Fate of SSS pension hike in limbo; Tax Reform first, says Diokno

Metro Manila (CNN Philippines) — Social Security System (SSS) Chairman Amado Valdez said the implementation date of the pension hike is still "floating in the air," as President Rodrigo Duterte is still studying the proposal.

"The President is studying all the possible implications of the increase, and I think it is good for the fund, for the SSS, and for the economic situation in general," Valdez said in an interview with CNN Philippines.

He said while there is willingness to approve the proposed pension hike, the economic burden of the pensioners would fall on the sustainability of the fund.

"If I may recall, an increase of ₱1,000, or ₱2,000, that was the proposal before by Congress, would entail about ₱64 billion a year, and that would be a stress on the sustainability of the fund," Valdez said.

Congress proposed a two-thousand peso hike for SSS pensioners. The joint resolution requires SSS to release the first ₱1,000 on January 2017, while the second half must be released on January 2019.

With the increase, the minimum monthly pension for members with 10 credited years of service will now be at ₱3,200, and those with 20 years will be at ₱4,400.

Valdez said if the current proposal for the pension hike is approved, their economic managers are saying the 2042 baseline for the fund would be depleted as early as 2032.

"The life of the fund should not be reduced by at least three years from 2042," he said.

However, being a private pension fund, Department of Budget and Management secretary Benjamin Diokno said the SSS should find the pension hike solution internally.

"I don't think it is fair to use the taxpayer's money to subsidize the benefits of the pension members," he said.

Presidential Communications Secretary Martin Andanar said Duterte is "looking for a win-win solution — where he can allow the hike while ensuring that the SSS can pay for it."

As for Diokno, the SSS Board of Trustees should have exercised leadership, rejected the resolution, and formulated an internal solution.

"It's unfair to give the problem to him [Duterte]. In fact, it's unfair for Congress to have passed that law, which, as you know, President Aquino vetoed. It should not have reached the President's desk," he said.

Aquino's veto of the SSS pension hike bill was criticized by Duterte. He eventually included the ₱2,000 pension hike in his presidential campaign promises.

Implementing the SSS pension hike

Diokno said SSS may impose a contribution adjustment with higher pay. This was expounded by Valdez, who said contributions might be increased by 1.5 percent. The employees' monthly salary credit, which is currently at ₱16,000, may increase to ₱20,000.

Valdez said SSS is looking into other solutions, such as the increase in collection efficiency.

"We were bothered by the fact that a lot of employees have not been remitting their contributions, and a lot of employees have not been registering under the SSS," he said.

This collection issue may entail a long-term problem, as the fund may not be enough to sustain pensioners in the future.

Diokno said the proposed tax reform must first be done before implementing the proposed SSS pension hike.

"Because of the tax reform, you got more money in your pockets, and therefore you are now in a position to contribute small amounts for the pension of those who are already receiving pension," he said in a press briefing, Tuesday, January 3.

The Tax Reform for Acceleration and Inclusion Act was filed on September 2016, and is currently stuck at the House of Representatives.

The bill was divided into five packages, with the first one focusing on a lower personal income tax rate from 32 percent to 25 percent.

A P200 billion revenue is expected through the proposed tax reform.

It is endorsed by Duterte to his allies in the Congress, and is targeted to take effect either on July 1, 2017 or January 1, 2018.