PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS |
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| Disclosure of defined benefit plans [abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | 31. PENSIONS PLANS AND OTHER POST-EMPLOYMENT BENEFITS 31.a. Accounting policy The Company and its subsidiaries individually sponsor pension funds of post-retirement benefits for active and retired employees, in addition to a multisponsor supplementary retirement plan and health care plan for former employees. Contributions are determined on an actuarial basis and recorded on an accrual basis. Liabilities relating to defined benefit plans are determined based on actuarial evaluations at each year-end, in order to ensure that sufficient reserves have been set up for both current and future commitments. The Company and its subsidiaries manage and individually sponsors a health care plan for retired employees and former employees with fixed contributions to the plan, in accordance with Law No. 9656/1998 (which provides for private health care and health insurance plans). As provided for in Articles 30 and 31 of said law, participants shall have the right to the health care plan in which they participated while they were active employees. Actuarial liabilities related to defined benefit plans were calculated using the projected unit credit method. Actuarial gains and losses are recognized immediately in equity (in other comprehensive income). For plans with defined contribution characteristics, the obligation is limited to the contributions payable, which are recognized in the P&L in the respective accrual periods. The asset or liability related to defined benefit plan to be recognized in the financial statements corresponds to the present value of the obligation for the defined benefit (using a discount rate based on long-term National Treasury Notes – “NTNs”), less the fair value of plan assets that will be used to settle the obligations. Plan assets are assets held by a privately held supplementary pension plan entity. Plan assets are not available to the Company’s creditors or those of its subsidiaries and cannot be paid directly to the Company or its subsidiaries. The fair value is based on information on market prices and, in the case of securities quoted, on the purchase price disclosed. The value of any defined benefit asset then recognized is limited to the present value of any economic benefits available as a reduction in future plan contribution from the Company. Actuarial costs recognized in the statement of income are limited to the service cost and cost of interest on the defined benefit plan obligation. Any changes in the measurement of plan assets and obligations are initially recognized in other comprehensive income, and immediately reclassified to retained earnings in P&L. 31.b. Critical estimates and judgments The cost of pension plans with defined benefits and other post-employment health care benefits and the present value of the pension obligation are determined using actuarial valuation methods. Actuarial valuation involves use of assumptions about discount rates, future salary increases, mortality rates and future increases in pension and annuity benefits. The obligation for defined benefits is highly sensitive to changes in these assumptions. All assumptions are reviewed on an annual basis. The mortality rate is based on publicly available mortality tables in the country. Future salary increases, and pension increases are based on expected future inflation rates for the country. 31.c. Information on pension plans and other post-employment benefits The plans sponsored by the Company and its subsidiaries and the related benefit types are as follows:
The Company has participation in the decisions that directly affect the governance of the plans, with members nominated for both the Deliberative Council and the Fiscal Council of the administrators Visão Prev Sociedade de Previdência Complementar (“Visão Prev”) and Fundação Sistel de Seguridade Social (“Sistel”). The defined benefit obligation is made up of different components, according to the pension characteristic of each plan, and may include the actuarial liabilities of supplementary pension liabilities, health care benefits to retirees and dependents or compensation for death or disability of members. This liability is exposed to economic and demographic risks, such as: (i) increases in medical costs that could impact the cost of health care plans; (ii) salary growth; (iii) long-term inflation rate; (iv) nominal discount rate; and (v) life expectancy of members and pensioners. The fair value of plan assets is primarily comprised of fixed income investments (NTN's, LFT’s, LTN's, repurchase agreements, CDBs, debentures, letters of guarantee and FIDC shares) and equity investments (highly liquid, well regarded, large company shares and investments in market indices). Due to the concentration of fixed income and floating rate investments plan assets are mainly exposed to the risks inherent in the financial market and economic environment such as: (i) market risk in the economic sectors where variable income investments are concentrated; (ii) risk events that impact the economic environment and market indices where variable income investments are concentrated; and (iii) the long-term inflation rate that may erode the profitability of fixed income investments at fixed rates. The companies that administer post-employment benefits plans sponsored by the Company (Visão Prev and Sistel) seek to meet the flows of assets and liabilities through the acquisition of fixed income securities and other long-term assets. With the exception of the Companhia Telefônica Brasileira ("CTB") and the healthcare plan under Law No. 9656/98, generally all benefit plans that have funds constituted present a surplus position. The economic benefit recorded in the Company's assets or that of its subsidiaries does not reflect the total surplus determined in these plans, as it only considers only the portion of the surplus which presents a real possibility of recovery. The means of plan surplus recovery is solely through reductions in future contributions and given that not all plans currently receive enough contributions for full recovery of surpluses, the economic benefit recorded under assets is limited to the total