DEJECTED Pensioner Rogie Bendol, 65, sits on the sidewalk just outside the Social Security System (SSS) head office on East Avenue, Quezon City, after venting his frustration at the SSS in a protest against President Aquino’s veto of a bill that sought to grant 2.1 million retirees an across-the-board P2,000 increase in their monthly pensions. RAFFY LERMA
President Benigno Aquino III vetoed the Social Security System (SSS) pension hike bill, arguing he would rather be “heartless” now to the pensioners than be considered “careless” and “heartless” in the future by the more numerous current members.
READ: Aquino vetoes increase in SSS pension
He further argued that he would rather be right than popular. His concept of right is an SSS that will not be rendered bankrupt in the future, thereby the current SSS members will not be rendered pensionless—never mind that the present pensioners continue to wallow in the mire of poverty.
The choice was between taking care of the 2.15 million aged, aging and ailing pensioners versus the 31 million SSS members who will wake up on retirement day to an imagined pensionless future, a bankrupt SSS.
Mr. Aquino is apprehensive about the future of the 31 million members, but not bothered by the present plight of the 2.15 million pensioners. He chose to be prudent even though “heartless.” Hence, the veto.
READ: Aquino on pension hike veto: Better to be heartless now than careless later
University of the Philippines School of Economics professor Solita Collas-Monsod asks the relevant question, “Which items of competing expenditures would be foregone by the government to save the SSS?” The Pareto criterion of optimality comes to mind, i.e., parity of marginal utilities. This requires that the marginal welfare of the 31 million SSS members and that of the 2.15 million pensioners come close to parity.
READ: Legislators thinking of themselves in pushing SSS pension hike
Pareto suboptimal
Therefore, favoring the 31 million at the expense of the 2.15 million appears Pareto suboptimal (unfair).
Is it more important to society to simply “save” the life of the SSS? If so, then why should the life of a legal creature trump the lives of the 2.15 million—aging, ailing, flesh-and-blood human beings?
Is the SSS ailing, too? If so, then is it true that it is self-inflicted with some sort of institutional atherosclerosis, owing to the self-serving management decisions of its “fat and fattened” executives? Is it true that its executives have appropriated for themselves “fat and fattening” yet moral bonuses and allowances?
Will the SSS go bankrupt if the pension hike is approved? No, not likely!
Initially, P-Noy and the SSS calculate thus: the P2,000 pension increase would result in an annual payout of P56 billion and given the annual SSS investment income of P30 billion to P40 billion, the resulting annual deficit would be P16 billion to P24 billion. Therefore, the SSS would go bankrupt in 2027. Also, it is estimated that the reserve fund (sans pension hike) will last until 2042.
Calculation ‘untrue’
But, wait a minute, their initial calculation appears untrue!
Thus, the President and Malacañang issued a subsequent clarification based on the 2014 SSS annual report as follows:
“The annual report also showed that SSS had a comprehensive income of P46 billion in 2014, putting the deficit arising from the pension hike—using these figures—at only P10 billion. The income is computed by deducting the total amount of benefits payout and operating expenses from membership collection and investment revenue.
“In 2014, SSS expenditures totaled P110.712 billion—P102.598 billion for benefits payout and P8.113 billion for operating expenses.
“Revenues amounted to P155.180 billion representing P120.650 billion from membership collections and P34.530 billion from investment revenue. The government-owned and-controlled corporation had reserve funds of P418.316 billion in 2014.”
True deficit
Now, what’s clarified? The true deficit is P10 billion. Initially, they defined income to mean just “investment income.” Now, they define income to include both “membership collection and investment revenue.” Moreover, they imply that income and revenue are synonymous.
Per their clarification cum application of simple arithmetic, in 2014, the SSS must have obtained a net revenue/income of P44.468 billion. However, their clarification begets more questions: How is this calculated net revenue/income of P44.468 billion related to the “comprehensive income of P46 billion in 2014” and on which basis the downward-adjusted deficit would be P10 billion?
