The SSS main office in Quezon City (File photo from the Philippine Daily Inquirer)
MANILA, Philippines–This year, Social Security System (SSS) members and their employers will shell out more for their contributions as the rate will increase to 12 percent, a move that the state-run pension fund’s chief said would replenish the fund life by six years.
In a telephone interview Saturday, SSS president and chief executive Emmanuel F. Dooc also told the Inquirer that the second tranche of pension hike would unlikely be implemented this year even as it will still be granted within the term of President Rodrigo Duterte.
A source said the amendments to the SSS’s charter was signed by Duterte last Feb. 7.
Dooc said the SSS will immediately craft the law’s implementing rules and regulations (IRR), such that the provision mandating a 1-percentage point increase in the contribution rate every two years, until it reaches 15 percent, can be implemented this year.
At present, the contribution rate stands at 11 percent.
As such, this year’s contribution rate hike will be followed by three more 1-percentage point increases in 2021, 2023 and 2025.
Under the SSS Rationalization Act, the Social Security Commission (SSC)—the pension fund’s highest policymaking body—can implement contribution rate increases even without the President’s approval, unlike the current charter wherein only the chief executive can green-light rate adjustments.
Two-thirds of the contribution rate increase will be shouldered by the employer.
With a higher contribution rate, the SSS’s fund life will be extended until 2038 from 2032 at present, Dooc said.
This means that SSS members and pensioners can still enjoy their benefits for at least 20 more years from now.
To recall, the SSS’s fund life was slashed by 10 years to 2032 from 2042 previously when the additional P1,000 a month were given away to pensioners starting 2017.
Dooc said the new law “will strengthen our fund life.”
The SSS had initially wanted to implement a higher contribution rate right after the Tax Reform for Acceleration and Inclusion (TRAIN) Act was enacted into law, as the lower income tax rates would generate more take-home pay and still provide some relief despite a rate hike.
However, despite having the power to increase the contribution rate, President Duterte did not do so.
Instead, it was the SSS that sought amendments to its charter so that the SSC can implement the contribution rate increase on its own.
For the part of the SSS, Dooc said they will not just rely on the higher contribution rate to raise revenues that will cover the pension fund’s also increasing expenses.
Dooc noted that the SSS had gradually increased its revenues—sourced from members’ contributions as well as investments—from P132 billion in 2015 to P144 billion in 2016, P159 billion in 2017, and P181 billion last year.
For this year, the SSS targets to collect P19 billion a month or at least P228 billion for the entire year, Dooc disclosed.
Dooc noted that revenues have grown by double-digits in recent years—10 percent in 2017 and 13.9 percent in 2018.
However, expenditures were also ballooning partly due to the pension hike implemented since 2017.
Dooc said the SSS shells out an additional P25 billion a month to 2.5 million pensioners to cover their additional P1,000 in pension benefits.
If the second tranche of another P1,000 in additional pension will be implemented, the fund life will be cut by about six years, hence offsetting the increase from the contribution rate hike, he said.
In this regard, Dooc said it would be up to the SSC to recommend to President Duterte when will be the best time to implement the second round of pension increase within his term, as it was a campaign promise of the President.
For Dooc, the timing for the additional pension benefits should be based on “our [the SSS’s] capacity to absorb the cost.”
Besides the mandated increase in contribution rate, the new SSS law will also make membership compulsory among overseas Filipino workers (OFWs).
At present, only about 550,000 OFWs were also SSS members, and the new law could jack up membership to at least two million, Dooc said.
The amended SSS charter also mandated a one-time, big-time condonation among delinquent employers within a six-month window period, which can be availed of without penalty, Dooc added.
The SSC will also have the power to implement future condonation programs, according to Dooc.
“The new law will wipe out a significant amount of delinquent accounts,” he said.
Under the SSS Rationalization Act, the Secretary of the Department of Finance will also serve as the pension fund’s chair. /jpv