P-Noy vetoes P2,000 SSS pension increase

MANILA, Philippines - Citing the need to ensure the stability and existence of the Social Security System until 2042, President Aquino has vetoed a bill raising the monthly pension of SSS retirees by P2,000 despite a possible public backlash.

Presidential Communications Operations Office Secretary Herminio Coloma Jr. said yesterday that Congress and the executive branch were given the same figures showing the proposed increase would drain SSS finances by 2029, but they came up with different decisions.

In his veto message sent on Tuesday to Senate President Franklin Drilon and Speaker Feliciano Belmonte Jr., the President said that while House Bill No. 5842 or the proposed law mandating the across-the-board increase would promote the well-being of the country’s private sector retirees, “we cannot support the bill in its present form because of its dire financial consequences.”

HB 5842 seeks to amend Section 12 of Republic Act No. 1661 or the Social Security System Act of 1997.

Aquino said the P2,000 across-the-board increase with a corresponding adjustment of the minimum monthly pension would result in substantial negative income for the SSS since the proposed hike per retiree multiplied by the present 2.15 million pensioners would result in a total payout of P56 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,” Aquino said.

“Given this situation, the Social Security System will be constrained to draw from and use its Investment Reserve Fund to support the pension increase. Consequently, the IRF will diminish over the years, eventually reaching zero by 2029. The stability of the entire benefit system, whose present membership comprises about 31 million individuals, will be seriously compromised in favor of two million pensioners and their dependents,” the President said.

In view of these considerations, Aquino said he was forced to veto the bill.

Coloma justified the President’s veto, saying it was the responsibility of the government to ensure that all its obligations to 31 million SSS members could be met.

Contrary to criticisms that Aquino was insensitive to the needs of retirees, Coloma said it would be the “height of irresponsibility and lack of compassion” if the administration would adopt a bill that could shorten the life of SSS.

Coloma, however, gave assurance that other options were being considered to grant more benefits to SSS members while making sure the pension firm would remain stable.

Asked whether SSS contributions must be increased to provide more pension, Coloma said everything would be studied.

He refused to speculate on why Congress insisted on passing the bill when it was election season and figures showed a negative impact on SSS’ life expectancy and cash flow.

Coloma said both the executive and legislative branches of government would just have to do their jobs.

The Senate and the House of Representatives have the right and power to pass a bill, but the President also has the prerogative to veto depending on how he assesses the situation, Coloma pointed out.

Coloma added they were open to study various means for the SSS management to further improve its services and grant of benefits to members.

He said Congress could override the veto with a two-thirds vote but it would be best to consider all factors.

Despite the upcoming elections and the unpopularity of the decision, Coloma said the President would have to think of the future and simply not pass on problems to the next administration.

Coloma said the President mentioned in one of his speeches that “I am not the person who will just kick the can around.”

Coloma said the SSS gave Congress all the data also given to the Palace that became the basis of Aquino’s decision.

“There was no information that was hidden from them,” Coloma said.

On the other hand, the government institutions that advised Aquino not to sign the bill deferred from giving statements following the President’s veto.

“It’s irrelevant. If the President has already decided, we all defer to him,” Budget Secretary Florencio Abad said in a text message.

The departments of Budget and Management and Finance, and state-owned and controlled corporations were consulted with regard to the proposed law.

Governance Commission on Government-owned and Controlled Corporations commissioner Ma. Angela Ignacio did not comment, deferring to the SSS management.

The SSS, on the other hand, said it will hold a press briefing on Monday. The DOF also did not respond to requests for comment.

Coloma explained the bill was just not viable, even if the SSS was in healthy condition and it could not be accused of inefficiency in collecting contributions from members and utilizing such funds.

The SSS improved its collection efficiency and from 2010 to 2014, net revenues increased significantly, averaging P33 billion compared to only P8 billion from 2000 to 2009.

“So the allegations of mismanagement at SSS do not have logic or basis,” Coloma said.

Coloma said SSS also recorded a contribution surplus aside from the 50 percent growth in assets in the last five years.

From 2000 to 2011, the SSS posted a deficit in terms of contributions relative to collections and income.

The surplus, started with P2.3 billion in 2012 and increasing to P9.9 billion in 2014 up to 2015, was because of the improvement in collection and operation efficiency.

“So that is what those criticizing without basis should look into,” Coloma said.

Coloma also belied claims that SSS funds were being spent on excessive bonuses for its executives.

Coloma noted the bonuses were just a fraction of total operating expenses of the pension firm.

“We should have a long-term view and not just focus on the here and now,” Coloma said, adding that aside from the benefits for current members and retirees, survivorship benefits for dependents up to 21 years old must also be considered.

No choice

Senate President Franklin Drilon and Sen. Vicente Sotto III said they respected the President’s prerogative to veto the measure.

Sen. Ralph Recto, for his part, recommended Aquino should take the initiative to influence the SSS board to act on the increase for pensioners on their own, which would actually not need legislative action.

“I suggest the President take executive action. The SSS law allows him to do so. For the sake of the pensioners, it should not be a choice between the availability of funds or none. There should be a compromise amount which can be effected through executive action,” Recto said.

If the President finds the P2,000 per pensioner too steep, Recto gave his unsolicited advice for Aquino to recommend an amount more reasonable and supportable by SSS finances. 

Sen. Juan Edgardo Angara said the situation could still be salvaged if Malacañang itself resorts to “executive action” to find ways to order the increase of SSS pensions, whose numbers are estimated at 1.9 million.

“At this stage, it may be too late for legislative action but nothing prevents executive action,” he added.

Sen. Grace Poe said the SSS board should provide an alternative amount that may be suitable under the law to enable the increases for pensioners.

Belmonte, for his part, said the President had no choice but to veto the bill after seeing its negative actuarial consequences.

He said the House passed a sister bill giving the SSS board powers similar to that of the Government Service Insurance System board to increase premiums, but it was not yet approved by the Senate.

“P-Noy chose to be a fiscally responsible leader and not just one driven by current politics,” Belmonte said.

Mandaluyong City Rep. Neptali Gonzales II said the House was cognizant of the need to balance the increase in pensions with the required authorization for the SSS board.

Gonzales warned the SSS could go bankrupt in 15 years if the pension fund is not allowed to increase contributions.

‘Unfortunate’

Sen. Francis Escudero said Congress could override the President’s veto by passing the bill with a two-thirds vote as specified under the Constitution.

“We need to muster the two-thirds majority vote to override the veto. It may be difficult but we will try for the sake of our SSS pensioners. It is saddening because our pensioners have waited long enough,” Escudero said.  – Paolo Romero, Jess Diaz, Christina Mendez, Prinz Magtulis, Perseus Echeminada, Mayen Jaymalin