The Social Security System’s (SSS) new contribution rate, scheduled to take effect this January 2021, will now be at 13%, a 1% higher rate than the 12% rate in 2020.
The said increase in SSS contribution rate will be implemented according to the provisions stated in Republic Act No. 11199 or the Social Security Act of 2018. President Rodrigo Duterte signed it in 2019. This law allows the Social Security Commission (SSC) — the SSS’s highest governing body — to increase the contribution rate by one percentage point (ppt) every other year until it reaches 15 percent.
- How the 2021 contribution terms will change and its effect on employees
- Other changes in SSS policies this 2021
- SSS responds to Contribution hike and the public sentiment
- The necessity for the contribution hike to continue as scheduled in the Social Security Act of 2018
How the 2021 contribution terms will change and its effect on employees
For those who are worried about how this will affect their salaries after deduction of increased SSS contribution, SSS says that it will not be shouldered by the employee alone.
Employed members, including OFW members in countries with Bilateral Labor Agreements (BLAs) with the Philippines and sea-based OFW members, the additional 1% will be divided equally between them and their employers. That said, it will break the contribution rate to 8.5% for their employers and 4.5% for the employee or OFW members.
Suppose you are an SSS member paying under the P10,000 monthly salary credit (MSC) bracket. Starting in January 2021, you will have to pay a monthly contribution of P1,300, which is P100 higher than the P1,200 in 2020.
“As to the contribution share of the employer and employee, the additional one percent will be equally divided; thus the employer share will be at 8.5 percent from 8 percent, while the employee share will be at 4.5 percent from 4 percent. It applies to employed members, land-based OFW members in countries with Bilateral Labor Agreements with the Philippines, and sea-based OFW members,” Ignacio said.
Under the same law, the SSS will not make the employee shoulder the extra P100 alone. It will be divided into two, between the employer and employee. That said, employers will pay P50 for a total employer share of P850, and members will pay the other P50 for a total member share of P450.
Other changes in SSS policies this 2021
Along with the increase in the required contribution, the SSS will also implement a few other changes. Members should note the minimum and maximum MSC changes and the auto-enrollment in WISP that will be implemented along with the increased contribution deduction.
Monthly Salary Credit (MSC)
One of them is regarding the Monthly Salary Credit (MSC). The SSS is implementing a mandatory hike in minimum MSC from P2,000 to P3,000 and maximum MSC from P20,000 to P25,000. The said bracket system change will apply to everyone, except for kasambahays and OFW members whose minimum MSC will remain at P1,000 and P8,000, respectively.
Workers’ Investment and Savings Program (WISP)
The MSC considered for computation of benefits is capped at P20,000. However, in line with the changes in SSS policies, they also came up with a way to deal with contributions on MSCs exceeding P20,000. The solution: The new Workers’ Investment and Savings Program (WISP).
WISP is a provident fund that promises additional pension income for members contributing under it. To join in, the member will have to go beyond the maximum MSC cap, and the exceeding contribution will automatically be credited to WISP.
For example, a member will be paying under the P25,000 MSC. Based on the new 13% contribution rate, their monthly contribution will be P3,250 – of which P2,600 will go to the regular social security fund, while the remaining P650 will go to the WISP.
The SSS also presented the WISP benefits, which includes: a safe, convenient, principal-protected, and tax-free individual retirement savings plan, which will serve to augment member savings from the regular program. Coverage under the WISP is automatic for all private-sector employees, self-employed individuals, OFW, and voluntary members who satisfy the following requirements:
- Has not made any final claim in the regular SSS program,
- Have contributions in the regular SSS program, and
- Have an MSC that exceeds P20,000.
Contributions in WISP shall be paid together with contributions in the regular SSS program. This will allow for faster growth of the worker’s savings because the employer will be paying a share of the contribution.
“WISP contributions will be invested following the principles of safety, high yield, and liquidity, and as provided under the SS Act of 2018, which will yield additional pension income for contributing members,” Ignacio said.
