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SSS on the right path

Social Security System president and chief executive officer Emmanuel Dooc, being the disciplined actuarial he is, must be having butterflies in his stomach the past few months after President Duterte directed him to increase pension benefits by P1,000 a month.

The plan to cover the pension hike with a 1.5-percentage point increase in SSS contributions by active members starting last May did not materialize, and as a result, the bleeding has started more profusely to shorten the state-run private pension fund’s life to between 2025 and 2029.

Previously, before the pensioners’ P1,000-a-month monthly benefit was granted starting January this year, in keeping with the incumbent president’s campaign promise, the SSS was looking at an actuarial life of until 2042 if no increases in members’ contributions would be called.

But by radically cutting SSS actuarial life anywhere from 14 to 17 years with the recent pension fund increase, being told that you had until 2029 at the latest or 2025 at the earliest to live would have been daunting for a person like Dooc who prides himself with no-nonsense actuarial science when he was insurance commissioner.

Fortunately for SSS members, even if they don’t think so, Dooc has been good for the private pension fund for insisting that an increase, however painful to employers and employees alike, would be in the best interest of the fund.

Let’s hope that Dooc, who I hear had been strongly supported by the economic team on the SSS members contributions hike plan, continues to be resolute in going after the health of the fund rather than succumbing to pressure, both from the private as well as the public sector.

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Botched up start

The original proposal to increase membership contributions of active SSS members starting May this year has obviously been botched up with the ensuing protests by employers and employees, and the reactionary investigations called by legislators.

The overall plan was to start raising membership contributions by 1.5 percent this year, going up gradually until 2022 when payments would reach 17 percent from the current 11 percent. With the delay this year, the next increase would have to be bigger if the intention is to play catch-up.

So far, Dooc sounds optimistic that under Plan B, the SSS will not only be able to significantly extend its actuarial life, but free the more important parts of its functions – like setting up membership contributions – from political interventions.

Plan B would still call for raising membership rates by 17 percent so that SSS actuarial life would extend to 2051, a welcome improvement from the previous 2042 estimate before pensioners’ monthly payouts were increased by P1,000.

‘Playing’ politics

The big difference would be a planned change in the SSS Charter, which as provided for in the Social Security Act, requires a Presidential Decree (PD) to set new increases in member contributions. In the past, political sensitive presidents chose not to issue such a PD when public opinion against them would be too negative.

A bill has been filed and is going through the motions in Congress. Since the bill has been certified as urgent by the Legislative-Executive Development Advisory Council (LEDAC), Dooc is optimistic that the uncoupling from political decision-making would happen at the latest before the year ends.

Include OFWs

In using politics to bring SSS into a better financial position, Dooc is also hoping that the bill’s provision seeking to make membership of all overseas Filipino workers mandatory will also pass. This will significantly widen the membership base of the fund and raise membership contributions.

Presently, only 550,000 OFWs are SSS members. If the bill passes through the Senate and the bicameral, this will bring the total OFW membership to at least nine million. This would have a huge impact on the fund since OFWs contribute higher individually because they earn more.

Timing

The smartest move, so far, in the attempt to bring some semblance of stability to the SSS fund would be the timing for the increase, which Dooc has said should be early next year during about the same time when personal and corporate income taxes are further reduced.

The President’s economic team has been working non-stop to implement the Tax Reform for Acceleration and Inclusion Act (TRAIN) that intends to simplify the current tax system. It consists of several packages, with the first one stipulating lower personal income taxes, a broadened value-added tax base, adjustment of excise taxes on petroleum and automobiles, and the reduction of estate and donor’s tax.

But, like the SSS plan to hike membership rates last May, TRAIN has been delayed several times, largely because of discussions and debates on the legislative floor, notably at the Senate level.

Aiming for passage of law before year end

Still, like Dooc, Finance Secretary Sonny Dominguez and his team continue to egg on concerned lawmakers. They now wish for a Senate ratification by mid-October before Congress adjourns, with the bicams to end in November and the President to sign the law by Dec. 15.

If this new schedule is not met, for whatever reason, the planned amendment to the SSS Charter may not be feasible – as well as the planned hike in membership rates.

This sliding timetable would have adverse effects on the SSS plan since any more delays would raise the succeeding membership rates higher, and the delayed mandatory inclusion of all OFWs would have a significant financial impact.

The SSS had also wanted to raise the maximum monthly salary credit to P20,000 from the current P16,000 as part of the package to extend its actuarial life, but this too will not happen if TRAIN does not pass. With the delayed 1.5-percentage point increase planned last May, both moves would have raised contributions to P23 billion this year. But that’s water under the bridge now.

If our concerned executive public servants will remain true to their vows when they accepted the job offered by the President last year, they will just have to double – perhaps even triple – their efforts to keep going forward.

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