INSS fraud challenges the government and raises tax alerts

The discovery of a scheme of undue discounts on retirement and pensions from the National Institute of Social Security (INSS) between 2019 and 2024, which may have diverted up to R$5.9 billion, according to the most recent estimate, has placed the federal government in a fiscal impasse of major proportions.

With injured retirees and pensioners demanding compensation, the Lula administration now faces the challenge of returning these amounts without compromising the stability of public accounts.

As a first measure, the government announced new features in the Meu INSS app for victims to contest the deductions. In a second front, the administration guaranteed a first batch of refunds of R$292.6 million that will be paid between May 26 and June 6, referring to deductions made in April even after the blockade was already in effect.

The amounts will be withdrawn from Social Security resources . The explanation is that the month's payroll had already been processed before the determination.

Even so, the economic team, led by Fernando Haddad, already admits that it will be necessary to reinforce the Social Security budget , but is still waiting for the amount to define the origin of the resources.

Although there is consensus within the government that affected beneficiaries should be compensated, the potential volume of the refund and the lack of definition regarding the exact amounts are still a concern.

The operation involves not only the return of resources, but also the tracking of fraud, the blocking of assets of involved associations and the development of a digital contestation system — with all the risks associated with the digital exclusion of a large part of the affected population, as they are elderly.

Furthermore, the episode highlights historical failures in control and oversight within the INSS itself, raising questions about administrative and political responsibilities, which are being examined by the Federal Court of Auditors (TCU).

Despite pressure for quick responses, the government is trying to adopt a cautious approach in the so-called “third phase” of the crisis — that of compensation.

Planning Minister Simone Tebet stated that “no one will be harmed,” but stressed that it will be necessary to ensure that only those who were effectively harmed receive the refund. The goal is to avoid undue payments and maintain fiscal responsibility.

Thus, a series of questions arise.

Where will the money come from?

The refund of amounts charged unduly still depends on confirmation of the exact amount, but the government is already studying possible sources to fund the reimbursement.

The first alternative under analysis involves the use of blocked resources from the associations under investigation, which already total more than R$2 billion, as requested by the Attorney General's Office (AGU). These amounts may be used to begin payments without resorting directly to the National Treasury at this first stage.

If the blocked amount is not sufficient, the economic team will discuss the use of Social Security resources. The Ministry of Social Security initially received R$2.36 billion of the total budget of R$972 billion for the year.

Within the commitment limits foreseen for discretionary expenses — of up to R$128.4 billion until May and R$69.5 billion until November — it would be possible to open space to supplement INSS resources without the immediate need for extraordinary credit.

These resources would come from the “savings” created at the beginning of the year, while the Budget had not yet been approved.

Only as a last resort, if the INSS proves that there is not enough margin, the Treasury may be called upon to cover the remainder through an extraordinary credit.

The Budget Execution Board (JEO) will focus on the issue in the coming days, seeking a fiscally responsible solution. But this should only begin to happen when two of the four ministers who make up the board return from their official mission to China.

Simone Tebet (Planning) and Rui Costa (Civil House) are part of President Lula's delegation to the Asian country, which he will return to next week.

Is there a risk of it becoming a court order?

The fear that the bill will end up turning into court orders — that is, judicial debts of the Union with mandatory payment in the following year — is minimized by the economic team.

The assessment is that, with the current administrative reimbursement effort led by the INSS and the AGU, the risk of mass judicialization and, consequently, the creation of legal liabilities, is reduced.

The process required for a debt of this nature to become a court order is long: the insured would need to file a lawsuit against the Union, win the case, wait the legal 60 days for payment and, only then, if the government does not pay, see the debt transformed into a court order.

The government's bet is to anticipate this scenario through administrative means — which avoids judicialization, reduces expenses with lawyers and prevents the accumulation of liabilities for the next fiscal years.

How will the refund be made?

The government has defined a procedure based on digital contestation via the “Meu INSS” app and the 135 call center. Starting May 14, beneficiaries will be able to check whether there were associative discounts on their benefits and, if they do not recognize the authorization, they will be able to contest directly through the app.

Entities will have up to 15 business days to present documents proving express authorization. If they are unable to do so, they will have another 15 days to return the amounts to the INSS, which will then forward the funds to the insured through a supplementary payroll.

The new president of INSS, Gilberto Waller, stated that there will be no face-to-face assistance for this process, which raises concerns given the high rate of digital illiteracy among the elderly — precisely the most affected group.

According to data from the 2024 Functional Literacy Indicator (INAF), 48% of people between 50 and 64 years old have low digital performance. To overcome this limitation, the government will reinforce telephone service via 135.

Learn about the main frauds against INSS beneficiaries