SSS revenue stream now critical

It was a surprise to read a statement issued by the state-run Social Security System early this month about plans to provide unemployment insurance benefits to its over 33 million active members as part of the proposed reforms in its Charter.

While the statement clarified that the proposed unemployment insurance benefit is still in its feasibility stage, it nonetheless raised once again the issue of the fund’s actuarial health, something which was already imperiled by the P1,000 pension fund hike in March this year.

In fulfillment of President Duterte’s election campaign promise, SSS pensioners would receive a P2,000 increase in their monthly pensions, albeit on a staggered basis, with the first half of P1,000 made payable this year, and the remaining half in 2022 or earlier, depending on how the SSS will be able to find new sources of funds.

The increase takes into account the fact that the monthly payout of 2.2 million SSS pensioners, especially those who had contributed only the minimum amount, is barely enough to cover for retiree-members’ most basic needs.

But it imprudently disregards the rights of its active SSS members who rely on many other benefits, however small, such as sickness, disability, maternity, and death when setting aside part of their monthly salaries. These members should have a bigger say on this.

Already, with the P1,000 pension hike made effective early this year, the fund’s actuarial life is computed to last only until 2032 max, if no increase in member contributions will take effect. If the P2,000 pension increase were given in one go, this would shorten the SSS fund life from 2042 to 2025.

More importantly, it would cause annual net losses in billions of pesos if no new sources of funds would be found, including possible government subsidies. In the first half of this year, the SSS revealed a net revenue drop of 60 percent compared to the same period last year resulting from the increased pension payout during the first four months of the year.

This was despite the fact that collection from members’ contributions as of the end of first semester of 2017 increased by 9.62 percent to P78.64 billion, and the SSS investment income increased by 12.27 percent during the same period from P16.09 billion to P18.35 billion.

Augmenting the fund

With the possibility that any contribution adjustment by members is not approved in January 2018 considering likely delays in the passage of the proposed Tax Reform for Acceleration and Inclusion (TRAIN) law, the SSS needs to look for new sources of funds in the interim.

The SSS recently announced it is selling P3.45 billion worth of properties as part of a concerted move to minimize the decrease in revenue depletion.

Many of the properties to be sold, the SSS clarified, were real estate that had been paid in kind because of non-remittance of contributions and/or non-payment of loans.

The amount raised, however, is but a fraction of the revenue drop that would likely be incurred by the SSS this year. If membership contributions continue to be at current levels next year, the fund is seriously in trouble.

Disconcerting is the statement made by Social Security Commission (SSC) chairman Amado D. Valdez denying the urgency of raising the monthly contribution rate by January 2018, and declaring such a move as a “last option.”

Let’s hope this posturing is a temporary stand to silence noisy politicians who pretend to be populists, or employers who will have to increase their share in membership contributions, and does not disregard the glaring reality that without additional membership contributions, income-generating measures will not suffice in the long term.

Currently being deliberated in Congress is the proposed bill to amend the 20-year old Social Security Charter. This is seen to provide a more sustainable solution of the fund’s actuarial health.

SSS eyes the charter amendment proposal as one of the long-term solutions that will make the pension fund viable and sustainable to further serve its future members and pensioners. The proposed revisions, in essence, seek to depoliticize the quasi-government corporation.

Empowering the SSC – rather than relying on the discretion of the president of the Philippines – to make important decisions regarding the fund’s long-term health should improve the management of the SSS and protect its existing and future members.

Care must be taken, though, in choosing the SSC members. They should have the technical capability to understand the complex issues that confront benefits and pension fund management, will not be cowed by political interventions, and more importantly, have a relatively ethically clean performance record.

Unemployment insurance

The bill to amend the SSS Charter has been certified as urgent, but it should not be at the expense of introduced mediocre provisions. Let’s make sure the new SSS will have an innate strength that balances well both contributions and benefits.

These definitely includes further increases in the contribution rate (from 11 percent to at least 20 percent), the removal of minimum pension guarantee (to reward members who have paid their contributions for a longer time), and increasing in maximum salary credit, among others.

The idea of unemployment insurance, even for members who – without fault of their own – have lost their jobs, must be viewed with more caution and not be spoken of with such a seemingly flippant attitude, especially now that the Fund’s life is threatened.

Let’s hurdle critical issues first before anything else.

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