According to the member’s contribution, the accumulated earnings generated from the WISP investments will be distributed proportionately. The total accrued account value (AV) of the member under the WISP will be the basis for the additional benefits, which will be given at the same time during either retirement, total disability, or death benefits. Like the regular benefits, it may either be an annuity or lump sum, depending on how the standard SSS benefit was disbursed.
The annuity will be given in the form of a fixed amount monthly pension, to be paid until the member’s AV is fully settled, covering at least 15 years.
Upon the death of a WISP pensioner, SSS will pay any remaining balance in the accumulated AV to the member’s nominated beneficiary in a lump sum.
SSS responds to Contribution hike and the public sentiment
SSS senior vice president and chief legal counsel Voltaire Agas said in a virtual presser that SSS has to carry out the law regardless of public sentiment. He said, “As much that the SSS would like to support the clamor of the public that the intended increase to be deferred, actually we are not going to do that because the basis for such increase is a legislative act.”
Ignacio understands that the hike may not be easy to accept now, with the pandemic. However, she. However, she said that it is necessary for the longevity of SSS so future generations can still enjoy their benefits.
“We understand the plight of our covered employers and members, but it is our duty to ensure the longevity of the SSS fund entrusted to us, to allow the continuous delivery of meaningful social security protection to our current and future members, as well as their beneficiaries,” Ignacio said.
Ignacio explained that SSS contribution has only increased four times from 1980 to 2016, but the pensions increased 22 times. Not only that, in 2017, an additional P1000 was also given to pensioners, further reducing SSS life span to 0 years, until 2035. With the increased contribution, Ignacio shared that SSS will continue for at least 20 years, until 2045.
She shared that the new law enacted in 2018 and the contribution hike schedule, and an increase in MSC.
“Upon full implementation, the reforms under it will offset the adverse financial impact of the additional monthly benefit granted in 2017,” Ignacio shared.
During the virtual presser, the second tranche of the P1,000 pension increase was also raised, prompting Ignacio to explain that the additional benefits may be hard for SSS to grant, considering the decreased collection caused by the pandemic. She said that SSS must guarantee the system’s actuarial soundness before considering granting the additional benefit.
“We must ensure that our current and future generation of members, pensioners, and their beneficiaries have access to social security protection through the programs that the SSS offers,” Ignacio said.
The necessity for the contribution hike to continue as scheduled in the Social Security Act of 2018
She said SSS had to push hard for the said reforms under the Social Security Act of 2018 to ensure the long-term viability of the SSS and to provide higher benefits for SSS members and their beneficiaries since Duterte did not increase the contribution rate despite having the power to help keep the pension fund afloat.
With RA 11199 or the Social Security Act of 2018 in place, the SSS’s fund life will be extended despite the “heavy toll” on cashflow brought by the coronavirus (Covid-19) pandemic, said Agas. Agas thinks it is no time for SSS to be giving away additional benefits in the form of the second tranche of the P1000. He believes doing so is counterproductive to the SSS lifespan and will only serve to “put at risk the sustainability of the fund.”
The SSS fund’s desperate position also does not allow any room for the contribution hike schedule to be delayed. Agas said any such delay might imperil SSS’s longevity and its ability to offer its members support.
“Because of these, any delay of implementation – which is mandated by the law – will seriously endanger not only the fund but equally important, in peril the SSS’ ability to provide prompt and much needed financial assistance for members during this pandemic,” Agas added.
All SSS executives also say that the SSS fund is currently thinned enough to be considered depleted. Hence, it is in grave danger of being discontinued after a couple of decades. That said, everyone thinks it is a must for SSS to find ways to extend its perpetuity for the benefit of the future generations- from both the current working class who will soon be pensioners, to the unborn generation of prospective members.
“The SSS is there to provide for the retirement security of all members, not just the current pensioners, but the current workers who are contributing and who will become future pensioners as well as even the generation yet unborn.”