Sub-issue on the SSS pension increase

Corporate Watch
Amelia H. C. Ylagan

Posted on January 25, 2016

See what you’ve done! At first you only wanted to be good-looking in the magic mirror of public opinion, a critical concern in these last four months before the May national elections. The ultimate “epal” (from the vernacular pumapapel, referring to those claiming political credit) was to propose House Bill No. 5842, the P2,000 per month across-the-board increase in the Social Security (SSS) pension, in the courtship of voters in this campaign period. Gago na lang (so, so stupid!) whoever would oppose such a clearly humanitarian consideration for “the 1.9 million Filipinos who survive on a measly P1,200 pension.” (figures from Philippine Star 01.23.16)

And so the proposed SSS pension increase rode on the shoulders of packs of epals in the House of Representatives and in the Senate, and this fragrantly-intoxicating social-relevance bill passed in both Houses until it was surprisingly vetoed by President Benigno S. C. Aquino III on Jan. 13.

The President said “...the P2,000 across-the-board pension increase with a corresponding adjustment of the minimum monthly pension will result in substantial negative income for the SSS. The proposed pension increase of P2,000 per retiree, multiplied by the present number of more than two million pensioners will result in a total payout of P56.0 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.” (CNN)

Aquino explained his veto by pointing out that “the passage of the bill would force the SSS to use the Investment Reserve Fund (IRF) to fund the pension increase, and this will result in the IRF reaching zero by 2029 (Inquirer). The solution would be to increase contributions of the present work force. Employer-contributors gallantly signified willingness to increase their share of the SSS contribution per employee, but will the people still working be happy with the increased burden on the employee-side contributions? Of course not, the active SSS contributors said -- they will not be willing to subsidize the pension increase for those who have stopped working and contributing.

Those in Congress who might have seen PR opportunities in pushing the SSS pension increase beyond the presidential veto seem to be now outnumbered by those who have thought it over and realized that many more voters (the present active SSS contributors) will be unhappy with the contributions increase than the voters who are retired and will enjoy the P2,000 per month bonanza. There are 33 million SSS members who pay an average of P1,100 per month and 2.15 million retirees and their dependents who receive an average P3,200 per month (Philippine Star 01.19.16).

In dissecting the carcass of the pension increase bill, some labor leaders said that SSS should better improve its 35% to 38% collection rate (Philippine Star 01.23.16). “Collection efficiency is not the solution,” Michael Victor Alimurong, representative of the general public to the SSS commission, said in the Philippine Star. The situation is tantamount to having five SSS members pay for a single pensioner every month. Of the 33 million SSS members, only 12 million are “actively paying.” The delinquent members are from the 75% from the informal sector who have no capacity to sustain payments every month, according to Alimurong (Philippine Star).

The same newspaper report cited civil society and interest group comments that the SSS should trim its humongous administrative and operating costs.

“It is the height of injustice that the SSS executives are receiving millions in bonuses despite their obvious inefficiencies and lack of regard for the welfare of millions of the now-destitute member contributors,” Buklurang Manggagawang Pilipino (BMP) cried.

In October 2013, various worker groups protested against the 2012 year-end bonuses and increased salaries of top SSS executives, demanding the return of these monies to the fund. Emilio de Quiros, Jr., SSS president and chief executive officer confirmed that he and seven other members of the SSS board got at least P1 million each as bonuses for the good performance in 2012 of the pension fund, but the P276 million was also distributed to other employees (Inquirer 10.05.13).

Malacañang had approved a 0.6-percentage-point increase in member contributions to the Social Security System (SSS) bringing monthly salary credit from 10.4% to 11%. “President Aquino in his State of the Nation Address in July (2013) said a reform agenda for the pension system was one of his administration’s priorities. He said a rise in SSS contributions was necessary since from the 1980s, contributions were raised only twice while pension benefits rose 21 times” (Inquirer 09.25.13).

In the midst of the SSS pension increase controversy, an unconfirmed table of salaries of SSS top executives and allowances of the Board has been going around in the Internet, but is best not cited and repeated in written and oral journalism, for lack of verified sourcing.

Whatever it is, the matter of bringing up executive pay in government to be at par with private business executive pay comes forward again. There has been a conscious effort in the Aquino administration to increase the pay of government executives as well as the pay grades equivalent to corporate rank-and-file, purportedly to attract the best to work in government and contribute time and talent to the growth and development of the country. Why, indeed, must government be second-choice or last resort, as a career and income-provider to family and survival?

But as he was discussing the administrative pay in the 2016 budget, Budget Secretary Florencio B. Abad said that it would really be difficult to bring executive salaries in government to par with the private sector’s.

In an interview with the Philippine Star in October 2015 Abad said that “there are 33 pay levels in the bureaucracy. Salary Grade 1 is the lowest and pays about P9,500 a month. Salary Grade 33 (the President’s pay level) is the highest and pays P120,000 a month.” The President’s basic monthly salary of P120,000 is only about “30% of the market,” meaning that it would have to be increased to P400,000 -- which is what President Aquino’s successor will be receiving under the salary adjustment plan, once signed into law. The Executive and Legislative are prohibited by the Constitution from benefitting from the laws they make and promulgate.

In the same Philstar interview, Abad admitted that under the new salary adjustment plan, those with high salary levels would get more than the lower ranks. “Those with low salary grades are receiving salaries that are already at par with the market. It is the higher grades that are far from the market,” Abad said, with “market” meaning the private sector. So also does the pay-grade scale appear to be at the Social Security System, now the “flavor of the month” for social activists (and the election-season rabble-rousers?). Do you really mean even higher executive pay at the SSS?

Alas, the debate will go on and on, as the haunting music of the Titanic goes, until the waves of protest would have been calmed only at the sinking of the ideal itself -- which in the present controversy is better social security benefits for all. It will not do much to belly-ache about how much Mr. de Quiros and his team earn, nor why the fund will run out in 2029 as only the actuarians might compute, in iterations and interpolations of ever-fluid statistics and assumptions.

Of course civil society must be vigilant and watch what guardians of the social good are doing, but the best personal hedge would be to “self-insure” by saving for retirement and old age, in the yet inadequate protection of our developing country.

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.