Probe SSS-delinquent employers first

Social Security System (SSS) President and Chief Executive Officer Romulo Neri recently said that the SSS would like to ask Congress to find ways to increase the contribution of members, in order to expand services and secure the financial stability of the fund.

Neri, who was speaking at the opening of the pension fund’s new building in Cebu City, said there may be demands for new benefits in the future and the only way to cover such benefits is to increase the contribution of SSS members.

He said they are initially looking at increasing the salary ceiling as base for the contribution from P15,000 to P50,000, which means those who earn more can contribute more and eventually receive more pensions when they retire.

Neri’s proposal is worth looking into. Retirement security in the Philippines is quite insecure. Security should have three strong factors: Social Security (the SSS and the GSIS, for government employees), employee retirement benefits, and personal savings.

Certainly, Filipino retirees here cannot live on their SSS or GSIS benefits alone.

Then there are few companies, whether in the private or public sectors, that provide guaranteed pensions.

The National Statistics Office reported that the country has a labor force of about 35.81 million, representing a 64 percent labor participation rate. Of this, only 78 percent are members of government-initiated pension funds: 26.49 million for SSS and 1.4 million for GSIS. About 8 million Filipinos have no pension or retirement savings to look forward to.

Also, Filipinos are not great savers, perhaps owing to the fact that most have meager salaries and actually spend more than they earn.

Last year, the Personal Equity and Retirement Account, a supplementary private retirement plan for all public and private employees that especially targets overseas Filipino workers, was signed into law. The law provides a good way to accumulate savings and augment Filipinos’ retirement plan.

Under the PERA bill, an individual contributor may make a total maximum annual contribution of P100,000 to his PERA account. The contributor shall be given an income tax credit equivalent to 5 percent of the total PERA contribution. Income from the contribution as well as the eventual distribution of the PERA to the contributor shall be tax-exempt. This amount is withdrawable when the contributor reaches the age of 55.

This savings plan will complement Neri’s proposed increase in the SSS contribution rate. SSS members contribute half of what the Government Service Insurance System is collecting at 21 percent. The SSS level is also far lower compared with other countries.

But first, we must make sure that increases in contributions would actually benefit the workers; and just as important, there must be a crackdown on SSS-delinquent employers.

The Trade Union Congress of the Philippines (TUCP) recently urged the SSS to disclose its list of more than 160,000 delinquent employers to the Bureau of Internal Revenue so that they could also be investigated for possible tax fraud.

Employers not remitting the mandatory SSS contributions are several times more likely to be violating other laws as well, including the Internal Revenue Code, or not making the required payments to the Philippine Health Insurance Corp. and the Pag-IBIG Fund.

These SSS-delinquent firms defraud workers on two counts. First, they are not paying their counterpart dues as employers. Second, they are deducting from the salaries of their workers the employee’s share.
However, instead of forwarding payments to the SSS, these employers are keeping the money for themselves. They are in effect robbing workers of their hard-earned money.

But the worst part of it all is that workers and their de-pendents are effectively deprived of protection, owing to the nonpayment of contributions, according to Herrera, a former commissioner of the SSS.

Also, SSS-delinquent firms pose dishonest and unfair competition to business rivals dutifully paying their dues. If you have two shops providing the same service or selling the same product, and one of them is not paying the SSS dues, then that shop if competing wrongfully through grossly unethical business conduct.

President Gloria Arroyo is set to sign into law a bill condoning some P94 billion worth of penalties slapped on 164,111 delinquent employers that failed to remit contributions to the SSS.

The SSS recently filed court charges against 1,623 employers, mostly for failing to remit their employees’ contributions. The erring companies violated provisions of Republic Act 8282, the Social Security Act of 1997, for non-remittance of contributions, failure to register and refusal to present employment records.

The SSS reported P36.3 billion in collections in the first half of 2009 and an additional P11.18 billion in earnings from its investments. It has a total of P239.16 billion in total investments, mostly in the government sector and loans to members, while its assets total P254.1 billion for the first six months.

The SSS has 27 million members but only 8.5 million are active and paying members, according to Neri.

I would bet on it that after a thorough inspection of companies, Neri would find out why this is so. –ERNESTO F. HERRERA, Manila Times

ernestboyherrera@yahoo.com