Republic of the Philippines

HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

SIXTEENTH CONGRESS
First Regular Session

HOUSE BILLN 5807

Introduced by HON. RENE L. RELAMPAGOS
First District, Bohol

EXPLANATORY NOTE

This bill seeks to provide the Social Security Commission (Commission), the
governing board of the Social Security System (SSS), the authority to condone penalties
‘on delinquent contributions and loans, to determine the monthly salary credits, the
schedule and rate of contributions, benefit increases and the rate of penalty on
delinquent contributions and unpaid loan amortizations san Presidential approval,
thereby further amending Republic Act No. 1161, as amended, otherwise known as the
Social Security Law.

‘The Commission is authorized under Section 4, paragraph (6) of Republic Act
No. 1161 as amended (SS Law) to compromise or release, in whole or in part, any
interest, penalty or any civil liability to SSS accruing from unpaid member loans.
However, the exercise of this authority is subject to approval by the President.

This new provision is patterned from the recently enacted GSIS Law, the
HDMF/Pag-Ibig Law and PhilHealth Law and the National Internal Revenue Code.
Under the said laws, the statutory powers which the governing boards of GSIS,
PhilHealth and HDMF can exercise in carrying out their mandates is not subjected to
Presidential approval. This proposal is based on the theory that operational details and
accounts management are the province of the Commission and the SSS, the ones
entrusted with the mandate of running the affairs of the country’s social security system
including the exercise of discretion and flexibility in managing its own affairs.

It is reported that for a big number of billing or demand letters issued against
cemployers-members of the $88, the amount of contribution-delinquency is computed
based on presumptive delinquency under Section 22 (d) of the $8 Law, and hence not
yet final being subject to reconciliation of records. ‘The Large Account Division of SSS
has a collectible of P1,033 Billion as of 26 May 2014 from delinquent employers. P408
Million is accounted for by penalties and P625.9 Million is for contributions that are
due. By providing a breathing space, we are actually helping SSS to immediately collect
about P625.9 Million overdue SS contributions which would otherwise be difficult to
collect. It is not a secret that companies choose not to pay what SSS demands of them
because of penalties slapped upon them that have accumulated through the years
which, at times, are actually bigger than the principal that should have been paid. ‘This
measure provides a strong incentive for those that have been in arrears in the payment
of their employees’ contributions to immediately settle what is due and overdue, minus
the huge burden of dealing with the delinquency penalties. Past SSS condonation
experience shows the amount of P3.42 B that was condoned as penalties while enabling


the $89, at the same time, to collect P3.546B from 24,042 delinquent employers which
availed of the program. This amount easily beefed up the SS Fund and contributed to its
stability and viability.

More importantly, this is a welcome development for the privately employed
workers comprising SSS’ general membership, the self-employed individuals,
financially distressed companies, small and medium businesses, other social
enterprises, the contributing members of the informal sector, the farmers and the
fisherfolks, the kasambahays and their household employers. ‘They can now avail of
the privileges of SSS members of good standing, full benefits and loans, which would
otherwise not be available had their delinquent payments remain unsettled.

Further, the current $$ Law contains an outdated schedule of the social security
contributions which have failed to keep pace with the changing times. Amendments to
the $8 Law, last introduced in 1997 (now 17 years old), are no longer reflective of
current socio-economic conditions.

The heavy strain on the $$ Fund being exacted by the increasing benefit
obligations of the SSS to be paid to its members and their beneficiaries has a dire effect
on the fund’s long-term viability. To lighten this load, the SSS, at the same time, carefully
manage benefit payouts and operating expenses to minimize 88S’ unfunded liability.

‘The existing contribution set-up does not ensure that SSS can continuously cover
its ballooning unfunded liabilities in the future. To addres ch concern and be able to
cope with this predicament, something must be done about the $$$ contribution rates
and align the same with industry standards and sound international practices taking into
consideration actuarial calculations, rate of benefits, inflation and other relevant socio-
economic indicators.

Under the present provisions of the SS Law, the Commission cannot increase the
minimum and maximum monthly salary credits, the schedule and the rate of
contributions as well as the rate of benefits without securing the approval of the President
of the Republic of the Philippines. This process is usually tedious and takes a
determinable time.

