SSS defers increase in contributions

THE PROPOSED increase in the contributions of members of the Social Security System (SSS) scheduled this month has been deferred until stakeholders agree on when to implement the hike.

Due to the delay, there is a possibility that the proposed increase by the pension fund may grow higher.

The proposed 0.6% hike in SSS members’ contribution was approved in principle by the Social Security Commission (SSC) last March 16, and documents of the pension fund’s proposed increase was supposed to be submitted to the Office of the President last April.

The SSC is composed of the Secretary of the Department of Labor and Employment or his duly designated secretary; SSS’ president; and seven appointed members of the pension fund’s president (three will represent the workers’ group, another three will represent the employers’ group, and one will represent the general public.)

“Nothing has been submitted to the Office of the President yet because the SSS board of directors have not yet decided on when to implement the increase in members’ contribution rate,” SSS Senior Vice-President Judy Frances A. See told BusinessWorld in a phone interview last Friday.

“Various stakeholders who are represented in the SSC have not yet reached a consensus on when to issue the planned increase in contribution rate,” she added, pointing out that: “The employer groups have already understood why the pension fund needs to increase it current member contribution rate.”

Currently, SSS members’ contribution is at 10.4%, with the proposed 0.6% increase, it would rise to 11%.

SSS President and Chief Executive Officer had said, the 0.6% increase will be divided equally between the employers and employees.

The state-owned pension fund for private employees wants to implement the increase to bring back the pension fund’s life to perpetuity, and allow SSS to pursue with its plan to adjust the benefits that members are getting, as well as giving a 10% across-the-board pension increase.

Based on SSS’ last actuarial valuation in 2007, the pension fund for private sector employees was estimated to last only until 2039. In a 1980 valuation, the fund was estimated to last until perpetuity.

With the implementation of the hike in contribution rate, another nine years would be added to the pension fund’s life.

SSS’ pension benefits were increased 21 times from 1980 to 2007, but the contribution rate was raised only twice. The contribution rate was pegged at 8.4% for 23 years and was adjusted to 9.4% in 2003 and to 10.4% in 2007.

The maximum salary credit (MSC) — the compensation base for contributions and benefits of members as indicated in Section 18 of the Social Security Law — will also rise to P20,000 from P15,000.

Ms. See, however, said that due to the deferment of the planned contribution rate increase, the proposed rate of 0.6% may be higher.

“There is a possibility that the 0.6% hike may be increased because what we are after is lengthening the pension fund’s life and prolonging its implementation may have an impact on the rate of increase,” she said.

“If the implementation would be delayed for a few months, say for the next three months, the 0.6% is still viable, but delaying the implementation to a year may mean another thing,” Ms. See added.

Ms. See said SSS has to conduct another round of talks with employers groups to settle the date of implementation of the members’ contribution rate increase.

Based on a 2009 Commission on Audit (COA) report, SSS’ members’ contributions amounted to P72.351 billion that year, 5.04% higher than the year before.

Benefit payments, meanwhile, rose by 6.09% to P72.05 billion in 2009 against the P67.917 billion paid a year earlier.

Meanwhile, in a statement, released last Friday, SSS said, it disbursed a total of P20.6 billion worth of pension and benefits in the first three months of the year.

The P20.6 billion released by the pension fund was 7% higher than the P19.2 billion released in the same period a year ago.

“The number of SSS pensioners swelled by more than 110,000 within the 12-month period ending in March this year. More than half of them are retirement pensioners and about 47,000 more are surviving spouses and dependent children of members,” SSS Officer-in-Charge Edgar B. Solilapsi was quoted as saying in the statement. –ANN ROZAINNE R. GREGORIO, Reporter, BUsinessworld