| EMPLOYEE BENEFITS |
NOTE 21 — EMPLOYEE BENEFITS Total assets and liabilities of all types of employee benefits granted by the Company and its subsidiaries as of December 31, 2025 and 2024 are as follows: | | | | | | | 2025 | | 2024 | Plan assets - Defined contribution pension plan | | 9,328 | | 9,716 | Total assets | | 9,328 | | 9,716 | | | | | | Actuarial liabilities - Defined benefit pension plan | | 190,790 | | 303,925 | Actuarial liabilities - Post-employment health care benefit | | 199,570 | | 224,677 | Retirement and termination benefit liabilities | | 14,319 | | 16,790 | Total liabilities | | 404,679 | | 545,392 | | | | | | Current | | 594 | | 186 | Non-current | | 404,085 | | 545,206 |
a) Post-employment defined benefit pension plan The Company’s Canadian and US subsidiaries sponsor defined benefit plans (Canadian Plan and American Plan), collectively referred to as the North American Plans, that cover substantially all their employees and provide supplemental benefits to employees during retirement. The assumptions adopted for pension plans can have a significant effect on the amounts disclosed and recorded for these plans. The Company and its subsidiaries in Brazil sponsor a defined benefit pension plan (Brazilian plans), managed by Gerdau - Sociedade de Previdência Privada (GPrev), a closed supplementary pension plan, which were settled in 2010 and include only participants who decided not to transfer the reserve to a new defined contribution plan and, therefore, opted to maintain the benefit settled in the defined benefit plan, which has been adjusted by the INPC (National Consumer Price Index). The potential effects of changes to the North American Plans on the Consolidated Statement of Income are presented below: | | | | | | | 1% Increase | | 1% Decrease | Discount rate | | (13,902) | | 12,981 |
The accumulated amount recognized in other Comprehensive Income for employee benefits is R$ (487,421) as of December 31, 2025 (R$ (539,300) as of December 31, 2024). Defined Benefit Pension Plan The current expenses of the defined benefit pension plans are as follows: | | | | | | | | | 2025 | | 2024 | | 2023 | Cost of current service | | 33,793 | | 49,339 | | 46,176 | Interest expense | | 154,048 | | 213,267 | | 204,604 | Return on plan assets | | (158,392) | | (205,604) | | (187,247) | Past service cost | | 5,888 | | 7,164 | | — | Settlement | | 1,122 | | (24,625) | | — | Interest cost on unrecoverable surplus | | 18,352 | | 14,129 | | 13,645 | Net pension cost | | 54,811 | | 53,670 | | 77,178 |
The reconciliations of assets and liabilities of the plans are as follows: | | | | | | | 2025 | | 2024 | Present value of defined benefit obligation | | (2,388,321) | | (2,752,097) | Fair value of plan assets | | 2,628,213 | | 2,871,304 | Asset ceiling restrictions on recognition of net funded assets | | (430,682) | | (423,132) | Net | | (190,790) | | (303,925) | Defined benefit obligation | | (190,790) | | (303,925) |
Changes in plan assets and actuarial liabilities were as follows: | | | | | | | | | 2025 | | 2024 | | 2023 | Variation of the plan obligations | | | | | | | Obligation at the begining of the year | | 2,752,097 | | 3,573,044 | | 3,841,213 | Cost of service | | 33,793 | | 49,339 | | 46,176 | Interest expense | | 154,048 | | 213,267 | | 204,604 | Payments of the benefits | | (201,795) | | (343,378) | | (410,621) | Past service cost | | 5,888 | | 7,164 | | — | Settlement | | (122,560) | | (1,346,899) | | — | Acturial remeasurements | | (22,519) | | (119,823) | | 117,644 | Exchange Variance | | (210,631) | | 719,383 | | (225,972) | Obligation at the end of the year | | 2,388,321 | | 2,752,097 | | 3,573,044 |
| | | | | | | | | 2025 | | 2024 | | 2023 | Variation of the plan assets | | | | | | | Fair value of the plan assets at the begining of the year | | 2,871,304 | | 3,383,887 | | 3,499,475 | Return of the plan assets | | 158,392 | | 205,604 | | 187,247 | Contributions from sponsors | | 56,322 | | 331,212 | | 75,321 | Settlement | | (123,682) | | (1,322,274) | | — | Payments of benefits | | (201,795) | | (343,378) | | (413,565) | Remeasurement | | 56,421 | | (10,050) | | 214,503 | Exchange Variance | | (188,749) | | 626,303 | | (179,094) | Fair value of plan assets at the end of the year | | 2,628,213 | | 2,871,304 | | 3,383,887 |
