THE SOCIAL Security System (SSS) does not see the need for further increases in its contribution rate as the last tranche of hikes would double the fund life to 28 years.
SSS President and Chief Executive Officer (CEO) Robert Joseph M. de Claro defended the scheduled 1% increase in the contribution rate to 15%, 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 28 years (vs 2032 or 14 years when an actuarial valuation study was performed in 2018). This will allow us to fulfill our social security obligations to current and future members during times of contingencies,” he said in a statement.
Under Republic Act (RA) No. 11199 or the Social Security Act of 2018, the SSS implemented incremental contribution rate hikes of one percentage point every two years starting in 2019 from the original contribution rate of 11%.
Of the 15% contribution rate, employers will shoulder 10% of the contribution, while employees will pay the rest.
The SSS also raised the monthly salary credits to P5,000 from P4,000, and the maximum credits to P35,000 from the previous P30,000.
Mr. de Claro said the contribution rate and MSC increases would result in 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 will be no more increases in the contribution rate.
“It also doesn’t make sense when you have to pay more than 15% from your salary considering that you have 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 in the contribution rate, Mr. De Claro said the SSS might not be able to provide members with short-term benefits in case of emergencies.
“During the last administration, the president mandated a P1,000 increase in benefits. This resulted in the SSS fund life only reaching up to 2032 or for 14 years. I’m happy to report that as of the moment, we have already doubled the fund life,” he said.
However, this is substantially below the ideal fund life of 68 years, Mr. de Claro said.
“I think 68 years is a dream unless we get subsidies from the government. Today, I’m happy to report that we are self-sustaining… I don’t think it’s practical also to target 68 years,” he said.
Instead, the SSS will study how to shift to a variable or hybrid model from a defined benefit model, Mr. de Claro said.
“Actually, that is utopia for the actuarial people, 68 years. The reality is once we are able to shift from a defined benefit to a variable or hybrid model, then that fund life of 68 years doesn’t come into play much because of 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 benefits plan guarantees beneficiaries a fixed-income stream after retirement. — AMCS