" SOCIAL SECURITY ***ACT OF-:- AZO Z Alo alk REPUBLIC ACT NO 11199 A BRIEFERThe Social Security Act of 2018 Rationale The repeal of the original SS Law, Republic Act (RA) No. 1161, first implemented in 1957 and last amended on 1 May 1997 by RA No. 8282 or the Social Security Act of 1997, is intended to substantially improve the capability of the Social Security System (SSS) to fulfill its mandate of providing meaningful social security protection. After more than 20 years, especially amid rapid demographic and economic changes, the Social Security Act of 2018 will enable the SSS as a pension fund to cope with the challenges of the present times and to fulfill its long-term obligations. In the pursuit of the State policy to establish, develop, promote and perfect a sound and viable tax-exempt social security system, the value of work, save, invest and prosper is now enshrined in the law. The maximum profitability of investible funds and resources is further ensured through a culture of excellence in management, grounded upon sound and efficient policies employing internationally recognized best practices. Brief History During the 17th Congress, 3 bills were introduced in the House of Representatives (HBN 1947, 2776 and 3550) to amend the SSS Law. These were later consolidated into HBN 2158, which the House approved on 3rd Reading on 16 Jan 2017. In the Senate, 14 bills (SBN 63,91,145,150,181,400,767,802,1036,1038,1068,1129, 1198 and 1236) were filed seeking amendments to the SS Law. All these were later consolidated into SBN 1753, and was approved on 3rd Reading on 8 Oct 2018. To reconcile the disagreeing provisions of the House and the Senate versions, the Bicameral Conference Committee was convened. Upon due deliberation, the Bicam Report was approved on 28 Nov 2018, both Houses voting separately. The Enrolled Bill entitled “An Act Rationalizing and Expanding The Powers and Duties Of The Social Security Commission To Ensure The Long-Term Viability Of The Social Security System, Repealing For The Purpose Republic Act No. 1161, As Amended by Republic Act No. 8282, Otherwise Known As The ‘Social Security Act Of 1997” was presented by Congress on 8 Jan 2019 for the approval of the President of the Philippines. President Rodrigo Duterte signed R.A. No, 11199 or the Social Security Act of 2018 into law on 7 February 2019, It was published in the Official Gazette on 18 February 2019 and took effect on 5 March 2019 pursuant to Section 34 thereof. On 13 March 2019, the Social Security Commission (Commission) approved the guidelines on Condonation/Non-imposition of Penalties on Delinquent Contributions via Circular No. 2019-004 dated 15 March 2019, which was published in the Manila Bulletin on 16 March 2019. On even date, the Commission likewise approved the guidelines on Legislated Contribution Rates and New Monthly Salary Credit (min & max) via Circulars No. 2019-005, 2019-006, and 2019-007 dated 15 March 2019 which were published in the Philippine Daily Inquirer on 17 March 2019. Salient Features The approval of the Social Security Act of 2018 is a historic event for the SSS and its 38 million members. It is a landmark legislation that will redound to the benefit of the private sector workers and the improvement of the social security protection of our people with hallmark provisions on the following: © Unemployment or involuntary separation benefits ® Mandatory coverage of Overseas Filipino Workers (OFWs) ® Provident Fund benefits ® Condonation of penalties on delinquent contributions © Enhanced investment capabilities, statutory investment limits & cumulative ceilings Y Unemployment or Involuntary Separation Benefits (Sec 14-B) - monthly cash payments equivalent to 50% of the average Monthly Salary Credit (MSC) for maximum of 2 months Basic guidelines - a) member is not over 60 years of age, b) has paid at least 36 months contributions, 12 months of which should be in the 18-month period immediately preceding the involuntary unemployment or separation, c) an employee who is involuntarily unemployed can only claim unemployment benefits once every 3 years, d) in case of concurrence of 2 or more compensable contingencies, only the highest benefit shall be paid.