Comprehensive income
And, why is the downward-adjusted deficit of P10 billion reckoned on the basis of the “comprehensive income” rather than on the net revenue/income? Where in the annual report can that “comprehensive income of P46 billion in 2014” be seen?
How expert are their highly compensated “experts”? Are they too erudite and recondite as to be beyond the grasp of ordinary mortals like me? But, never mind, let me just proceed on the basis of their downward-adjusted deficit of P10 billion.
The effect of the adjusted deficit, ceteris paribus, is to delay bankruptcy—beyond 2027. Solving the equation 10x = (24)(11) yields x = 26.4 (correct me if I’m wrong)—meaning that this smaller deficit would delay bankruptcy until 2042, 26 years from now.
Much ado about nothing
Now, isn’t 2042 also the SSS-reported year of death of the reserve fund? This is intriguing. Nonetheless, why should there be too much ado about nothing in light of this showing that the fund will not be depleted after all?
Indeed, there appears to be no shortening of life after all—none, except the accelerated shortening of life of the aging and ailing impoverished SSS pensioners who are heartlessly deprived of pension hike. This finding appears to falsify their claim that the pension hike will shorten the life of the reserve fund—from 2042 downward.
Let us pursue the logic and mathematics of this serendipitous though intriguing finding. The initial claim of P-Noy and the SSS is that the life of the fund (with P2,000 pension hike cum consequent deficit of P24 billion) will be shortened from 2042 to 2027 (11 years from 2016).
Subsequently, as shown in the preceding paragraph, if we use the downward-adjusted deficit (P10 billion), the equation churns out 26.4—meaning that the expected bankruptcy will occur 26.4 years (26 years and 4.8 months) from 2016 or in the fourth month of 2042.
And, if, for example, possibly due to enhanced collection efficiency, the deficit would go down further to, say, P9 billion, then the expected bankruptcy will occur 29.3 years (29 years and 4 months) from 2016 or in 2045.
Inverse relationship
The first implication of this analysis is obvious, i.e., there is an inverse relationship between deficit and fund life, meaning that a smaller deficit means a longer fund life.
The second implication, assuming that the fund will last until 2042, mathematically reveals a range of deficits that cause bankruptcy even after the fund shall have been bankrupted, i.e., the fund would die following its death in 2042! This implies a negative bankruptcy, which could be interpreted as the fund having a positive balance even after its depletion (death)! Absurdity!
This is at least a nomological impossibility since the attribute and mechanism leading to bankruptcy gets to have meaning only in the context of a nonzero fund. Once bankrupted, it cannot be bankrupted again. Equivalently, only a living organism can die; it is nonsense to assert that the dead will die!
Reductio ad absurdum
The second implication instantiates a devastating reductio ad absurdum! There must be something wrong with the data that underpinned P-Noy’s veto of the pension hike. The alleged deficit has already been corrected downward to P10 billion. Therefore, necessarily, the SSS claim that the fund as it currently exists will last only until 2042 (the premise of their syllogism) must be factually false; it must have a life longer than that. Or, is the already corrected P10 billion deficit still false?
Further, on the issue of deficit and fund life, if, on or before 2042, the reported P13 billion would be collected from delinquent employers and the reported P64 billion collected from delinquent borrowers—P77 billion collectible over a period of 26 years—then the life of the reserve fund would be prolonged even more by eight years; or the SSS would die even much later in 2050,
34 years from now—beyond the projected death in 2042!
GDP, collection efficiency
Additionally, if the touted gross domestic product growth rate (6 percent) invariantly holds true within the 34-year period—causing an expansion of the formal sector of the economy—then the number of registered firms would likewise proportionally increase, thereby producing a greater number of registered members and employers from whom the SSS could enforce compulsory contributions.
