Premium increase upsets SSS

The Social Security System (SSS), the pension fund for workers in the private sector, started the New Year with the bad news that the Aquino administration had summarily rejected calls to stop the increase in SSS and Philippine Health Insurance Corp. (PhilHealth) premiums.

In a radio interview on Jan. 5, Secretary Herminio Coloma of the Presidential Communications Operations Office, the public face of the administration who comes off as an arrogant and abrasive presidential spokesperson, said the increase in the amount of the contributions “is minimal and affordable.”

The adjustment could bring better benefits to citizens, Coloma added, emphasizing that the decision should be understood in the government’s “social protection” program. In what way he did not explain.

In his typical patronizing tone, Coloma said: “It is clear that the higher contributions for the SSS and PhilHealth are the result of a thorough study to make sure they will not be a burden on members, and will result in greater benefits for members. The move was based on thorough studies and is within the law. There is no plan to stop it.”

Ring of a decree

The decision had the irrevocable ring of a decree being handed down from the commanding heights of an authoritarian state. What the President wants, will be done.

Coloma said the adjustments were made after consultations with trade unions, the Employers Confederation of the Philippines, and the Philippine Chamber of Commerce and Industry.

He emphasized that the higher contributions were in the context of social protection in which the proceeds would benefit the underprivileged members of society.

PhilHealth currently covers 80 percent of the population, including 4 million families who are sponsored members free from the higher contributions and who are beneficiaries of the conditional cash transfer program, he pointed out.

Inadequate safety nets

The Aquino administration is trying to make us believe that, through PhilHealth and the SSS, it is running a welfare state when in fact, the scope of its social safety nets is extremely limited, and inadequate.

According to Coloma, the increase in the contribution to the SSS, which started on the first day of January, amounts to 0.6 percent of the monthly contributions.

The contributions are expected to bring down the unfunded liability of the SSS to P908 billion from P1.077 trillion [based on an 2011 actuarial update, according to SSS president Emilio de Quiros Jr.]
Once the funds of the SSS are depleted, all Filipinos will have to shoulder the costs of pension because the pensions are guaranteed by the government, Coloma said.

As a sweetener for the increase in premiums, President Aquino, on the eve of Labor Day last year, unveiled a 7-percent rise in benefits for SSS members to be drawn from the 0.6-percent increase in premiums.

Unfunded liability

The 0.6-percent increase in contributions—about P60 for an employee earning P10,000 a month and to be shared equally by the employee and the employer—seeks to cut the SSS unfunded liabilities of P1.1 trillion by P141 billion, Mr. Aquino said.

(In an article in the Inquirer’s Talk of the Town on Sunday, De Quiros said the increase in contributions would reduce the unfunded liabilities from P1.077 trillion to P908 billion.)

Unfunded liabilities are obligations at a certain time in the future for which no funds have been set aside.

In 2012, the SSS reported that it collected P94.2 billion in contributions, a 9.7-increase from P85.9 billion in 2011 as the SSS introduced measures to ease members’ transactions with the pension fund and to broaden its membership base.

The disbursement of benefits went up by 2 percent to P84.4 billion in 2012, resulting in a surplus (contributions less benefits) amounting to P9.8 billion.

30M members

Members of the SSS in 2012 consisted of 602,139 employers, 21,945,734 employees, 3,803,327 self-employed and 3,708,306 voluntary.

There were 1,595,741 pensioners as of last December.

All the incremental benefits announced by the President on the eve of Labor Day failed to repair the damage inflicted by the disclosure, later confirmed by De Quiros, that he and seven other members of the SSS board had helped each other to awarding themselves at least P1 million each in bonuses for the pension funds’ “good performance” in 2012.

Performance bonuses

The raid on the pension fund was justified by De Quiros, who said that performance bonuses, amounting to P276 million, were also distributed to other SSS employees who faced a mandatory increase in contributions in January on the grounds that the SSS won’t have enough funds to cover retirement and other benefits beyond the year 2039.

De Quiros said the bonuses—a total of P10 million for the eight board members and the P276 million for its employees—were given in accordance with the performance-based incentive system set by the governance commission for government-owned or -controlled corporations.

He said the granting of bonuses under the performance-based incentive system was not a practice observed only by the SSS but also by all other state-owned corporations. Board members’ bonuses are computed largely on the basis of their attendance at meetings.

The incentive system applies to state-owned companies that register net incomes, according to De Quiros.

Net income

The SSS reported that it posted a net income of P36.2 billion in 2012, up year on year by 42 percent. Net income is computed from its investments plus premium contributions from members less expenses for operations and payments of members’ benefits.

But while it enjoys a net-income position, the SSS suffers from a huge unfounded liabilities estimated at P1.1 trillion.

The SSS has estimated that its existing reserve fund would be enough to cover liabilities for the next 26 years, or until 2039. But with the increase in members’ contributions last January, it estimates that the life of its fund will be extended by four years, or up to 2043.

The problem is that the government approved the increase in SSS premiums after it was disclosed that the SSS board had received hefty perks for attending board meetings.

De Quiros has been roundly criticized, among others, for taking all-expenses-paid trips abroad (first class) every two months since he took office. In light of the increase in SSS premiums borne by its members, it would be hard to justify the continuation of these generous perks. –Amando Doronila, Philippine Daily Inquirer

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