Corollary to these proposed amendments in the powers of the Commission is the
authority to review and periodically adjust the rate of penalty on due but unremitted
contributions and unpaid loan amortizations taking into consideration inflation and
other pertinent socio-economic data. This is the logical consequence as this harmonizes
the power to condone, compromise or release, in whole or in part, such penalties imposed
upon delinquent social security contributions regardless of the amount involved under
such valid terms and conditions it may preseribe when the financial position of the
employer demonstrates a clear inability to pay the assessed delinquency.

Again, the proposed amendments are aligned with the GSIS Law, the PhilHealth
Charter, the Pag-Ibig Law and the NIRC. It is expected that the 30 million SSS
members here and around the world will stand to benefit from these amendments.

It is in this context that the early passage of this bill is earnestly sought.

u
RENE



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

SIXTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 5807

Introduced by HON. RENE L. RELAMPAGOS.
First District, Bohol

‘AN ACT AUTHORIZING THE SOCIAL SECURITY COMMISSION TO
CONDONE PENALTIES ON DELINQUENT CONTRIBUTIONS AND TO.
DETERMINE THE MONTHLY SALARY CREDITS, THE SCHEDULE AND
RATE OF CONTRIBUTIONS AND THE RATE OF PENALTY ON
DELINQUENT CONTRIBUTIONS AND UNPAID LOAN AMORTIZATIONS,
THEREBY FURTHER AMENDING REPUBLIC ACT NO. 1161, AS
AMENDED, OTHERWISE KNOWN AS THE SOCIAL SECURITY LAW.

Be it enacted by the Senate and the House of Representatives of the Philippines
in Congress assembled:

SECTION 1. Section 4, paragraph (a) of Republic Act No. 1161, as amended,
otherwise known as the “Social Security Law”, is hereby further amended to read as
follows:

“SEC. 4. Powers and Duties of the Commission and SSS. -
(a) The Commission. ~ For the attainment of its main objectives as set
forth in Section 2 hereof, the Commission shall have the following powers
and duties:

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(6) To compromise or release, in whole or in part, any interest,
penalty or any civil liability to SSS in connection with the investments
authorized under Section 26, hereof, under such terms and conditions as it
may prescribe;

(7)_NOTWITHSTANDING THE PROVISIONS OF ANY LAW TO
THE CONTRARY, TO CONDONE, COMPROMISE OR RELEASE, IN
WHOLE OR IN PART, SUCH PENALTIES IMPOSED UPON
DELINQUENT SOCIAL SECURITY CONTRIBUTIONS REGARDLESS OF
THE AMOUNT INVOLVED UNDER SUCH VALID TERMS AND
CONDITIONS IT MAY PRESCRIBE WHEN THE FINANCIAL POSITION
OF THE EMPLOYER DEMONSTRATES A CLEAR INABILITY TO PAY
THE ASSESSED DELINQUENCY. THE IMPLEMENTING RULES AND
REGULATIONS TO CARRY OUT THIS PROVISION SHALL BE ADOPTED
AND PROMULGATED BY THE COMMISSION NOT LATER THAN
NINETY (90) DAYS AFTER THE APPROVAL OF THIS ACT.

THE COMMISSION SHALL SUBMIT TO BOTH THE SENATE AND
HOUSE OF REPRESENTATIVES, AN ANNUAL REPORT ON THE


EXERCISE OF THE POWERS UNDER THIS SECTION, STATING
THEREIN THE FOLLOWING FACTS AND INFORMATION, AMONG
OTHERS: NAMES AND ADDRESSES OF EMPLOYERS WHOSE
PENALTY DELINQUENCIES HAVE BEEN THE SUBJECT OF
COMPROMISE OR CONDONATION; AMOUNT INVOLVED; AMOUNT
COMPROMISED OR CONDONED; AND THE REASON/S FOR THE
EXERCISE OF POWER TO DETERMINE THAT SAID POWERS ARE
REASONABLY EXERCISED AND THAT THE SSS IS NOT UNDULY
DEPRIVED OF REVENUES.