Thus, proportionally increasing collection efficiency, further extending the reserve fund life, hopefully to approximate the 70-year standard.
Take note that an increase in membership contribution is not even included in this calculus. Likewise, this analysis assumes the persistence of the present caliber of SSS management (mismanagement?).
What would happen if the present crop of SSS managers become Government Service Insurance System (GSIS) retirees (they are lucky that they will not be SSS retirees. Does that explain their unmitigated unconcern and unfairness to SSS retirees?) and then get succeeded by a team of more efficient and effective managers? Wouldn’t the SSS become even more viable and sustainable?
Bankrupt of basis
Verily, their “bankruptcy” appears bankrupt of basis.
Where P-Noy could have acted compassionately, he opted to be “heartless.” He disregarded the maxim: “Those who have less in life should have more in law.”
There’s a glass 50 percent filled with water. P-Noy and the SSS see it as half-empty. The others see it as half-full. The former focuses on the negative (emptiness), while the latter focus on the positive (fullness).
Unkindest cut
He who has a positive prism attempts to find ways to augment the water or replenish a drawdown. But he who has a negative prism and/or even twisted axiology simply discourages others from drinking off the glass, if only to conserve the water, the depletion of which is seen as alarming. Never mind that he who tries to drink is aged, ailing and thirsty. Shakespeare aptly described something like this: “That’s the most unkindest cut of all.”
Even if the SSS can go bankrupt, will it be allowed to go bankrupt? No!
Monsod, who is against the pension hike, confidently asserts that “the future governments will not let the SSS go down. They will save it” (Inquirer, Jan. 16). If so, then how come she vigorously defends P-Noy’s veto (premised on “bankruptcy”), knowing in her heart of hearts that the SSS will not die, as she asserts?
Maintaining a pension system is sound public policy. Small wonder then that the SSS Act of 1997 provides (See Section 20.) a sovereign (Congress) guarantee “xxx to assure the maintenance of an adequate working balance of the funds of the SSS xxx”; and guarantee (Section 21), i.e., “The benefits prescribed in this Act shall not be diminished and to guarantee said benefits the Government of the Republic of the Philippines accepts the responsibility for the solvency of the SSS.”
No, the SSS won’t die unless the SSS law will get abrogated by a more “heartless” P-Noy successor!
If the deficit (P10 billion) is to be subsidized by government, will it be unfair to the taxpayers at large? No!
CCT for pensioners
One immediately implementable modality of subsidy is to use a part of the 2016 appropriation (and thereafter) for the conditional cash transfer (CCT) program to fund the deficit, considering that the pensions of most SSS pensioners are below the poverty threshold. To make the modality more equitable, those whose monthly pensions fall below the poverty threshold should be given the P2,000 hike and those above maybe only P1,000.
Rejecting this scheme on the grounds that the pensioners are not taxpayers does not hold water because they still pay taxes like the value-added tax and other indirect taxes. Moreover, during their prime, they themselves were diligent taxpayers. When their time comes to retire, the 31 million will be where the 2.15 million are currently situated. And so, on this ground, they cannot validly raise the issue of unfairness.
Indeed, there should be no quibbling about the primordial moral responsibility of society to take care of its aged, aging and ailing members—SSS pensioners included.
Aquino may yet redeem himself by promulgating an executive order, mandating the automatic enrollment in the CCT program of all SSS pensioners whose pensions fall below the poverty threshold.
Lastly, still on the issue of fairness, it appears that the government (taxpayers) contributes 12 percent of monthly salary to augment a GSIS-member’s monthly contribution, while it contributes nothing (zero percent) to an SSS-member monthly contribution? Isn’t that blatantly unfair to private sector employees and taxpayers?
“The SSS will go bankrupt,” with due respect, this is nothing but the ghastly ghost of paranoia.
(Eduardo R. Alicias Jr. is an SSS pensioner. He can be contacted via edalicias@gmail.com.) TVJ
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