The Social Security System will seek to delay the implementation of the second tranche of additional pension scheduled next year as the planned contribution rate hike has yet to push through.
Emmanuel F. Dooc, SSS president and chief executive officer, told reporters that the state-run pension fund would have to shell out an additional P2.5 billion a month if the pension increase were to be jacked up to P2,000 per month starting 2019.
At present, the SSS collects about P15 billion a month from its members, up from P12 million monthly in 2016, but disbursements already amount to a higher P16 billion per month, Dooc said.
According to Dooc, it will be “difficult” for the SSS if the second round of pension increase pushes through next year without upward adjustments in its contribution rate.
Dooc said they would ask the Office of the President and the Department of Finance to defer the implementation of the further increase in pension to 2020 instead.
“I think [Finance] Secretary [Carlos] Dominguez will support us because he wanted to strengthen the fund,” Dooc said.
“The President’s commitment is to increase the benefit during his term – his term is until 2022, and we already gave away the first half of it,” Dooc noted.
Last year, President Rodrigo Duterte approved an initial P1,000 additional monthly pension benefit, with a second tranche of another P1,000 to be granted to pensioners beginning 2019.
But after the approval of higher pension benefits for retirees, the net income of SSS in 2017 slid 37 percent to P20.3 billion.
While the revenues of SSS last year rose 15 percent to P200.5 billion, expenditures climbed by a faster 27 percent to P180.2 billion.
The jump in expenditures, which include operating expenses, came on the back of the additional P1,000 in monthly pension, which totaled P33.5 billion for the entire 2017.
So the SSS sought the President’s approval of its proposal to jack up members’ contribution rate to up to 14 percent from the current 11 percent to compensate for the impact of the pension increase on its fund life.
The SSS was unable to implement the planned 1.5-percentage point contribution rate increase as initially scheduled in May last year as it awaited passage of the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
The pension fund also sought to raises the minimum monthly salary credit to P4,000 from P1,000 at present, as well as the maximum cap to P20,000 from P16,000.
The higher contribution rate will allow the SSS to extend the fund’s life up to 2044 from the current 2042.
The contribution rate hike is needed as the actuarial life of SSS will be reduced by 14 to 17 years to 2025 to 2028 if members’ contributions would not be increased.
The increase in contribution rate can be effected either through an executive order from the President, or by the proposed amendment in the Social Security Act of 1997 currently pending in Congress.
The proposed amendments to the SSS charter include allowing the Social Security Commission to jack up contribution rates without presidential approval.
According to Dooc, SSS is waiting for 17th Congress to approve the measure before its second session goes into recess, for implementation by the third quarter, instead of waiting for an EO.
“The President already has many problems, I don’t want this to add to his concerns… I don’t want his political capital used for this. I’d rather that the commission implement the contribution rate hike. It’s our job,” Dooc said. /atm