SOCIAL SECURITY SYSTEM ANNUAL REPORT

SOCIAL SECURITY SYSTEM

ANNUAL REPORT2011

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2 SOCIAL SECURITY SYSTEM

3 Highlights of Operations 4 Statements of Mission and Vision 5 Message from the President of the Republic of the Philippines 6 Message of the Chairman 8 Message of the President and CEO12 2011 In Review: Accomplishments15 Actuarial Report 17 Taking Care of Our Modern-Day Heroes: OFWs19 Loan Penalty Condonation Program: A Fresh Start for both Employers and Employees21 Ensuring Compliance Thru Legal Efforts 22 Automated Records Management System (ARMS) 24 e-Service means Speed, Accuracy, Convenience 25 Corporate Social Responsibility: Rebuilding from the Ruins of “Sendong” 27 Paving the Way Towards World-Class Excellence 28 Statement of Management’s Responsibility for Financial Statements 29 State Auditor’s Report on The Financial Statements30 Statement of Financial Position31 Statement of Comprehensive Income32 Statement of Changes in Reserves33 Statement of Cash Flows34 Notes to Financial Statements45 Internal Auditor’s Report46 Historical Data51 SSC Commissioners Pictures53 SSS Management Pictures57 SSC & SSS Management Directory59 AR Committee and Secretariat Photo

Contents

About the Cover

Sa SSS : Miyembro’y Protektado, Kinabukasa’y Sinisiguro

SSS bands together to achieve that one goal, which is to ensure social security protection for the Filipino people. In its 54 years of service, SSS continues to deliver quality of service and build strengthened systems.

Our cover reflects various representations of the very people that we serve- different faces of Filipinos from all walks of life who have one thing in common – that they are SSS members.

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Highlights of Operations

For the year Increase/(Decrease) 2012 2011 Amount %A. REVENUES & EXPENDITURES

Revenues 115,836.85 107,120.75 8,716.10 8.1 Contributions 85,971.48 79,272.86 6,698.61 8.5 Investment and Other Income, net 29,865.38 27,847.89 2,017.48 7.2

Expenditures 90,282.15 84,288.57 5,993.58 7.1 Benefit Payments 82,759.85 77,174.16 5,585.69 7.2 Operating Expenses 7,522.30 7,114.41 407.89 5.7

Net Revenue/(Loss) 25,554.70 22,832.19 2,722.51 11.9

B. ASSETS & RESERVES

Assets 322,379.90 297,591.34 24,788.56 8.3 Investments 290,806.09 273,265.61 17,540.48 6.4 SSS Properties 3,218.49 3,318.75 (100.26) (3.0) Others 28,355.32 21,006.98 7,348.34 35.0Liabilities 7,707.07 8,496.31 (789.24) (9.3)Reserves 314,672.83 289,095.03 25,577.80 8.8


Revenues 113,166.36 104,973.40 8,192.96 7.8 Contributions 84,602.87 77,956.99 6,645.88 8.5 Investment and Other Income, net 28,563.48 27,016.41 1,547.08 5.7

Expenditures 89,107.39 83,102.24 6,005.15 7.2 Benefit Payments 81,682.88 76,088.14 5,594.74 7.4 Operating Expenses 7,424.51 7,014.10 410.41 5.9

Net Revenue/(Loss) 24,058.97 21,871.16 2,187.81 10.0


Assets 294,775.83 271,267.54 23,508.29 8.7 Investments 276,745.95 252,630.57 24,115.38 9.5 SSS Properties 3,218.49 3,318.75 (100.26) (3.0) Others 14,811.38 15,318.21 (506.83) (3.3)Liabilities 7,815.37 8,604.29 (788.92) (9.2)Reserves 286,960.45 262,663.25 24,297.21 9.3


Revenues 2,670.50 2,147.35 523.14 24.4 Contributions 1,368.60 1,315.87 52.74 4.0 Investment and Other Income, net 1,301.89 831.49 470.41 56.6

Expenditures 1,174.76 1,186.33 (11.57) (1.0) Benefit Payments 1,076.97 1,086.02 (9.05) (0.8) Operating Expenses 97.79 100.31 (2.52) (2.5)

