2014 @ 11%: The new SSS rate you need to know

SSS will increase contribution rates and maximum monthly salary credit starting January 2014.

Employers and employees need to take note of the new Social Security System (SSS) rule starting next year that will implement a 0.6 percent increase in its current 10.4 percent monthly contribution rate. The new rate will be 11 percent effective January 2014. It will also increase the maximum monthly salary credit from P15,000 to P16,000.

“The 0.6 percent increase will be divided equally between employees and employers, with the latter to pay 7.37 percent, while the former will pay 3.63 percent based on the applicable monthly salary credit. Self-Employed and Voluntary Members will shoulder the entire 11-percent contribution rate,” SSS President and Chief Executive Officer Emilio S. de Quiros, Jr. said. “This contribution rate increase is part of the SSS Reform Agenda that seeks to lengthen gradually the actuarial life of the Social Security Fund,” he added. “It also aims to reduce the unfunded liability of SSS, which was at P1.07 Trillion as of December 2011 and increases by about eight percent annually.”

An unfunded liability exists when the present value of a pension fund’s contributions and assets is insufficient to cover the present value of future benefit payments and operating expenses. Such situation occurs because the benefits that a member receives or is entitled to far outweigh the accumulated contributions, including interest.

“Increasing the contribution rate would result in bridging the gap between contributions and benefits,” de Quiros added. Aside from the 0.6 percent increase in the contribution rate, President Aquino also approved an increase in SSS’ maximum monthly salary credit (MSC) from P15,000 to P16,000. The MSC is the compensation base that determines both the amount of monthly contributions to be paid by the member and the amount of benefits to be derived. With the 11 percent contribution rate, the monthly contribution will be P110 for the minimum MSC of P1,000; P550 for the minimum MSC of P5,000 for OFWs; and P1,760 for the maximum MSC of P16,000.

“The new maximum MSC at P16,000 means that a greater portion of the members’ incomes are covered in their SSS contributions,” de Quiros explained. “Higher contributions eventually mean higher benefits in the future.”

source:   Entrpreneur Philippines