On Wednesday September 6th the Social Security Board hosted members of the media to a mixer with the sole purpose of informing on the proposal to increase coverage via increased contributions.
Established in 1981, the Social Security Board provides a safety net for employed persons who would otherwise not have benefits accrue to them while they work. Since its inception the board has had only one adjustment in its rates and coverage and that was back in 2001. Now a full 16 years later there is an urgent need to revisit the scheme.
Speaking to the media, the SSB’s actuary, Hernando Montas, spoke plainly and explained that under the current demands, the fund will collapse within 4 years. Actually, the fund is currently operating at a deficit if it were solely dependent on contributions in order to make benefit payments. Chief Executive Officer for the SSB told the media that the deficit is for 11.4 million dollars. In 2016 there was 81 million dollars in contributions while benefits paid out amounted to 92.4 million dollars. The supplement came as a result of income from investments which are also taking a hit with banks reducing their interest on deposits.
That now has the Social Security Board looking at ways to place the fund in a better position. Since January of this year they have been holding consultations with government, unions and employers and according to the SSB’s Chandra Nisbet Cansino, the reception has been good. And the plan is to increase coverage. Currently the maximum insurable earning is 320 dollars per week with the fund covering persons employed and earning under 70 dollars. The payment for employees at the lowest end is 4 dollars and 40 cents with the employer paying 3 dollars and 57 cents and the employee paying 83 cents. At the highest end the maximum payment is 25 dollars and 5 cents with employers paying 16 dollars and 5 cents and the employee paying 9 dollars and 55 cents.
The new proposal will see these payments remain as they are, the difference will be an increase in the insurable earning to 520 dollars. So 5 more bands are being proposed to be added with the highest payment being 41 dollars and 60 cents per week for anyone earning 520 dollars and more. The proposal at this time is that any increment in payment be shared equally between the employer and employee. For now it is only a proposal and one that is being well received.
That positive reception according to SSB money managers needs to be maintained as the fund is weakening every year. Last year alone retirement pensions and grants sucked almost half of the contributions by 31 million dollars. With life expectancy for pensioners at an average of 10 years after retirement, the fund is not looking at being healthy for too long.
Montas told the media that he’d want that the changes to the SSB legislation be enacted by February of next year to ensure the viability of the fund. He added that with the proposal it would mean that the SSB would not have to tinker with the numbers for at least 10 years. Notably the bracket of employees to be impacted by the changes make up about 40% of contributors. As of 2016 there were a total of 103,251 active insured persons.