possible recovery amount in accordance with projected future contributions. The position of plan assets is on December 31, 2025 and 2024, respectively, and plan assets were apportioned based on the Company’s actuarial liabilities in relation to the total actuarial liabilities of the plan. The actuarial gains and losses generated in each year are immediately recognized in equity (in other comprehensive income). The following is a summary of the pension plans and other post-employment benefits: 31.c.1. Post-Employment Health Benefits Plans The actuarial valuation made for the PAMA health plan used the registration of the participants with a base date of August 31, 2025, while the actuarial valuation made for the health plan Law No. 9,656/98 used the registration of the participants with a base date of September 30, 2025, both plans projected for December 31, 2025. For comparative exercises, the actuarial valuation made for the PAMA health plan used the registration of the participants with a base date of August 31, 2024, while the actuarial valuation made for the health plan Law No. 9,656/98 used the registration of the participants with a base date of September 30, 2024, both plans projected for December 31, 2024. In September 2025, changes occurred in the health plan for employees and retirees (Law No. 9,656): the Company carried out a review and adjustments to the methodology used for calculating medical costs for active employees and retirees (eligible under Law No. 9,656), including a review of assumptions such as: discount rates for actuarial liabilities, aging factor (increase in the use of medical services during the period), and take-up (percentage of terminated/retired employees eligible for the benefit under Law No. 9,656). The consolidated accounting effects of these changes were: (i) R$105,841 in pension plan and other post-employment benefit liabilities (note 23); (ii) R$24,223 in other comprehensive income (equity), net of taxes; (iii) R$13,178 in deferred income tax and social contribution (note 8.e); and (iv) R$68,440 in general and administrative expenses (personnel expenses, charges, and social benefits) (note 26). 31.c.1.1. Healthcare Plan to Retirees and Special Coverage Program (PAMA and PAMA-PCE) The Company, together with other companies of the former Telebrás System, at shared cost, sponsor health care plans (PAMA and PAMA-PCE) to retirees. These plans are managed by Fundação Sistel and are closed plans, not admitting new members. Contributions to the plans are determined based on actuarial valuations prepared by independent actuaries, in accordance with the rules in force in Brazil. The funding procedure is the capitalization method and the sponsor’s contribution are at the fixed percentage of payroll of employees covered by the Telefônica BD plan. 31.c.1.2. Health care plan – Law No. 9656/1998 The Company manages and together with its subsidiaries sponsors a health care plan to retired employees and former employees with fixed contributions to the plan, in accordance with Law No. 9656/98. As provided for in Articles 30 and 31 of said law, participants shall have the right to the health care plan in which they participated while they were active employees. Benefitted participants are classified as (i) retirees and their dependents; and (ii) dismissed employees and their dependents. Retirees and dismissed employees, in order to keep their right to the benefits, must make contributions to the plan in accordance with the contribution tables by age bracket established by carriers and/or insurance companies. 31.c.2. Post-employment Social Security Plans Post-employment pension plans include: PBS Assistidos (“PBS-A”), CTB, Telefônica BD and Visão. The actuarial assessment carried out for the CTB, PBS-A, Telefônica BD and Plano Visão pension plans used the participant registry with a base date of July 31, 2025, projected to December 31, 2025, and the participant registry with a base date of July 31, 2024, projected to December 31, 2024. 31.c.2.1. PBS Assisted Plan (PBS-A) The PBS-A plan is a defined benefit private pension plan managed by Sistel and sponsored by the Company jointly with the other telecommunications companies originating in the privatization of the Telebrás System. The plan is subject to funding by sponsors in the case of any asset insufficiency to ensure pension supplementation of participants in the future. The PBS-A plan comprises assisted participants of the Sistel Benefit Plan who were already retirees on January 31, 2000, from all the participating sponsors, with joint liability of all sponsors to the plan and Sistel. According to PREVIC Ordinances No. 249/23 and No. 926/24, dated March 14, 2023 and November 8, 2024, and published in the Official Gazette on April 13, 2023 and November 14, 2024, respectively, Sistel approved distributions of part of its surplus, in the form of a special PBS-A reserve, with reversion of amounts to sponsors and improvement of benefits, in the form of temporary income, to beneficiaries. The Company's share in the distribution of this reserve was calculated at R$89,130 for the distribution approved in 2023 and R$114,852 for the distribution approved in 2024, with distributions expected in the form of 36 monthly payments, adjusted by the plan's income (Note 11). According to Ordinance No. 753 of the National Superintendency of Complementary Pensions (“PREVIC”), published in the Official Gazette on August 20, 2025, the distribution by Sistel of the PBS-A plan surpluses for the years 2022 and 2023 was approved, with the reversal of amounts to the sponsors and temporary additional income to the beneficiaries. The Company's share in the distribution of these surpluses was calculated at R$107,077, with distributions scheduled in the form of 36 monthly payments, adjusted by the plan's yield. The consolidated accounting effects of this distribution were: (i) R$107,077 in assets (surplus) of post-employment benefit plans (Note 11); (ii) R$70,671 in other comprehensive income (equity), net of taxes; and (iii) R$36,406 in income tax and social contribution payable (Note 8.d). Even considering the distribution of the reserve approved by PREVIC, PBS-A still has assets in excess of actuarial obligations as of December 31, 2025 and 2024. These surpluses were not recognized due to the lack of legal provision for their reimbursement and, as they are not a contributory plan, no deduction is possible in future contributions. 