February 14, 2018 | Posted by: Venus Zoleta | Government Services
February 14, 2018
The Social Security System has recently proposed an increase in the SSS contribution rate to 14% from the current 11%. SSS also plans to raise the minimum monthly salary credit (MSC) to PHP 4,000 from PHP 1,000, and the maximum MSC to PHP 20,000 from PHP 16,000.
This will raise the minimum contribution to PHP 560 from PHP 110 and the maximum contribution to PHP 2,800 from PHP 1,760.
As of this writing, President Rodrigo Duterte is still studying the proposal and has yet to decide on it. If the president approves the SSS contribution hike, expect to see an adjustment in your payroll deductions starting in April.
Is the impending SSS contribution hike something to worry about? Once it’s implemented, it will certainly have an impact on the state-run agency’s over 36 million registered members.
Although the 3% contribution hike will lead to higher salary deductions, employees won’t feel the effect that much. According to former Social Security Commission Chairman Amado Valdez, employers will pay two-thirds of the total contribution, while employees will shoulder only one-third of it.
Specifically, the proposed 14% contribution rate will be shared by employers at 8.87% and employees at 5.13%. Presently, the employer share is 7.37%, and the employee share is 3.63%.
In short, your employer will pay the bigger share of your higher monthly SSS contributions.
Consider also the effect of the tax reform or TRAIN law, specifically the lower income tax, on your take-home pay. It will offset your higher payroll deductions due to the higher SSS contributions.
If you’re a salaried employee, you’re less likely to feel the impact of the possible increase in SSS contribution than self-employed and voluntary SSS members who shoulder 100% of their contributions.
The higher contribution rate will also result in increased SSS benefits for members and pensioners.
If the 3% contribution rate hike will push through, expect the following changes to SSS benefits, according to SSS President and CEO Emmanuel Dooc:
Without any increase in SSS contributions amid the growing number of pensioners, the fund life of the SSS will keep on declining, according to Department of Budget and Management Secretary Benjamin Diokno.
The SSS fund’s life got shorter from 2042 to 2032 following the approval of the PHP 1,000 pension increase in 2017 and the additional PHP 1,000 pension hike in 2022.
According to SSS, the contribution hike will help extend the agency’s fund life until 2044 (from the current fund life of 2032.)
What is the SSS fund life and why should you care about it? The shorter the fund life is, the sooner the agency will run out of money to fund the pension of the future retirees and the benefit claims of its members. You could be one of them.
Let’s say the proposed SSS contribution hike will not happen. With the current fund life of SSS, members who will retire after 2032 will not be able to receive monthly pensions. Same goes for those will file for benefit claims by then.
Paying your SSS contributions is like building your retirement fund and protecting yourself through insurance. If you put more money into it, you’ll reap the benefits later on when you need them. Think of the possible contribution hike as a forced saving—it’s like you’re making small sacrifices to invest for your future. Just be sure to monitor your SSS contribution payments to verify if your employer does it correctly and on time. In doing so, you’ll be assured that your benefit claim and loan processing won’t get delayed.