Will cutting operating expenses raise more funds for the SSS pension hike?

By Susie Bugante, Businessmirror, January 9, 2017

IN the midst of the discussions concerning the proposal to increase the Social Security System (SSS) pensions by P2,000 is the issue on the agency’s operating expenses (opex). Allegedly, the pension fund’s operating expenses are high due to excessive salaries and benefits. But are the compensation and benefits of the agency employees really beyond the standard?

Under Republic Act 8282 (Social Security Act of 1997), Section 25 provides “…that not more than 12 percent of the total yearly contributions plus 3 percent of other revenues shall be disbursed for administrative and operational expenses, such as salaries and wages, supplies and materials, depreciation, and the maintenance of offices of the SSS: Provided, further, that if the expenses in any year are less than the maximum amount permissible, the difference shall not be availed of as additional expenses in the following years.”

For instance, in 2015, the agency collected more than P132.6 billion in contributions and earned more than P29.4 billion in investment and other income, with Charter limits of P15.9 billion and P884.6 million, respectively. Operating expenses for the year amounted to P8.8 billion, or 52.6 percent of what is allowed under the law.

According to Social Security Commission Chairman Dean Amado D. Valdez, cost-efficiency measures have greatly reduced expenditures from years 2010 to 2016, which contributed to the SSS’s profitability. Thus, the challenge to SSS is to be more cost-efficient and, for this reason, the SSC reduced the agency’s 2017 proposed budget of P13.22 billion by P1 billion to P12.21 billion, which is 54 percent of the Charter limit, or 5.7 percent of total revenues.

Relatedly, SSS President and CEO Emmanuel F. Dooc assured the public of the SSS’s strict attention to its duties, particularly the prudent allocation of SSS funds for expenditure.

He explained that the SSS costs of operating activities had remained below its allowed Charter limit at an average ratio of 59 percent over the past seven years, or at 5.9 percent of total revenue. Despite an annual average increase of 8 percent in volume of transactions processed by the agency, it has run the cost of its operations with a moderate increase in opex by 6 percent every year. This rate increase in opex is effectively at 3 percent only, if the 3-percent average inflation for the same period is taken out.

He noted that the continued prudence was achieved amid branch expansion activities and system-wide upgrades that paved the way for growth in membership and collections across the region. He added that the SSS will determine how low operating expenses could be further reduced without compromising its operations.

Latest data from the agency showed that the SSS has posted P10 billion in total expenses last year, comprised of payments made for the salaries, wages and bonuses of employees and for maintenance of branches, rent and other operating costs.

The salaries and bonuses of 6,000 SSS officials and employees deployed across its 296 branches nationwide and abroad have been the subject of criticisms leveled at the SSS in debates around the pension hike issue. The SSS, in its previous statements, clarified that these have been capped not only for the SSS, but across all government-owned and controlled corporation (GOCCs) with the enactment of the GOCC Governance Act and Executive Order 24 in 2011. The SSS management asserts that, in fact, among the government financial institutions, the SSS has the lowest compensation.

Will cutting down SSS’s opex to the barest minimum help raise the annual requirement of at least P64 billion to pay the P2,000 increase of some 2.2 million pensioners? Yes, in a very, very small way.