MANILA, Philippines — The net loss of the Social Security System (SSS) nearly doubling to 843.9 billion pesos in 2021, inflated by the inclusion of future liabilities in the new accounting system it uses, is not expected to be a cause for concern as it remained awash in cash, the public pension fund for private sector workers said.
Audited SSS comprehensive income statements released on Friday showed the same net loss figure for 2021 as the unaudited statement reported by the Inquirer in May. Last year’s net loss increased by 99% from 424.4 billion pesos in 2020.
The SSS increased its total income – service and business income derived mainly from membership dues, gains from investments and other non-operating income – to 276.3 billion pesos last year, from 257. 2 billion pesos in 2020. But the SSS’s total income was lower than the 2021 total expenditure of 1.12 trillion pesos, almost two-thirds more than the 681.6 billion pesos in 2020. The rise in expenditure total was mainly due to the change in policy reserves, which took into account future debts or benefits to be paid to SSS members and retirees, increasing to 872.4 billion pesos in 2021 compared to 461.7 billion pesos in 2020 .
SSS President and CEO Michael Regino earlier explained that the net losses of the past two years were caused by the adoption of Philippine Financial Reporting Standards (PFRS) 4. As a reminder, the former Secretary to finance Carlos Dominguez III last year ordered the SSS, the government Service Insurance System (GSIS) and the Philippine Health Insurance Corp. (PhilHealth) to use the PFRS 4 accounting method, which is supposed to provide a “more accurate” financial situation of these public insurers. PFRS 4 counted future liabilities, unlike in the past where the financial statements, while showing profits, hid these obligations.
“The SSS’s adoption of PFRS 4, which recognizes social benefit liabilities (SBL) and margin for adverse deviation (MfAD), resulted in an increase in policy reserves which contributed to the net accounting loss of nearly 844 billion pesos for 2021. We want to clarify that the increase in police reserves is not actual money taken out of the fund in 2021. It is simply estimates of the reserves needed to finance the future claims for benefits,” Regino said.
“We are recognizing these future liabilities now to be more transparent in managing the SSS fund and to create a clearer view of our long-term financial position. We assure our stakeholders that this does not affect our current cash flow and that we remain financially viable in terms of delivering benefits to our members,” added Regino.
“In its unaudited 2021 financial statements, SSS cash inflows of 262 billion pesos exceeded its cash outflows of 234 billion pesos. Over the past six years, the SSS has recorded cumulative revenues of 202 billion pesos, even with record benefit payments of 1.1 trillion pesos and loan releases of 254 billion pesos to its members and retirees. notes Regino. This meant that the SSS could still make payouts to its members and retirees given unrestricted cash flow and funding.
Regino said that the life of the SSS fund will not be exhausted until 2054, similar to that of Thailand, and longer than that of the United States (until 2034) as well as that of Vietnam (until 2034). 2027).
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