THE SOCIAL Security System (SSS) doesn’t see the necessity for further increases in its contribution rate because the last tranche of hikes would double the fund life to twenty-eight years.
SSS President and Chief Executive Officer (CEO) Robert Joseph M. de Claro defended the scheduled 1% increase within the contribution rate to fifteen%, which takes effect this month.
“With this last tranche of contribution rate and MSC (monthly salary credit) increases, the SSS fund is projected to last until 2053 — doubling the fund life to twenty-eight years (vs 2032 or 14 years when an actuarial valuation study was performed in 2018). This may allow us to satisfy our social security obligations to current and future members during times of contingencies,” he said in an announcement.
Under Republic Act (RA) No. 11199 or the Social Security Act of 2018, the SSS implemented incremental contribution rate hikes of 1 percentage point every two years starting in 2019 from the unique contribution rate of 11%.
Of the 15% contribution rate, employers will shoulder 10% of the contribution, while employees pays the remaining.
The SSS also raised the monthly salary credits to P5,000 from P4,000, and the utmost credits to P35,000 from the previous P30,000.
Mr. de Claro said the contribution rate and MSC increases would lead to additional collections of about P51.5 billion in 2025. Of this, 35% or P18.3 billion will go to the Mandatory Provident Fund accounts of SSS members.
He also reassured SSS members that there can be no more increases within the contribution rate.
“It also doesn’t make sense when you’ve to pay greater than 15% out of your salary considering that you’ve to pay your income tax which is around 25 to 30%. The take home amount will really shrink,” Mr. de Claro said at a briefing in Malacañang on Monday.
In response to calls to delay the hike within the contribution rate, Mr. De Claro said the SSS may not have the ability to offer members with short-term advantages in case of emergencies.
“In the course of the last administration, the president mandated a P1,000 increase in advantages. This resulted within the SSS fund life only reaching as much as 2032 or for 14 years. I’m comfortable to report that as of the moment, we now have already doubled the fund life,” he said.
Nonetheless, that is substantially below the best fund lifetime of 68 years, Mr. de Claro said.
“I feel 68 years is a dream unless we get subsidies from the federal government. Today, I’m comfortable to report that we’re self-sustaining… I don’t think it’s practical also to focus on 68 years,” he said.
As an alternative, the SSS will study how you can shift to a variable or hybrid model from an outlined profit model, Mr. de Claro said.
“Actually, that’s utopia for the actuarial people, 68 years. The truth is once we’re capable of shift from an outlined profit to a variable or hybrid model, then that fund lifetime of 68 years doesn’t come into play much due to the corresponding impact with regard to the unfunded liability,” he said.
A variable-benefit plan offers members a non-constant income stream after retirement, while the defined advantages plan guarantees beneficiaries a fixed-income stream after retirement. — AMCS
