Published: 4:02 p.m., Oct. 1, 2017 | Updated: 1:22 a.m., Oct. 2, 2017
Starting January next year, the contribution rate of Social Security System (SSS) members will increase to over 12.5 percent of the monthly salary credit to enable the pension fund for workers in the private sector to cover the higher pensions of retirees.
SSS president Emmanuel Dooc said over the weekend that the Social Security Commission would approve the increase in the contribution rate to coincide with the implementation in January of the first package of the tax reform package that would reduce personal income tax rates.
In January this year, President Duterte approved a two-stage monthly pension increase of P2,000, of which P1,000 a month had been been disbursed to each pensioner since March.
The President also ordered that SSS members’ contribution rate be adjusted upward in increments of 1.5 percentage points per year until 2020 when it will have reached 17 percent from the current 11 percent.
Employer-employee sharing
The current contribution rate of 11 percent is being shared by the employer (7.37 percent) and employee (3.63 percent).
The SSS was unable to implement the contribution rate increase in May, as initially scheduled, because it had to wait for the passage of the first tax reform package, which would increase the take-home pay of employees.
Dooc said the contribution rate by January would exceed 12.5 percent to allow the SSS to cover the months during which the rate increase was held in abeyance.
The contribution rate increase is needed because the SSS actuarial life will be reduced by 14 to 17 years to 2025-2028 from 2042, based on 2016 estimates, if members’ contributions are not increased.
Dooc said the adjustments in the contribution rate would enable the pension fund’s actuarial life to be extended to 2049-2051.
Besides the rate increase, the SSS is considering raising the maximum monthly salary credit to P20,000 from the current P16,000 to prolong its actuarial life.
“Had we implemented the 1.5-percentage point increase this year plus the maximum salary credit increasing it from P16,000 to P20,000, that would have fetched us P23 billion [in] additional contributions this year,” Dooc said.
He said the SSS “will try to collect everything next year.”
Amending the SSS charter
The increase in contribution rate in January will no longer need Mr. Duterte’s approval, as the bill in Congress seeking to amend the SSS charter will allow the Social Security Commission to approve the adjustment, according to Dooc.
Dooc, also the SSS chief executive officer, is optimistic that the amendment to the SSS charter will be approved before end of 2017 because it is among the priority bills of the Legislative-Executive Development Advisory Council.
Mandatory OFW coverage
Aside from the increase in the contribution rate, the SSS is looking forward to a further rise in membership once all overseas Filipino workers (OFWs) are required to be members of the pension fund.
At present, only 550,000 OFWs are among the more than 14 million SSS members.
If passed into law, the amended SSS charter will make it mandatory for at least 9 to 10 million more OFWs to contribute to the SSS, according to Dooc.
Since OFWs are expected to pay higher contributions because they get better pay, the SSS expects total contributions to further expand and cover the higher expenditures due to the pension increase, Dooc added.
Pension hike by 2022
A second tranche of another P1,000 monthly benefit to pensioners is expected before 2022 or at the end of Mr. Duterte’s term.
The SSS expects membership expanding by 1 million a year because not only OFWs but also the ranks of workers in the country will increase due to the government’s “Build, Build, Build” program, which aims to generate up to 1.1 million jobs yearly.
The SSS will also sell over P3.45 billion in real estate property starting this year until 2022 to augment its revenues.
Latest SSS data showed its net revenue slid by 60 percent year on year to P6.561 billion in the first half mainly due to the pension increase.
/je /pdi /atm