¥ Mandatory Coverage of Overseas Filipino Workers (OFWs) [land-based & sea-based] [Sec 9-B]- Substantial growth in membership coverage, in terms of depth and breadth is expected with the expansion of this mandatory coverage. a. All sea-based and land-based OFWs, up to the day of his/her 60th birthday. An OFW, as defined under RA No. 10022 or Migrant Workers & Overseas Filipinos Act of 2009, refers to a person who is to be engaged, is engaged, or has been engaged in a remunerated activity in a State of which he/she is not a citizen, or on-board a vessel navigating the foreign seas other than a government ship used for military or non-commercial purposes, or on an installation located offshore or on the high seas. A “person to be engaged ina remunerated activity” refers to an applicant worker who has been promised or assured employment overseas. a . All benefits such as Retirement, Death, Disability, Funeral (RDDF), Sickness, Maternity (SickMat) and Unemployment Benefits can now be availed by all covered OFWs c. Manning agencies duly licensed by DOLE are considered employers of sea-based OFWs. They are jointly and severally or solidarily liable with their principals with respect to civil liabilities incurred in violation of the law. c.1,) The persons having direct control, management or direction of manning agencies shall be held criminally liable for any violation notwithstanding Sec 28, par (f) thereof. c.2.) Manning agencies are responsible for performing functions of the employer such as timely reporting for coverage of sea-based OFWs, regular remittance of required contributions, and advance payment of short-term benefits. d. Land-based OFWs are considered in the same manner as self-employed persons, until a Bilateral Labor Agreement (BLA) shall have been entered into, in accordance with such rules and regulations that the Commission shall prescribe. (please refer to IRR Rule 14, Sec 5) e. The minimum Monthly Salary Credit (MSC) for land-based OFWs shall be P8,000.00 (SSC Res No. 90 dated 25 Jan 2017), those receiving monthly lower than P8,000.00 shall pay the contribution based on the said minimum MSC. (please refer to IRR for guidelines on change in MSCs and deadline for payment) f. Mandate of Department of Foreign Affairs (DFA) and Department of Labor and Employment (DOLE) - DFA, DOLE and agencies involved in deploying OFWs shall negotiate BLAs with the host countries to ensure that employers of land-based OFWs, similar to the principals of sea-based OFWs, pay the required contributions, in which case these land-based OFWs shall no longer be considered in the same manner as self-employed persons. Instead, they shall be considered as compulsorily-covered employees, with employer and employee shares in contributions that shall be provided for in the BLAs and their implementing administrative agreements. [Sec 9-B, (d)] In countries that already extend social security coverage to OFWs, the DFA, through the Philippine Embassies and DOLE, shall negotiate further agreements to serve the best interests of the OFWs. g. = Bilateral Social Security and Labor Agreements - DFA, DOLE and SSS shall ensure compulsory coverage of OFWs thru BLAs and other measures for enforcement. (please refer to IRR guidelines on standard provisions) For land-based OFWs in countries without any SSA or BLA, measures of enforcement of compulsory coverage shall include the collection of contribution payments by the POEA and/or the attached DOLE agency, thru its applicable deployment processing facility, as follows: a) For new hires, direct/name hires, and government-to-government hires - 1 monthly contribution; b) For re-hires/returning workers/Balik-manggagawa - 3 monthly contributions. . Voluntary Membership - Upon termination of overseas employment, OFWs may voluntarily pay contributions to maintain their rights to full benefits. [Sec 9-B, (f)] Filipino permanent migrants, Filipino immigrants, permanent residents and naturalized citizens of their host countries may be covered by the SSS on a voluntary basis. v Provident Fund (PF) Benefits [Sec 4, (a), (2)] - The Benefits under the PF will be based on the individual's Account Value. Said benefits to PF members or their beneficiaries are in addition to the RDDF, SickMat benefits provided for by law. a) The PF consists of the contributions of employers and employees, self-employed, OFW and voluntary-paying members, including a consideration of the existing voluntary Provident Funds of SSS members, ie. the Personal Equity and Savings Option (PESO) Fund and the OFW Flexi-Fund.°) The creation of a transitory voluntary PF until a mandatory PF is established in 2021 will be based on the MSC in excess of P20,000.00 up to the prescribed maximum MSC and their earnings. The member may contribute voluntarily in excess of the prescribed contribution rate and/or the maximum MSC. [Sec 4, (a), (2)] v Reorganization & Rationalization of the Powers of the Commission - The reorganization of the Commission and the rationalization of its powers provide the flexibility and the tool for the Commission to perform its Fiduciary obligations. a) Power to Condone Penalty on Delinquent Contributions [Sec 4, (a), 8] - To condone, enter into a compromise, or release, in whole or in part, such penalties imposed upon delinquent contributions