Starting January next year, the state-run Social Security System (SSS) has deferred the planned increase in contribution of its members to over 12.5 percent of the monthly salary credit. This is to make the pension fund for workers in the private sector possible to cover up the higher pensions for retirees.
SSS President and Chief Executive Officer Emmanuel Dooc said that the SSS would approve the increase in the contribution rate to correspond with the implementation in January of the first package of the tax reform package that would lower personal income tax rates, the Tax Reform for Acceleration and Inclusion Act (TRAIN). This TRAIN bill is also being discussed in the Senate.
A bill seeking to amend the SSS Charter, as provided in Republic Act 1161 or the Social Security Act, is currently being deliberated in the Senate.
However, Dooc assured that SSS has other revenue measures to enhance the pension fund’s financial standing following the recent adjustment in pensioners’ monthly pension by Php1,000.
It was January of this year, 2017, if remembered, when President Rodrigo Duterte approved a two-stage monthly pension increase of Php2,000, of which Php1,000 a month had been disbursed SSS pensioners since March.
In addition to that, the President also ordered that SSS member’s contribution rate can be adjusted upward in increments of 1.5 percent points per year until 2020 when it will have reached 17 percent from the current 1 percent.
Furthermore, Dooc explained that there are provisions in the new SSS bill that will empower the state fund to increase its members’ contribution. He, however, declined to give the new rate of the increase to be imposed in 2018.
Dooc maintained that additional contribution is needed to keep the state fund running even with the pension increase.
Originally, the SSS contribution rate should have been raised by 1.5 percentage points to 12.5 percent as early as May this year; bringing the contribution range to R15 from R740. Under the original proposal, the premium hike of active SSS members will be implemented in tranches until 2022. The SSS earlier said members’ premium could go up to 17 percent from the current 11 percent until 2022.
However, given the unpopularity of the plan, the SSS did not put the increase in operation in the contribution; which was approved by President Rodrigo R. Duterte last January. The pension fund earlier released P33 billion to more than two million retirees after President Duterte approved the pension hike. However, the move shortened the SSS fund life to year 2032 from 2042.
The pension increase was among President Duterte’s promises during the 2016 presidential campaign.
Besides the rate increase, the SSS is considering raising the maximum monthly salary credit to P20,000 from the current P16,000 to prolong its actuarial life.
Dooc added the premium hike would help extend the life of the pension fund up to 2051 from the current actuarial life of until 2042.
The current contribution rate of 11 percent is being shared by the employer which is 7.37 percent and employee which is 3.63 percent.
Mandatory OFW coverage
Aside from the increase in the contribution rate, the SSS is looking forward to a further rise in membership once all overseas Filipino workers (OFWs) are required to be members of the pension fund.
At this time, there are 14 million OFWs registered;only 550,000 of those OFWs are SSS members. If passed into law, the amended SSS charter will make it mandatory for at least 9 to 10 million more OFWs to contribute to the SSS, according to Dooc. Since OFWs are expected to disburse higher contributions for the reason that they get better pay, the SSS expects total contributions to further increase and cover the higher expenditures due to the pension increase.