SENATE BILL

OCT
30
2015

SBN-2995: SSS Amendments

An Act Rationalizing the Powers, Duties and Accountabilities of the Social Security Commission, Further Amending for the Purpose Republic Act No. 1161, As Amended, otherwise known as the “Social Security Law.

  • This bill provides the Social Security Commission powers to ensure prudent fiscal management and sound investment strategies.
  • It empowers the Commission to bolster its collection capabilities, and improve its revenue generation.
  • It grants flexibility by allowing the Commission to formulate and implement measures to improve its collection rate and efficiency by expanding membership coverage and encouraging member compliance.
  • The bill also provides the Commission with a broader menu of investment options to increase its non-contribution revenue.
  • Through these interventions, the bill aims to strengthen the revenue generation capability of the SSS and allow it to provide better services and benefits to its active members and pensioners.

Explanatory Note

In the spirit of social justice, the State is mandated to establish, develop, and promote a suitable, sound and viable social security service that will protect covered employees and their families from the hazards of disability, sickness, old age and death.

Social insurance programs are designed to mitigate income risks by pooling resources and spreading risks across time and groups of individuals[1]. Social insurance like the Social Security System (SSS) needs to provide basic economic security for the people while curbing poverty, providing economic stability, redistributing income and preserving important social and individual values[2]. Given these requirements, an effective social security protection will depend significantly on a robust financial capacity, extensive membership, and sustainability of benefits vis-à-vis revenues.

Year-on-year financial reports of the SSS indicated an effective management of the social pension funds. Total SSS revenue grew by an average annual rate of 10% from 2010 to 2014. Membership contributions rose by 52% from P79.27 billion in 2010 to P120.65 billion in 2014 when the Commission increased the P15,000 maximum salary credit to P16,000. Investments likewise grew by 23% during the same period, from P27.85 billion to P34.53 billion. Total assets in 2014 have increased by 43.55% from total assets in 2010. The average annual operating cost from 2010-2014 amounted to only about six percent (6%) of the total collected revenues, or roughly 36% lower than the established charter limits[3].

Despite the rosy financial statistics, the SSS is still fraught with two crucial concerns. First, constrained capacity to improve collection rate and efficiency deprived the Commission of additional funds that it could use for social security protection and investments. In 2014, SSS collected from 11.17 million paying members which accounts for only 46.7% of the average full-time employed labor force[4]. A Commission on Audit Report also noted the P8.168 billion pesos delinquency in premium contributions and penalties as well as a net receivable of 61.23 billion from its membership loans, of which P20.7 billion has been delinquent for over five years[5]. Second, restricted investment options kept the Commission from maximizing potential market gains and made them more dependent on membership contributions to extend benefits and services. While SSS revenues have been increasing since 2010, the increases came not from investment income but from membership contributions. Increases in contribution collections accounted for 86.1% of the increases recorded from 2010-2014, while investments income comprised the remaining 13.9%. The share of membership contribution to the total revenue increased from 74% in 2010 to 78% in 2014, while the returns on investments decreased from 10.8% to 8.3% during the same period. In the absence of judicious intervention, the Commission would be unable to improve its revenue generation capability and mitigate market risks like inflation, currency fluctuation, and economic downturn. These issues will, in turn, adversely affect the SSS fund life and put the future of the social security at risk.

The most sensible way to secure the future of the SSS and its 32.5 million members is to provide the Social Security Commission powers to ensure prudent fiscal management and sound investment strategies. This bill[6] seeks to do so by empowering the Commission, bolstering its collection capabilities, and improving its revenue generation. It grants flexibility by allowing the Commission to formulate and implement measures to improve its collection rate and efficiency by expanding membership coverage and encouraging member compliance. The bill also provides the Commission with a broader menu of investment options to increase its non-contribution revenue. Through these interventions, the bill aims to strengthen the revenue generation capability of the SSS and allow it to provide better services and benefits to its active members and pensioners.

Social security protection is one of the keystones in protecting the right of all the people to human dignity, reduction of social, economic, and political inequalities, and the removal of cultural inequities. As such, it is imperative to ensure that social security protection would be enjoyed by the generations to come. In view of the foregoing, the swift passage of the proposed measure is earnestly sought.

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[1] Manasan, R. G. (2010). “Reforming Social Protection Policy: Responding to the Global Financial Crisis and Beyond.” Research Paper Series. Makati: Philippine Institute for Development Studies.
[2] Social Security System. (2004). Actuarial Study Notes. Quezon City: Social Security System.
[3] Social Security System. (2014). Year-ender Report. Quezon City: Social Security System
[4] Total Average Labor Force Estimate for 2014 is 41.379 million; Total employed labor force is 38.651 million. Data taken from Philippine Statistics Authority 2015 Current Labor Statistics.
[5] Commission on Audit. (2014) Annual Audit Report of the Social Security System.
[6] This is a counterpart measure of House Bill No. 6112.

 

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