regardless of the amount. Basic requirements : financial position demonstrates a clear inability to pay the delinquency due to economic crisis, serious business losses or financial reverses, or natural calamity or man-made disaster w/o fault of the employer i. under such valid terms and conditions the Cornmission may prescribe e.g. installment of payment . Annual Report to the Office of the President and the Congress, the following: 1, names and addresses of employers whose penalty delinquencies have been subjected to condonation; 2. amount involved; 3. amount condoned; and 4, underlying reasons and justifications, to determine that said powers are reasonably exercised and that the SSS is not unduly prejudiced. ¥ Enhancements of Investment Capabilities (Sec 26) - The new Charter now offers a broader range of investment options to generate more income to shore up the funds and in order to build up reserves to cover future benefit obligations. The easing up of the investment limits and cumulative ceiling as an important factor behind ensuring the financial viability of the pension fund, is a welcome development. A. Investment Limits Sec. 26 Provision From To (a) Bonds, securities, PNs of Nat! No minimum Minimum of Govt or those w/ Govt guarantee 15% of IRF (b) Domestic infrastructure projects | Max of 30% of IRF No change (0) Govt Financial Institutions or Max of 30% of IRF | Nochange Government Corporations (d) Banks Max of 40% of IRF No change (e) Housing Purposes Max of 35% of IRF | Max of 5% of IRF (e) Salary, educational, livelihood, Max of 10% of IRF Max of 25% of IRF calamity and emergency loans (f) Educational or medical institutions | Max of 10% of IRF No change @) Real estate property and Max of 5% of IRF Max of 10% of IRF shares of stocks Other income-earning projects (9) secured by 1st mortgages or Max of 25% of IRF No change other collaterals (h) Prime corporation or Max of 30% of IRF Max of 40% of IRF multilateral institution (i) Preferred or common Max of 30% of IRF Max of 40% of IRF shares of stocks (i) Pomest or foreign Max of 20% of IRF Max of 40% of IRF mutual funds in existence 7 Investments in Investments in for at least 3 years foreign mutual funds | foreign mutual funds shallnot exceed 1% | shall not exceed 1% of the IRF in the 1st of the IRF in the 1st year which shall be year which shall be increased by 1% for | increased by 1% for each succeeding year, } each succeeding year, but not to excee but not to excee 7.5% of the IRF 15% of the IRF (k) | Foreign currency deposits Such investment shall | Such investment shall not exceed 1% ofthe | not exceed 1% of the IRFin the 1st year IRF in the 1st year which shall be which shall be increased by 1% for increased by 1% for each succeeding year, } each succeeding year, but not to excee but not to excee 7.5% of the IRF 15% of the IRF ) Loans secured by collaterals like | Max of 30% of IRF No change cash, government securities, or guarantees of multilateral institutions 6B. Cumulative Ceilings From To in private securities 40% IRF 60% in housing 35% 5% inreal estate-related investments 30% No change in short & medium-term member loans 10% 25% in govt financial institutions & corporations 30% No change in infrastructure projects 30% Removed but set max 5% in private-sponsored infra projects w/o guarantee Removed but set max 5% private & govt sponsored infra projects w/ guarantee Removed but set max 5% in private & govt sponsored infra projects in any particular industry 15% No change In foreign-currency denominated 75% 15% investments : ¥ Legislated Contribution Rate and New MSC (min & max) Sec 4, (a), (9) - Congress in its wisdom as affirmed by President Duterte, has determined the following adjustments on the contribution rate and the new MSC (min and max). It is imperative for the government to bring the SSS Fund Life to safe levels to promote an actuarially sound and viable social security institution. Year of Share Monthly Salary Credit Implementation | Cortibution Rate Employer | Employee | Minimum Maximum 2019 12% 8% 4% 2,000.00 20,000.00 2020 12% 8% 4% 2,000.00 20,000.00 2021 13% 8.5% 45% 3,000.00 25,000.00 2022 13% 8.5% 45% 3,000.00. 25,000.00, 2023 14% 9.5% 45% 4,000.00 30,000.00 2024 14% 9.5% 45% 4,000.00 30,000.00 2025 15% 10% 5% 5,000.00 35,000.00 *The MSC to be used for purposes of calculating premiums for and benefits from the Social Security Fund is capped at P20,000. Any contribution corresponding to the MSC in excess of P20,000 but less than the maximum MSC goes to the mandatory Provident Fund. (please refer to IRR Rule 4, Sec 10 for actual schedule of contributions for EE, SE, VM, Kasambahay and OFW) Prepared by the SSS Legislative Affairs Department and published by the SSS Corporate Communications Dept. June 2019