Amounts recognized as actuarial gains and losses in the Statement of Comprehensive Income are as follows: | | | | | | | | | 2025 | | 2024 | | 2023 | Return of the plan assets | | (56,421) | | 6,340 | | (214,503) | Actuarial Remeasurements | | (22,519) | | (119,823) | | 117,644 | Restriction recognized in Other Comprehensive Income (Asset Ceiling) | | (4,626) | | 70,212 | | (22,456) | Remeasurements recognized in Other Comprehensive Income | | (83,566) | | (43,271) | | (119,315) |
The historical actuarial remeasurements are as follows: | | | | | | | | | | | | | 2025 | | 2024 | | 2023 | | 2022 | | 2021 | Present value of defined benefit obligation | | (2,388,321) | | (2,752,097) | | (3,573,044) | | (3,841,213) | | (5,409,065) | Fair value of the plan assets | | 2,628,213 | | 2,871,304 | | 3,383,887 | | 3,499,475 | | 4,647,361 | Surplus (Deficit) | | 239,892 | | 119,207 | | (189,157) | | (341,738) | | (761,704) | Experience adjustments on plan liabilities (Gain) | | (22,519) | | (119,823) | | 117,644 | | (1,058,898) | | (457,421) | Experience adjustments on plan assets (Gain) | | (56,421) | | 6,340 | | (214,503) | | 791,672 | | (25,498) |
Actuarial remeasurements are recognized in the period in which they occur and are recorded directly in comprehensive income. The allocations for plan assets are presented below: | | | | | | | 2025 | | | | | North | | | Brazilian Plans | | American Plans | Fixed income | | 99.7% | | 66.0% | Variable income | | — | | 30.0% | Others | | 0.3% | | 4.0% | Total | | 100% | | 100% |
| | | | | | | 2024 | | | | | North | | | Brazilian Plans | | American Plans | Fixed income | | 99.7% | | 58.3% | Variable income | | — | | 36.8% | Others | | 0.3% | | 4.9% | Total | | 100% | | 100% |
The investment strategy for the Brazilian Plan is based on a long-term macroeconomic scenario. This scenario assumes a reduction in Brazil’s sovereign risk, moderate economic growth, stable levels of inflation, exchange rates and moderate interest rates. The Canadian and American subsidiaries have an Investment Committee that defines the investment policy for the defined benefit plans. The primary investment objective is to ensure the security of benefits that were accrued under the plans, providing an adequately funded asset pool which is separated and independent of the Company. To reach this objective, the fund must invest in a manner that adheres to safeguards and diversification to which a prudent investor of pension funds would normally adhere. These subsidiaries retain specialized consultants that advice and support Investment Committee decisions and recommendations. The asset mix policy considers the principles of diversification and long-term investment goals, as well as liquidity requirements. To do this, the target allocation ranges from 29% to 36% in shares,from 60% to 70% in debt securities and from 0% to 7% in alternative securities, and for Brazilian Plan it is close to 100% in fixed income. The tables below show a summary of the assumptions used to calculate the defined benefit plans in 2024 and 2023, respectively: | | | | | | | 2025 | | | Brazilian Plan | | North American Plan | Average discount rate | | 11.15% | | 4.75% to 5.42% | Rate of increase in compensation | | Not applicable | | Not applicable | Mortality table | | AT-2000 per sex | | RP-2012 and MP-2017&2021 | Mortality table of disabled | | AT-2000 per sex | | Not applicable | Rate of rotation | | Null | | Based on age and/or the service |
| | | | | | | 2024 | | | Brazilian Plan | | North American Plan | Average discount rate | | 11.07% | | 4.58% to 5.62% | Rate of increase in compensation | | Not applicable | | 3.00% | Mortality table | | AT-2000 per sex | | RP-2006 and MP-2024 | Mortality table of disabled | | AT-2000 per sex | | RP-2006 and MP-2024 | Rate of rotation | | Null | | Based on age and/or the service |
