Amicus Curiae

SSS pension hike -- noble intentions, legal questions

Carmina C. Reyes

January 19, 2017

President Rodrigo Duterte has fulfilled another of his campaign promises when last Jan. 10, his approval of a one thousand-peso (P1,000) increase in monthly Social Security System (SSS) pension benefits for retirees was announced. This is expected to take effect early this quarter, with another P1,000 increase by 2022 in the works. This approval comes after a period of contentious debate regarding the effect of the increase on the SSS Fund’s continued viability.

Moreover, the monthly salary credit will also be increased to twenty thousand pesos (P20,000) from the current sixteen thousand pesos (P16,000). As the computation of benefits to which an employee is entitled under the SSS (e.g. sickness, maternity, etc.) depends upon the employee’s average daily salary credit, employers should also expect to encounter increases in the amounts of benefits they must grant their employees.

Together with the increase in benefits, however, the rate of monthly member contributions has also been raised.

At present, employees contribute eleven percent (11%) of their monthly salary credit to the SSS. In May 2017, this will be raised to twelve and a half percent (12.5%). According to Presidential spokesperson Ernesto Abella, this translates to an increase of monthly contributions ranging from fifteen pesos to seven hundred forty pesos (P15-740), which shall be shared equally by employees and their employers.

Nevertheless, the SSS is also looking to reduce contribution delinquency, with plans to lobby Congress to enact a law that will enable the SSS to penalize employers who do not remit the correct contributions.

At present, however, Republic Act No. 8282 or the Social Security Act of 1997 (RA 8282) has numerous provisions penalizing employers for failing to remit the required contributions to the SSS.

For example, SSS is authorized to assess employers for delinquent contributions or remittances, and institute the necessary actions for collection. Further, those who fail or refuse to remit their contributions can be penalized by a fine or imprisonment, or both.

Implementation has always been the problem. Now, however, the SSS has an escalated incentive to monitor compliance with the law. Perhaps an increase in penalties is also eyed as added security in response to the expected increase in liabilities of the Fund due to the pension hike.

However, issues regarding the legality of increasing member contributions have been raised. The ever vigilant Senator Franklin M. Drilon has spoken out against it, stating in a press release dated Jan. 11 that “[t]he SSS is not allowed to raise the premium rates so it can increase benefits.”

Indeed, under Sec. 4 (b) (2) of RA 8282, the SSS shall have the power to “...provide for feasible increases in benefits every four (4) years, including the addition of new ones, under such rules and regulations as the Commission may adopt, subject to the approval of the President of the Philippines: Provided, that the actuarial soundness of the reserve fund shall be guaranteed: Provided, further, that such increases in benefits shall not require any increase in the rate of contribution.”

Under the law, therefore, before benefits can be increased or added, it must be shown that such will not affect the viability of the SSS Fund even if there is no increase in the monthly contributions. Also, the increase in pension should not require any increase in contributions.

In fact, what has mainly hampered proposed increases in SSS benefits throughout the years is the issue of maintaining the Fund’s viability. While some have long clamored for an increase in SSS pension benefits, proposals have been struck down due to fears of the SSS Fund going bankrupt.

On the other hand, Presidential spokesperson Martin Andanar insists that the increase in member contributions is for improving the long-term viability of the Fund. In other words, it seems to be that the increase in contributions is not directly because of the benefit hike, but is for the support of the Fund itself.

Nonetheless, the law is clear: if the increase in contributions is needed in order to keep the SSS Fund viable because of the pension hike, then the SSS is not authorized to approve or implement the same. However, since no actuarial report has been released, there is no way of actually knowing whether the current SSS Fund will remain viable despite there being no increase in contributions, and that the latter is really just to strengthen the Fund’s viability.

What is clear is that the intention behind the pension hike is noble. However, any act, no matter how noble, must follow the law.

In this regard, the validity of the proposal to increase monthly contributions is in issue. Nevertheless, it will be up to our courts later on to decide whether such proposal is legal or not.