31.c.2.2. CTB Plan Contributions to the CTB plan are determined based on actuarial valuations prepared by independent actuaries, in accordance with the rules in force in Brazil. The funding procedure is the capitalization method and the sponsor’s contribution are a fixed percentage of payroll of employees covered by the plan. The Company also individually manages and sponsors the CTB plan, originally provided to former employees of CTB who were in the Company in 1977, with whom an individual retirement concession agreement was executed to encourage their resignation. This is an informal pension supplementation benefit paid to former employees directly by the Company. These plans are closed, and no other members are admitted. 31.c.2.3. Telefônica DB Plan The Company individually sponsors the defined benefit retirement, Telefônica DB plan. In order to improve allocation of Telefônica DB plan assets and analyze the coverage ratio of plan obligations in future years, a stochastic Application Lifecycle Management (“ALM”) study was prepared by Visão Prev and Willis Towers Watson. This ALM study aimed at projecting the ratio between coverage of liabilities (solvency ratio) and the risk of mismatching measured by the standard deviation of the solvency ratio. The study concluded that the plan presents sustainable projection of their coverage ratio with the current investments’ portfolio. At the time of the concession, a benefit is calculated which will be paid in a lifelong form and updated by inflation. This plan is not open to new accessions. The contributions are defined according to the costing plan, which is calculated considering financial, demographic and economic hypotheses in order to accumulate enough resources to pay the benefits to the participants who are already receiving them, and to the new pensions. 31.c.2.4. VISÃO Plans The Visão Telefônica and Visão Multi plans, due to their similarity, are now shown together under the name Visão. The Company and its subsidiaries sponsor defined contribution plans with defined benefit components (hybrid plans) and pension benefits, the Visão plans, managed by Visão Prev. The contribution is attributed to each subsidiary in the economic and demographic proportion of its respective obligation to the plan. The contributions made by the Company and subsidiaries related to defined contribution plans totaled R$65,641 and R$60,106 on December 31, 2025 and 2024, respectively. The contributions to the Visão Telefônica and Visão Multi plans are: (i) basic and additional contribution, with contributions made by the participant and sponsor; and (ii) additional, sporadic and specific contribution, with contributions made only by the participant. In addition, the participant has the possibility to choose one of five investment profiles to apply to their balance, and they are: Super Conservative, Conservative, Moderate, Aggressive and Aggressive Fixed Income Long-Term. 31.c.3. Consolidated information on pension plans and other post-employment benefits 31.c.3.1. Reconciliation of net liabilities (assets)
31.c.3.2. Total expenses recognized in the statement of income
31.c.3.3. Amounts recognized in other comprehensive income (loss)
Income tax and social contribution levied on the total amounts recognized in other comprehensive income were:(i) in 2025: R$6,277, with R$30,129 in deferred income tax and social contribution and R$36,406 in current income tax and social contribution (ii) in 2024: R$188,153, of which R$149,103 was deferred income tax and social contribution and R$39,050 was current income tax and social contribution; an (iii) in 2023: (R$48,925), of which (R$79,229) was deferred income tax and social contribution and R$30,304 was current income tax and social contribution. 31.c.3.4. Changes in amount net of liability (asset) of defined benefit, net
31.c.3.5. Changes in defined benefit liability
31.c.3.6. Changes in the fair value of plan assets
31.c.3.7. Changes in asset limitation
31.c.3.8. Results projected for 2026
31.c.3.9. Sponsoring company contributions projected for 2026
31.c.3.10. Average weighted duration of defined benefit liability
31.c.3.11. Actuarial assumptions
In addition to the assumptions presented in the tables above, for 2025 and 2024 other assumptions common to all plans were adopted, as follows: (i) long-term inflation rate: 3.50% in 2025 and 2024; and (ii) annual increase in the use of medical services according to age: 4.0% in 2025 and 2024. 31.c.3.12. Changes in actuarial assumptions in relation to the prior year In order to adjust some actuarial assumptions to the economic and demographic reality, a study was conducted for the plans administered by Visão Prev and Sistel, which adopted the definition of the assumptions in their Deliberative Councils. The main economic and financial assumptions that have changed in relation to the previous fiscal year and that interfere with the defined benefit liability are: (i) rates for discount to present value of the defined benefit liability; (ii) long-term inflation rate; (iii) rate of future wage growth; (iv) rate of growth of medical costs; and (v) annual nominal index of adjustment of social security benefits. The impacts on the plans’ defined benefit liabilities due to the new definition of the actuarial assumptions are as follows:
31.c.3.13. Sensitivity analysis for actuarial assumptions The Company believes that the significant actuarial assumptions with reasonable likelihood of variation due to financial and economic scenarios, which could significantly change the amount of the defined benefit obligation, are the discount rate used to adjust the defined benefit liability to present value and the rate of growth of medical costs. Below, we present a sensitivity analysis on the defined benefit obligation for scenarios of a 0.5% increase and a 0.5% reduction in the discount rate used to adjust the defined benefit liability to present value.
Below, we present a sensitivity analysis on the defined benefit obligation for scenarios of a 1% increase and a 1% reduction in the medical cost growth rate used to adjust the defined benefit liability to present value.
31.c.3.14. Allocation of plan assets
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