Net Revenue/(Loss) 1,495.73 961.02 534.71 55.6


Assets 27,712.43 26,431.84 1,280.59 4.8 Investments 14,060.14 20,635.03 (6,574.90) (31.9) Others 13,652.30 5,796.81 7,855.49 135.5Liabilities 0.05 0.06 (0.00) (8.4)Reserves 27,712.38 26,431.79 1,280.59 4.8

CONSOLIDATED

SOCIAL SECURITY FUND

EMPLOYEES’ COMPENSATION AND STATE INSURANCE FUND

(Amounts in Million Pesos)

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The mission of the SSS is spelled out in Section 2 of the Social Security Law (Republic Act No. 1161), as amended by the Social Security Act of 1997

(Republic Act No. 8282):

“It is the policy of the State to establish, develop, promote and perfect a sound and viable tax-exempt social security system suitable to the needs of

the people throughout the Philippines, which shall promote social justice and provide meaningful protection to members and their beneficiaries against

the hazards of disability, sickness, maternity, old age, death and other contingencies resulting in loss of income or financial burden. Towards this

end, the State shall endeavor to extend social security protection to workers and their beneficiaries.”

The SSS aims to develop and promote a viable, universal and equitable social protection scheme through world-class service.

VIABLE means that it is financially sustainable, non-distortionary, and requires no government subsidy. Current and future generations of

workers and retirees are also assured of meaningful benefits in return for their contributions.

UNIVERSAL means that protection shall be provided to all residents of the Philippines, citizens and non-citizens alike, regardless of race,

creed, gender, age, geographic location and socio-economic status. Attention will be given specially to the disadvantaged and overseas

Filipino workers (OFWs).

EQUITABLE means fair and uniform coverage shall be made available to all. Benefit entitlements shall be closely linked

with contributions.

WORLD-CLASS SERVICE means that the highest standards of service shall be used to ensure total member satisfaction.

A multi-skilled, forward-looking and generalist SSS workforce shall provide service that is prompt, accurate and courteous.

OurMission

OurVision

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52011 ANNUAL REPORT

My most heartfelt congratulations to the Social Security System (SSS) for a fruitful 2011 marked by your continuing financial strength and service improvements.

The SSS has closed the year with positive net revenues as a result of intensified collection efforts and prudent administration. Your institution has reached even higher levels of service efficiency by upgrading your information infrastructure, enabling electronic or internet-based transactions, and widening your membership coverage among the informal sector, the self-employed, and overseas Filipino workers.

Your efforts of reform have extended the vibrancy of your organization, especially by ensuring that integrity and transparency remain integral aspects of your process. I offer my most sincere felicitations to the good men and women of SSS on your solidarity to promote good governance and uphold the welfare of the Filipino people.

BENIGNO S. AQUINO III

November 2012

Message from the Presidentof the Republic of the Philippines

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Message of the Chairman

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72011 ANNUAL REPORT

For almost five and a half decades the Social Security System slowly expanded from its modest beginnings with its mission to uphold social justice to the working man through social security. Today, this institution serves over 1.7 million pensioners, with more than 2.6 million recipients of social security benefits in 2011. The Social Security Commission (SSC) continues to pursue this evolving need of SSS members, anchored on the strength of information technology (IT) development, starting with the modernization of the SSS Automated Records Management System (ARMS) in pre-determined phases. Several batches of the new SSS chip-based Unified Multi-Purpose Identification Cards (UMID) were mailed to our members, with the remaining build up to be completed next year. Along this line, SSS also implemented the relocation of its Business Recovery Center to a more secure site, improved its network structure and back-up capability, and reorganized the IT Management Group to streamline its functions for better efficiency. The SSC fully commits to the continuing upgrade of the SSS IT infrastructure as the backbone that enables SSS to provide services to its members securely and accurately, through online and real-time inquiries and member services in malls similar to the recently-concluded Agreement for SSS presence at the Robinsons Mall chain. The SSC is also aware that universal coverage for social security demands intensified efforts to reach out to Filipinos overseas, where many of inactive SSS members reside. The OFW Caravan was an avenue to revisit the need to increase branch and manpower presence abroad, more electronic overseas collection agreements and to introduce enhancements to the Flexi-Fund program for OFWs. This effort inspired new 2012 programs like the Member-Get-Member promotion, the reopening of foreign offices and the approval of additional foreign staff in the Middle East, Asia and Europe. To preserve and maintain the growth of the SS Fund, the SSC reviewed the SSS investment guidelines, observing utmost care in the investment of its reserve funds, matched with the modernization of the Investment Management System of the SSS Equities Department to enable the group to accomplish greater milestones beyond the over P12.9 billion in gains last year. Institutional investments based on prescribed criteria and grounded on transparency assures members and stakeholders that this Commission upholds honesty and integrity in all investments and that contracts are properly enforced and for strict compliance.

