Flawed calculation of SSS income and expenditure
THIS IS in reply to Eduardo Alicias Jr.’s article titled “‘SSS to go bankrupt’: Ghost of paranoia” (Talk of the Town, 1/24/16). Alicias alleged that the Social Security System would incur a “true deficit” of only P10 billion if the pension increase was implemented.
He used a flawed calculation, by which he simply deducted the SSS’ comprehensive income in 2014 from the total amount of pension payments needed for the first year of implementation of the increase. His computations completely overlooked market trends, membership growth and other projections which would provide for a proper equation for calculating the deficit.
Based on our projections for this year, the SSS will have a net revenue loss of P26 billion due to the higher number of pensioners and lower market environment. It also incorporated the amount the SSS has to divest in financial assets to meet the system’s cash needs for the increase.
Asserting that the deficit would only be P10 billion based on an incorrect equation creates the wrong impression that the SSS can take in the impact of the additional P2,000 across-the-board increase in monthly SSS pensions.
We would also like to refer Alicias to our 2014 annual report and check Page 53, which clearly shows the figure “P46 billion” in total comprehensive income for that period.
Alicias further argued that the SSS funds can last by eight more years beyond the projected fund life of 2042 if only the agency could collect from delinquent employers and loan borrowers. While his observation is partly true as all collections would add to our total reserve funds, the amount of collectibles would still not be enough to offset the amount of benefit payouts as more members begin to retire, and receive pensions, too, every year. Based on the 2014 Commission on Audit report, the SSS’ collection delinquency was only P13.6 billion.
The underlying problem in granting higher pensions is more than just a collection efficiency issue. We have to understand that the SSS pension is low because the SSS contributions are low to start with. A member’s contribution is only 11 percent of his monthly salary, and this is capped at P16,000. So even if a member is earning more than P16,000 a month, his contribution will be computed against that salary ceiling. These are legislative limitations that we have to address if we desire much higher benefits that are aligned with those in the government service.
Following his logic that the SSS cannot go bankrupt because it has a government guarantee is an unacceptable guide to manage the SSS funds. This idea clearly goes against our mandate: SSS fiduciaries are legally and morally obliged to ensure that the SSS funds remain viable through the years in order to provide benefits to current and future members, including their beneficiaries. This duty entails regular review of benefits, valuation of the actuarial soundness of the fund, extensive membership coverage, establishment of a wide network of offices, improvement of services, among other things. The SSS cannot just let SSS reserves dry up and reach the point where it can no longer pay for the members’ benefits.
—MARISSU G. BUGANTE, vice president, Public Affairs and Special Events Division, Social Security System
