As if the Social Security System (SSS) was not in enough controversy. And now the most recent issue is that of alleged conflict of interest and insider trading among investment operations officers managing collections and investing the almost P500-billion assets of SSS (The Philippine Star, Nov. 4, 2017). Must controversy and reported anomalies continue to gnaw at the trust and confidence of the Filipino private workers in their institutional provider for life-in-retirement?
After initial internal investigation, SSS commissioner Jose Gabriel Laviña filed an administrative complaint against four officials for allegedly trading stocks using “insider information” acquired from an SSS-accredited stockbroker or buying shares of stock for themselves (conflict of interest) upon the advice of a stockbroker hired by the SSS (Ibid.). President and chief executive officer Emmanuel Dooc said the officials failed to inform the SSS of planned initial public offering (IPO) of companies, which could have served as potential revenue sources for the state fund. “There was some lost opportunity to the SSS,” Dooc said (Ibid.). Social Security Commission (SSC) Chairman Amado Valdez said the allegations indeed suggest conflict of interest, which the SSS would not tolerate. He, however, gave assurance that money from the state fund was not used in the questionable stock trading transactions (The Philippine Star, Nov. 2, 2017).
It’s just these four scalawags — a manageable problem which will be dealt with in a big way, the top brass at SSS seems to be saying.
Of course, if accusations are proven, the guilty would have committed the high crimes of sabotage and treason, as trustees for about 35 million members who are employees in the private sector.
But then again, nobody was ever convicted of insider trading and conflict of interest here in the Philippines, a concerned SSS pensioner (high-profile in his time) reminded on what he called the “smokescreen-issue” of lower-level executive dishonesty at SSS, and we might agree.
Is not the real issue the viability of the SSS retirement plan itself, and the continuity of monthly payments to retirees who, in their young, working years have contributed jointly with their employers to help insure continued social and economic wellbeing in their retirement years?
Alas, that SSS benefits have been “politicized” as dole-outs at the personal beneficence of those in power. This culture seems to have been heightened especially more since the last national elections, when many a candidate, presidential or senatorial (or even lower) boasted promises of increasing SSS retirement benefits when they were elected. But this was probably opportunistic reaction and a convenient case in point to differentiate candidates and political parties then: exiting President Benigno S. C. Aquino III had just vetoed the bill raising the monthly pension of SSS retirees by P2,000 (The Philippine Star, Jan. 15, 2016).
In explaining his veto, President Aquino said that while House Bill No. 5842 or the proposed law mandating the across-the-board increase would promote the well-being of the country’s private sector retirees, “we cannot support the bill in its present form because of its dire financial consequences,” (Ibid.) He figured that the P2,000 across-the-board increase with a corresponding adjustment of the minimum monthly pension multiplied by the then 2.15 million pensioners would result in a total SSS payout of P56 billion annually. “Compared against annual investment income of P30 billion (to) P40 billion, such total payment for pensioners will yield a deficit of P16 billion to P26 billion annually to SSS, Aquino said. The Social Security System will be constrained to draw from and use its Investment Reserve Fund to support the pension increase. Consequently, the IRF will diminish over the years, eventually reaching zero by 2029. The stability of the entire benefit system, whose present membership comprises about 31 million individuals, will be seriously compromised in favor of two million pensioners and their dependents,” the President said (Ibid.).
House Majority Leader Rep. Neptali Gonzales II at that time pointed out that absence of HB 5482’s twin bill — HB 6112, which was designed to secure the SSS from bankruptcy by authorizing its board to increase contributions of current members — might have prompted the presidential veto on the proposed pension hike (Rappler, Jan. 14 2016). For in the threat of the SSS-IRF reaching zero by 2029 after the P2,000 across the board pension increase, member contributions which account for 75% of SSS total revenue must increase by 11-17% to keep the Fund viable (Rappler, Jan. 17 2017).
Collection efficiency of SSS (at 88%) is not the problem, Prof. JC Punongbayan of the UP College of Economics showed in his analysis of the SSS retirement benefits increase cum contributions increase (Ibid.). He pointed out that Duterte’s own Finance group Secretaries Ernie Pernia (NEDA), Ben Diokno (Budget), and Sonny Dominguez (Finance) tried to dissuade the President from approving the pension increase because this will drastically reduce the lifespan of the reserve funds of SSS (Ibid.). But a campaign promise is watched closely by the people, and Duterte had to make good on that promise and gave a P1,000 pension increase — without yet knowing where the funds for the increase will come from.
In this funding dilemma, for those SSS contributors aged 20 and above, the SSS may be bankrupt by the time they reach retirement (Ibid.)
Five current members of Social Security System are now paying for a single pensioner every month, making even an increase in collection efficiency insufficient to fund a P2,000 across-the-board pension hike (philstar.com, Jan. 18, 2016). Besides, SSS’s claimed 88% collection efficiency must be discounted by the fact that of the 33 (to 35) million members, only 12 million are “actively paying” members. The informal sector (the farmers, self-employed, other poor workers) comprise 75% of SSS members who have no capacity to sustain payments every month, and yet are members and eligible retirees even for just one month of contribution (Ibid.).
Prof. Punongbayan is concerned that, “Combating social inequality is hard in itself. But the recent debacle over the proposed SSS pension hike highlights the even tougher task of redressing inequality across generations: that is, balancing the welfare of current and future Filipinos (Rappler, Jan. 7, 2017).” “The issue also showcases yet another important trade-off between politics and economics. In this era of global populism never has it been more crucial to demand forward-looking and sound economic policies,” he concluded in his “case study (Ibid.).”
SSS would have fewer problems if leaders to the top do not themselves have conflict of interest between what is good for the country and what is good for them. SSS, and government, both: you have blundered on this pension increase vs. contribution increase. No other choice in the immediate and urgent now, but the politically unpalatable increase in present member-contributions to keep SSS alive.
Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.