SSS fund in peril
Hardly no one believes in campaign promises as these are easier said than done, particularly in a presidential election.
Take President Duterte’s promise to increase the pension benefits of members of the Social Security System (SSS). That had been on the table since the term of President Benigno Aquino III, but actuarial studies showed that a pension increase was simply not possible without a corresponding increase in contributions from SSS members.
So it was a big surprise that the Duterte administration pushed hard to implement an increase in the SSS pension — P1,000 additional monthly benefit starting last year and another P1,000 starting Jan. 1, 2019.
This would have been fine if the contribution rate of members were increased also last year, but the proposed increase had to wait for the impact of the tax reform package.
It would have been too much of a burden for the working class to pay higher taxes on essential goods and services and at the same time contribute more to the SSS.
Finally the realization came this month that the two-step increase would jeopardize the very existence of the SSS.
The state-run pension fund’s president and chief executive, Emmanuel F. Dooc, warned that implementing the second tranche of the President’s pension increase next year would cut short the SSS’ fund life to only until 2026.
This means members and pensioners can still enjoy their benefits in the next seven years, but beyond that, the SSS will no longer have funds for these benefits.
Last year’s P1,000 monthly pension increase in fact slashed the fund life of the SSS by 10 years — from 2042 to 2032.
The numbers speak for themselves. After the pension benefits were increased last year, the net income of the SSS for 2017 slumped 37 percent to P20.3 billion.
Its revenues actually rose 15 percent to P200 billion, but expenses surged 27 percent to P180 billion because of the increase that amounted to P33.5 billion for all SSS pensioners.
It is estimated that the amount needed for the implementation of the second tranche of the pension increase in January 2019 would be slightly higher than P33.5 billion as the number of pensioners increase every year by an average of 100,000.
Today, the SSS collects about P15 billion a month from its members, but disbursements amount to P16 billion each month.
It will indeed be difficult for the SSS if the second round of pension increase pushes through next year without upward adjustments in its contribution rate.
The solution to the problem is to jack up members’ contribution rate to 14 percent within the year from the current 11 percent to compensate for the impact of the pension increase.
The adjustment in the contribution rate can be effected through an executive order from the President. It can be done as well through the proposed amendment in the Social Security Act of 1997 now pending in Congress, which will allow the Social Security Commission to raise contribution rates without presidential approval.
The SSS could generate some P7 billion in the last quarter of 2018 should an initial 1.5-percentage point increase in contribution rate be implemented by October.
The President should now approve the request of the SSS to increase members’ contribution rate to 14 percent to compensate for the impact on the fund life of last year’s pension increase.
This will allow the SSS to extend the fund life to 2044.
Alternatively, Malacañang could delay the implementation of the P1,000 increase in monthly pension scheduled in January 2019 to the following year, 2020—or, better still, to the last year of the President’s term, 2022.
As Dooc has emphasized, this is important to support the viability of the pension fund and assure current members that the SSS will still be there in their times of need.
Otherwise, Mr. Duterte will just be leaving to the next administration the problem of keeping the SSS viable. All to the detriment of SSS members that he wanted to please, in the first place.
