More on SSS from readers

We continue to receive comments from our readers who have, in different ways, a stake in the health of the Philippines’ Social Security System or SSS. Like the traffic problem in Metro Manila and some of the major urban centers in the country, the SSS problem involves millions of Filipinos.

This one is from Oscar M. Salazar of Olongapo City. Here’s what he wrote:

“The proposed increase in SSS pension has always been a great concern for the retirees, the SSS, and the government.

“Some years ago, I addressed to the SSS president the need to improve the retirement benefits to make it comparable with the GSIS. She was kind enough to answer my email. She replied that my comments/recommendation would require legislative action that’s beyond their authority.

“I was thinking at that time that my idea has some merit, and somehow maybe they would include it in their future agenda for take up with Congress. Apparently, the lady president did not really care – just like those who took over after her (or they have very limited imagination). What they came up with is the ‘flexi-fund,’ if I’m not mistaken.

Higher salary credits

“I have been an OFW so many years (now a retiree) and am wondering why the SSS management can’t factor in the capability of our overseas workers to generate more funds.

“Also, I believe we have supervisors, middle managers, even executives who would be willing to contribute more, if they could expect a better benefit in the future. One way under the current structure is to establish ‘higher average monthly salary credits.’

“We know that it is the basis of the contribution and benefit computation. For example, add five more monthly salary credits or as many as necessary, with equivalent higher contribution (maybe in increments of P10,000.00, P15,000.00, P20,000.00, etc.).

“Above the mandated average monthly salary credit, we could make it ‘optional to the members’ who will also shoulder the difference in employer’s contribution.

“SSS should be able to devise a much-improved benefit computation. It would be more attractive to further include the cost of living index percentage computed every two years.

“I’m quite positive that a big percentage of OFWs and local employees in the upper income bracket would be willing to avail of this given the opportunity.”

Onerous burden

We continue where we left off in the last column from a letter sent by another reader on the SSS. Here’s the second part of retired SSS senior deputy administrator Hector Inductivo’s views on the current SSS problem:

“(6) While the pension increase will benefit the present retirees and those nearing retirement, it will be highly unfair to impose on the younger generations of SSS contributors the onerous burden of paying for the tremendous cost of the resulting deficit, either through increased contributions or cuts on their benefits when the reserve fund is totally depleted around 10 to 12 years from now.

“(7) Setting a very generous minimum pension not supported by contributions exposes the system to unwanted ‘moral hazard,’ which encourages SSS members, especially the marginalized group, to pay just enough to qualify for the minimum but liberal benefit.

“(8) Ordinarily, under existing formula, employees who have been regularly engaged in full-time work and pay contributions to the SSS, need not fall under the category of ‘minimum’ pensioners receiving P1,200.00/P2,400.00 monthly pension, which the proponents claim is very ‘low.’

“For example, applying the formula to an employee who barely earns the mandated minimum wage all his working life with an average pre-retirement income of P9,400.00 (AMSC) would, upon retirement in 2015, roughly receive a fairly decent pension of P3,760.00, P4,040.00 or P5,940.00 based on an employment record of 10, 20, and 30 years, respectively.

“At this point, it might be worthwhile to investigate the circumstances (e.g., employment and contribution records) of members receiving the minimum pension. We might be surprised to learn that prior to retirement, their employment was off and on, their contributions sporadic and far between, with a good number of them being self- employed or voluntary members whose contribution payments have become virtually discretionary, both in frequency and amount, opening the door to “adverse selection” against the SSS.

Height of irresponsibility

“(9) Of course, in a changing world, there is no such thing as a perfect system. Precisely, the law mandates periodic actuarial studies of the SSS finances, and an increase in benefits where feasible without necessarily raising contributions.

“But for politicians to determine the need to increase benefits just by gut feel and then arbitrarily pluck out of the blue an amount to augment them without even a semblance of such studies is the height of irresponsibility, especially when it will endanger the very viability of the SSS.

“To be sure, paying benevolent benefits is not all there is to it in administering social security programs. Managing the funds fairly and prudently to provide the ‘greatest good to the greatest number’ at the least cost is an equally important part of accountable and responsive social security administration.

“Thank you for the opportunity of having been able to bring to your attention the foregoing concerns and I wish you more power and success in effecting meaningful reforms in the SSS that would make it truly ‘suitable to the needs of the people throughout the Philippines’ (Sec. 2).”

Combining two

Commenting on a previous column on the Department of Tourism’s plan to change the current campaign slogan “It’s more fun in the Philippines” to something that will entice tourists to visit the country, here are a few reactions from readers.

From Joe Ramon of Cebu: “Why spend money (as if we’re wallowing in it) for a new slogan. Why not just combine two previous ones: WOW! It’s more fun in the Philippines. Very simple and cheap.”

And from Joseph Jesus So: “I guess one area to explore is the cost of wedding receptions. I understand that some locals getting married prefer to celebrate their reception in foreign destinations like Bangkok. The cost of plane fare and wedding receptions are relatively cheaper abroad than here in Manila.”

Facebook and Twitter

We are actively using two social networking websites to reach out more often and even interact with and engage our readers, friends and colleagues in the various areas of interest that I tackle in my column. Please like us at www.facebook.com and follow us at www.twitter.com/ReyGamboa.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.