Finance Secretary Carlos Dominguez III on Friday said a new accounting system would soon bloat the liabilities of state-run pension funds and insurance institutions, roughly the equivalent of more than half the economy’s output last year, but stressed the government only wanted to show their real financial makeup.
He assured that the Government Service Insurance System (GSIS) and Social Security System (SSS) as well as the Philippine Health Insurance Corp. (PhilHealth) would continue to pay their obligations despite these changes, meant to correct their “overstated incomes.”
Dominguez noted all three government social institutions still have several years before their funds get depleted: the SSS’s fund life is until 2054; the GSIS, up to 2053; and PhilHealth, in 2027.
“We are determined to correct it once and for all to provide the stakeholders and policymakers with a more accurate financial situation of our government social institutions,” Dominguez said in an online press conference yesterday.
P9.94T in liabilities
The institutions will now have to adhere to the Philippine Financial Reporting Standards 4, which means they have to include in their liabilities book the reserves required for future claims.
Before the Commission on Audit releases the audited 2020 financial reports of the GSIS, the SSS and PhilHealth, Dominguez said the public would notice their combined liabilities ballooning to P9.94 trillion. In 2019, their total liabilities were a smaller P153.6 billion, as these did not count future obligations to members and pensioners.
The accounting adjustment will also put their total equity to negative P7.59 trillion, a reversal of the positive P1.96 trillion they reported in 2019.
“Booking and reporting the social benefit liabilities do not affect the institutions’ cash flow and funding situations. The SSS, the GSIS and PhilHealth can still meet their short- and long-term obligations to their members,” Dominguez assured.
Sovereign wealth fund
To further enhance these three institutions’ finances, Dominguez proposed the creation of a sovereign wealth fund that would pool their resources together.
“This will help us maximize returns on investments. Professional fund managers may be hired to manage these funds. This is the practice of many countries, including Singapore, Japan and Indonesia,” Dominguez said.
He also said the three agencies needed to improve their contribution collections to maximize fund efficiency.
“Similar to the payroll tax in the United States, we are looking at the possibility of having one agency collect all the contributions instead of each institution doing its own. Like most countries imposing the payroll tax, we can have the Bureau of Internal Revenue, for instance, collect for these institutions,” he said.