The Social Security System is a state-run social insurance agency that extends social security protection to Filipino workers in the private and informal sectors. Under the Social Security Act of 2018, the pension fund provides seven benefit programs: Sickness, maternity, unemployment, retirement, disability, death, and funeral benefits. Members can also avail themselves of various loan privileges.
Members’ contributions are considered the lifeblood of the SSS, accounting for about 80 percent of total agency revenues, while the remaining 20 percent comes from earnings generated from SSS investments. As of May 2021, SSS has about 40.52 million members. More than 30 million are employed members, while 3.36 million are self-employed, and 5.07 million are voluntary members.
A significant aspect of the pension fund’s operations is its ability to boost members’ benefits, which, in turn, depends on how well the SSS manages the four components of the agency’s finances, namely, contribution collections and investment income for the revenues side, and benefit payments and operating expenses for the expenditures side.
In 2021, SSS registered earnings of P28 billion from its operations, with contributions and investment income exceeding benefit payments and operating expenses. In its 2021 unaudited financial statement, its cash inflows of P262 billion surpassed its cash outflows of P234 billion. In the last six years, SSS recorded cumulative earnings of P202 billion, even with a record-breaking P1.1 trillion benefit payments and P254 billion loan releases to its members and pensioners.
Last week, Sen. Francis Tolentino alarmed the pension fund’s 40 million members after he called for a Senate probe into the “massive net losses” in the finances of the Social Security System amounting to P843.9 billion. The reported huge net loss of the SSS prompted Tolentino to file Senate Resolution No. 1006, which urged the Senate committee on government corporations and public enterprises to investigate the state-run pension fund “to ensure its financial viability and capacity to carry out its fiduciary responsibilities to the general public.”
“The effect of the aforementioned reported losses should be scrutinized for the purpose of crafting laws and regulations that would provide further security to the agency’s long-term financial standing,” Tolentino said.
Social Security System President and CEO Michael G. Regino, however, clarified in media releases that the net loss of P843.9 billion shown in its unaudited financial statements for 2021 is a result of a change in accounting standard brought by Philippine Financial Reporting Standards (PFRS) 4. “We want to clarify that the increase in policy reserves is not actual cash that went out of the fund in 2021. These are simply estimates of the required reserves to fund future benefit claims,” Regino said.
“This increase in net loss from the previous year is due to the recognition of the Margin for Adverse Deviation [MfAD] in our policy reserves. MfAD serves as a buffer for conservatism, which we have considered in our financial statements beginning 2021,” Regino explained. “These future liabilities need to be recognized now as these provide us an accurate view of our long-term financial standing, which serves as our guide, as well as for the government in ensuring that we will be able to continuously serve our current and future members and their beneficiaries.” (Read, “SSS clarifies net loss in unaudited 2021 FS; pension fund gains P28B,” in the BusinessMirror, May 16, 2022).
Regino said the SSS is always open to dialogues with policymakers, which can be a platform to help the pension fund’s stakeholders understand the current accounting standard it follows for the reporting of its financial performance.
Members of Congress have the power to investigate issues that may require legislation in the future. Senator Tolentino may have suspected something is wrong when he saw the term “net loss” and the amount of “P843.9 billion” in the SSS 2021 unaudited financial statements. But, in the age of instant communication, a phone call, text message or e-mail would have sufficed to clarify the issue.
The senator’s call for a probe has unduly alarmed millions of SSS members, who started airing their fears on social media that the pension fund’s “huge losses” may prevent the SSS from providing social protection to its 40 million members; that their contributions are going down the drain. This is not the way to help the SSS expand membership and optimize members’ benefits.