b) Post-employment defined contribution pension plan The Company and its subsidiaries in Brazil, in the United States and in Canada maintain a defined contribution plan to which contributions are made by the sponsor in proportion to the contributions made by its participating employees. The total cost of these plans was R$ 235,888 in 2025 (R$ 215,085 in 2024 and R$196,027 in 2023). c) Post-employment health care benefit plan The North American plans include, in addition to pension benefits, specific health care benefits for employees who retire after a certain age and with a certain number of years of service. The Americans and Canadian subsidiaries have the right to change or eliminate these benefits, and the contributions are actuarially calculated. The net periodic costs of post-employment health care benefits are as follows: | | | | | | | | | 2025 | | 2024 | | 2023 | Current service cost | | 1,744 | | 1,933 | | 2,069 | Interest expense | | 9,718 | | 11,059 | | 10,127 | Net cost pension benefit | | 11,462 | | 12,992 | | 12,196 |
The funded status of the post-employment health benefits plans is as follows: | | | | | | | 2025 | | 2024 | Present value of obligations | | (199,570) | | (224,677) | Total net liabilities | | (199,570) | | (224,677) |
Changes in plan assets and actuarial liabilities were as follows: | | | | | | | | | 2025 | | 2024 | | 2023 | Change in benefit obligation | | | | | | | Benefit obligation at beginning of the year | | 224,677 | | 196,445 | | 224,180 | Cost of service | | 1,744 | | 1,933 | | 2,069 | Interest expense | | 9,718 | | 11,059 | | 10,127 | Contributions from participants | | 792 | | 1,125 | | 1,096 | Payment of benefits | | (19,214) | | (18,729) | | (20,265) | Remeasurements | | 649 | | (9,457) | | (7,232) | Exchange variations | | (18,796) | | 42,301 | | (13,530) | Benefit obligation at the end of the year | | 199,570 | | 224,677 | | 196,445 |
| | | | | | | | | 2025 | | 2024 | | 2023 | Change in plan assets | | | | | | | Contributions from sponsors | | 18,422 | | 17,604 | | 19,168 | Contributions from participants | | 792 | | 1,125 | | 1,096 | Payments of benefits | | (19,214) | | (18,729) | | (20,264) | Fair value of plan assets at end of the year | | — | | — | | — |
The historical actuarial gains and losses of the plans are as follows: | | | | | | | | | | | | | 2025 | | 2024 | | 2023 | | 2022 | | 2021 | Present value of defined benefit obligation | | (199,570) | | (224,677) | | (196,445) | | (224,180) | | (318,181) | Deficit | | (199,570) | | (224,677) | | (196,445) | | (224,180) | | (318,181) | Experience adjustments on plan liabilities | | 649 | | (9,457) | | (7,232) | | (61,524) | | (36,938) |
The amounts recognized as actuarial gains and losses in other comprehensive income are as follows: | | | | | | | | | 2025 | | 2024 | | 2023 | Gains (Losses) on actuarial obligation | | 649 | | (9,457) | | (7,232) | Actuarial losses recognized in Equity | | 649 | | (9,457) | | (7,232) |
The accounting assumptions adopted for post-employment health benefits are as follows: | | | | | | | 2025 | | 2024 | Average discount rate | | 4.75% - 5.42% | | 4.58% - 5.62% | Health treatment - rate assumed next year | | 4.28% - 7.90% | | 4.76% - 8.40% | Health treatment - Assumed rate of decline in the cost to achieve in the years of 2032 to 2041 | | 3.31% - 9.20% | | 3.26% - 4.40% |
The assumptions adopted for post-employment health benefits have a significant effect on the amounts disclosed and recorded for post-employment health benefits plans. The change of one-point percentage on discount rates would have the following effects: | | | | | | | 1% Increase | | 1% Decrease | Effect over total service costs and interest costs | | (4,619) | | 4,530 | Effect over benefit plan obligations | | (45,422) | | 55,338 |
d) Other retirement and termination benefits The benefits of this plan provide a compensation supplement up to retirement date, cost of living allowance, and other benefits as a result of termination and retirement of the employees. The Company estimates that the total obligation for these benefits was R$ 14,319 as of December 31, 2025 (R$ 16,790 as of December 31, 2024).
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