Stopping the mandatory hike in private workers’ monthly contributions to the Social Security System (SSS) this year would result in P41.37 billion in foregone collections and could place the state-run pension fund’s bottom line in the red, its top official said on Thursday.
During a hearing conducted by the House committee on government enterprises and privatization to tackle the pending measures aimed at halting the contribution rate hike to 13 percent, SSS president and chief executive Aurora Ignacio warned, “the provisions of the bills tend to weaken, rather than strengthen the SSS, especially in these difficult times.”
Having delayed the collection of contribution payments from members while lending more amid the pandemic-induced recession, the pension fund shed revenues and saw its net income drop 8 percent to P28.6 billion as of end-September last year.
“The SSS has implemented various ‘bayanihan’ measures as its institutional response to the COVID-19 emergency. These included the extension on contribution payment deadline, advance pension, COVID-19 calamity loan, unemployment insurance benefit, and moratorium on loan payments. These have posed considerable strain on our liquidity, with the financial outflows outpacing the inflows,” Ignacio told legislators.
On top of the projected loss in contributions this year, the effect of suspending the rate hike would also spill over to the coming years, further widening the SSS’ losses, Ignacio noted.
As outflows covering its 3.3 million members and pensioners’ benefits amid these hard times were expected to outpace revenues, the SSS was projected to incur a P14.9-billion deficit in 2021, Ignacio said.
It did not help that the SSS already had “trillions of pesos” in unfunded liabilities, which Ignacio said would further balloon if the pension fund could not increase revenues.
Ignacio said keeping the contribution rate at 12 percent “will further exacerbate our already dire financial position.”
“The additional peso contributions are relatively small, ranging from P15 to P100 for employed members, from P30 to P200 for self-employed and voluntary members, and from P80 to P200 for OFW (overseas Filipino worker) members,” Ignacio said.
A predetermined, long-overdue contribution schedule would help offset the impact of expanded benefits that SSS has been giving since 2017, including maternity benefits and unemployment insurance benefits, she added.
“At this time of the COVID-19 pandemic, when members and pensioners have clamored for heightened benefits, including allowable loans, we would expect that proposed measures should clearly strengthen the SSS, not weaken it financially. Stopping the collection of this considerable amount would clearly weaken our institution established to provide social protection,” Ignacio said.
Republic Act No. 11199 or the Social Security Act of 2018 signed by President Duterte in 2019 allowed the Social Security Commission (SSC)—the SSS’s highest governing body—to jack up the contribution rate by 1 percentage point every other year starting in 2019 until it reaches 15 percent.
Thus, the contribution rate hike to 12 percent, which took effect in 2019, will be followed by an increase to 13 percent in 2021, 14 percent in 2023, and 15 percent in 2025.
To recall, the SSS had to push for legislation amending its charter and allowing the SSC to hike the contribution rate after its fund life was slashed by 10 years or only up to 2032 when pensioners began receiving additional P1,000 each starting 2017.
During his presidential campaign, Mr. Duterte promised a total of P2,000-a-month increase in pension.