(8) TO DETERMINE AND FIX FROM TIME TO TIME THROUGH
RULES AND REGULATIONS, THE MINIMUM AND MAXIMUM
MONTHLY SALARY CREDITS, THE SCHEDULE AND THE RATE OF
CONTRIBUTIONS, THE RATE OF PENALTY ON DUE BUT
UNREMITTED CONTRIBUTIONS AND — UNPAID LOAN
AMORTIZATIONS TAKING INTO CONSIDERATION ACTUARIAL
CALCULATIONS, RATE OF BENEFITS, INFLATION AND OTHER
RELEVANT SOCIO-ECONOMIC DATA, AND;

(9) To approve, confirm, pass upon or review any and all actions of,
the SSS in the proper and necessary exercise of its powers and duties
hereinafter enumerated.”

SECTION 2. Section 4, paragraph (b), sub-paragraph (2) of the Social Securil
Law is hereby further amended to read as follows:

“SEC. 4. Powers and Duties of the Commission and SSS .
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(b) The Social Security System ~ Subject to the provision of Section
four (4), paragraph (a), SUB-PARAGRAPH NINE (9) hereof, the SSS
shall have the following powers and duties:

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(2) To require the actuary to submit a valuation report on the
benefit program every four (4) years, or more frequently as may be
necessary, and to undertake the necessary actuarial studies and
calculations concerning increases in benefits taking into account inflation
and the financial stability of the SSS and to provide feasible increases in
benefits every four (4) years, including the addition of new ones, under
such rules and regulations as the Commission may adopt, Provided,
‘That the actuarial soundness of the reserve fund shall be guaranteed;

SECTION 3. Section 18, paragraph (a) of the Social Security Law is hereby further
amended to read as follows:

“SEC. 18. Employee’s Contribution. — (a) Beginning as of the
last day of the calendar month when an employee’s compulsory coverage
takes effect and every month thereafter during his employment, the
employer shall deduct and withhold from such employee's monthly
salary, wage, compensation or earnings, the employee's contribution in
an amount corresponding to his salary, wage, compensation or earnings
during the month in accordance with the MONTHLY SALARY CREDITS,



THE SCHEDULE AND THE RATE OF CONTRIBUTIONS AS MAYBE
DETERMINED AND FIXED BY THE COMMISSION.

The foregoing MONTHLY SALARY CREDITS, schedule AND RATE
of contributions shall also apply to self-employed and voluntary members.

SECTION 4. Section 22, paragraph (a) of the Social Security Law is hereby further
amended to read as follows:

“SEC. 22. Remittance of Contributions. — (a) The contribution
imposed in the preceding section shall be remitted to the SSS within the
first ten (10) days of each calendar month following the month for which
they are applicable or within such time as the commission may prescribe.
Every employer required to deduct and to remit such contributions shall be
liable for their payment and if any contribution is not paid to the SSS as
herein prescribed, he shall pay besides the contribution a penalty thereon
from the date the contribution falls due until paid. THE RATE OF THE
PENALTY ON DELINQUENT CONTRIBUTIONS PER MONTH SHALL BE
DETERMINED AND FIXED BY THE COMMISSION THROUGH RULES.
AND REGULATIONS TAKING INTO CONSIDERATION THE CURRENT
INFLATION RATE AND OTHER RELEVANT SOCIO-ECONOMIC DATA.
If deemed expedient and advisable by the Commission, the collection and
remittance of contributions shall be made quarterly or semi-annually in
advance, the contributions payable by the employees to be advanced by
their respective employers: Provided, ‘That upon separation of an
employee, any contribution so paid in advance but not due shall be credited
or refunded to his employer.”

SECTION 5. Separability Clause. If any provision of this Act is declared
invalid, the other provisions not affected thereby shall remain valid.

SECTION 6. Repealing Clause. All laws, decrees, orders, rules and regulations
and other issuances or parts thereof which are inconsistent with the provisions of this Act
are hereby repealed or modified accordingly.

SECTION 7. Effectivity. — This Act shall take effect fifteen (15) days following its
complete publication in the Official Gazette or in at least (2) national newspapers of
general circulation whichever comes earlier.

Approved,