 2006:
On August 9, 2002, the Petros Plan stopped admitting new participants and since 2003 we have been engaged in complex negotiations with representatives of the Oil Workers National Union to address the deficits of the plan and develop a supplementary pension plan. We have also been subject to material legal proceeding in connection with the Petros Plan. In August 2007, we approved new regulations for the Petros Plan and entered into an agreement with the Oil Workers National Union and other parties involved which will extinguish the existing lawsuits in connection with the Petros Plan. The main changes introduced to the Petros Plan include: (i) salary increases of active employees will no longer be passed to retired employees, (ii) the benefits of participants of the plan will be adjusted according to the IPCA inflation index, and (iii) decreases in pensions provided by the government plan will not be supplemented by the Petros Plan. We agreed to pay R$5.8 billion updated retroactively to December 31, 2006 by the consumer price index (IPCA) plus 6% per year, which will be paid in semi-annual installments with interest of 6% per year on the balance for the next 20 years, as previously agreed during the renegotiation.
On July 1, 2007, we implemented the Petros Plan 2, a variable contribution or mixed pension plan, for employees with no supplementary pension plan. A portion of this plan with defined benefits characteristics includes risk coverage for disability and death, a guaranty of a minimum benefit and a lifetime income, and the related actuarial commitments are recorded according to the projected credit unit method. The portion of the plan with defined contribution characteristics, earmarked for forming a reserve for programmed retirement, is recognized in the results for the year as the contributions are made. In 2008, the contribution of Petrobras and its subsidiaries to the defined contribution portion of this plan was U.S.$267 million. The expenses and benefit
obligations related to Petros Plan 2 were recorded according to FASB Statement No. 87, Employers Accounting for Pensions.
We maintain a health care benefit plan (AMS), which offers health benefits and covers all employees (active and inactive) together with their dependents. We manage the plan, with the employees contributing fixed amounts to cover principal risks and a portion of the costs relating to other types of coverage in accordance with participation tables defined by certain parameters, including salary levels.
Our commitment related to future benefits to plan participants is calculated on an annual basis by an independent actuary, based on the Projected Unit Credit method. The health care plan is not funded or otherwise collateralized by assets. Instead, we make benefit payments based on annual costs incurred by plan participants.
On December 15, 2006, we implemented the Medicine Benefit, which provides special terms on the acquisition of certain medications by members of the AMS from participating drugstores, located throughout Brazil. See Item 5. Operating and Financial Review and ProspectsCritical Accounting Policies and EstimatesPension and Other Post-Retirement Benefits.
In addition, some of our consolidated subsidiaries have their own benefit plans.
With the exception of 40 employees of Petrobras Europe Limited, or PEL, and 24 employees of Petrobras Singapore Private Limited, or PSPL, PifCos personnel consist solely of our employees, and PifCo relies on us to provide all administrative functions.