Higher SSS contributions for 30M members starting Jan 2014

Monthly Social Security System (SSS) contributions of at least 30.04 million individual members and 871,642 employers rise to 11 percent from 10.4 percent effective January 2014, the SSS said as it posted the new contribution schedule on its website.

The 0.6 percent increase translates to a total contribution of P285 for an employee whose monthly compensation is from P2,250 to P2,749. Employee’s share in the P285 is P90.80 while the employer chips in P194.20. Domestic helpers’ minimum monthly wage in Metro Manila is P2,500.

According to the new contribution schedule, a slightly lower rate applies for the self-employed, voluntary members and members who are overseas Filipino workers.

The minimum wage rate in Metro Manila is P429 per day, which amounts to P8,580.00 for 20 working days in a month. The SSS contribution rate at this wage level is P945.00, of which P308 is the employee’s share while the employer’s share is P636.20.

For private sector employees who earn more than P15,750 per month in compensation income, the total contribution is P1,790, for the employee’s share of P581.30 and employer’s share of P1,208.70.

SSS finances

“The increase in contribution rate is to correct unfunded liability, and this will reduce the unfunded liability by P166 billion or 15 percent,” SSS president and CEO Emilio de Quiros said last October.

As of December 2011, the unfunded liability of SSS was at P1.07 trillion, which increases by about 8 percent a year.

The SSS chief also said the higher contribution rate will allow the pension fund to extend the Social Security Fund or SSF by four more years from 2039 to 2043. SSF is the total contribution of private sector employees currently held by SSS.

In the new contribution schedule, P16,000 is the maximum monthly salary credit.

“The new maximum MSC at P16,000 means that a greater portion of the members’ incomes are covered in their SSS contributions…Higher contributions eventually mean higher benefits in the future,” de Quiros said. The ceiling is the basis for the computing SSS benefits.

SONA origin

The SSS contribution increase has presidential backing. President Benigno Aquino III revealed it in his fourth State of the Nation Address last July.

“Consider that, since 1980, across-the-board pension increases occurred 21 times, but actual pension contribution increases only occurred twice.

As a result, the SSS has accumulated an estimated 1.1 trillion pesos in unfunded liability. According to a study done in 2011, this shortfall will increase by 8 percent per annum, eventually resulting in the complete consumption of the fund 28 years from now. If this happens, the next generation is certain to suffer.

We believe that it is time to amend the SSS Pension Scheme. We must establish measures that remedy the outflow of funds. If we add 0.6 percent to the contribution rate, it will immediately deduct 141 billion pesos from the unfunded liability of the SSS. If we begin to invest in our future today, no further problems will be handed down to the next generation of Filipinos.” (excerpt from SONA on July 22, 2013 – English translation).

On September 20, the SSS governing board approved its resolution implementing the increase.

Then in October, de Quiros disclosed details, including the prospect of later adjustments that would raise eventually the contribution rate to 14 percent from the current level of 11 percent.

The state-run pension fund has been pushing for a higher contribution rate since 2011. “For every P1 contribution, P6 is generated in terms of benefits. It will come to a point SSS will not be able to provide benefits due to the gap between P1 and P6,” De Quiros said.

“Our estimate is that if we want to attain international standard of 70 years or perpetuity, we need to increase the contribution rate to 14 percent.”

According to SSS data, available on its website, the pension fund disbursed P43.46 billion in benefits to 2,072,092 members, from January to June 2013. It also paid out P14.42 billion in loans to 791,921 members during the same period.

SSS investments as of June 2013 total P368.788 billion of which 37 percent are in government securities, 25 percent are in equities (including shares of stock), and 4 percent in real estate assets.

The SSS said it has a 12 percent average return on investment. — with a report by Danessa O. Rivera/Earl Victor Rosero/DVM, GMA News