At the same time, the SSC prioritized a study on the best use of its inventory of real properties while approving the disposal of its sizeable number of residential properties all over the country in order to concentrate more on investments within its primary area of expertise and also generate more favorable yields and return on investments. Also in 2011, the Annual Confirmation of Pensioners (ACOP) was reactivated, primarily through the banking system to verify the list of pensioners with the least amount of inconvenience to our senior members. Not forgetting its corporate social responsibility, the SSC also approved the permanent P50 million Annual Calamity Assistance Fund Program for SSS members and dependents where immediate assistance could be accessed during events caused by natural calamities. The SSC also believes that investments should be aimed at promoting economic growth in the country by consolidating Business Development and Social Development Loan Facilities with simpler, more competitive and affordable rates, making it easier for members to avail of business and institutional loans.

As part of its commitment to nation-building, the SSC also pledged the amount of P50 billion in the Private Infrastructure Development Fund (PIDF) Bonds of the National Development Company (NDC) in support of the Public-Private Partnership (PPP) projects of the Aquino Administration immediately upon its constitution. The Social Security Commission and the Social Security System continue to direct its efforts towards programs with only the best interest of its members at heart. Knowing the hard work invested by Filipino workers daily to secure a brighter future for their families, it is our duty to make certain that each member’s SS contributions will bring meaningful protection in return. On behalf of my fellow Commissioners, the SSS Management and its employees, we are determined to be a channel for SSS to attain greater levels of strength and stability responsive to the needs of its members in the years to come.

Juan B. Santos

Putting our Members on Top of Our Agenda

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Message of the President and CEO

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92011 ANNUAL REPORT

United for a Common Goal

Since the implementation of the Social Security Law in 1957, workers, employers, and the men and women of the Social Security System (SSS) have worked hand-in-hand to establish and perfect a sound social protection program aimed at promoting social justice in the country. For more than five decades, the cooperation between the SSS and its members served as the bedrock of its growth and ability to fulfill its magnanimous mandate.

Today, this relationship is much stronger. In 2011, our joint commitment to protect the members and their families from life contingencies was reaffirmed, evidenced by the marked improvements in our financial position and service delivery.

The SSS continues to be upbeat on the challenges in the years ahead through the various plans and programs set to fulfill our commitment to our members. Fueled by the trust and support of our stakeholders, our members can be assured of a stronger SSS for years to come.

Financial Highlights

Our goals continue to be maintaining the excellent financial performance that the SSS has been achieving in the past years, and to extending to perpetuity the Social Security Fund’s actuarial life, which as of the latest actuarial valuation report, is projected to last until 2039.

Thanks to higher earnings from contribution collections and investment income, accompanied by more efficient spending, SSS’ net income for 2011 reached P25.55 billion – a 12 percent jump from the P22.83 billion we earned in 2010. Both contribution collections and investment income grew steadily in 2011, registering P85.97 billion and P29.86 billion, respectively. Meanwhile, benefit payments reached P82.76 billion, while operating expenses was at a modest P7.52 billion.

I am also pleased to report that as of yearend 2011, SSS assets reached P322.38 billion, which is P24.79 billion higher, or 8.3 percent, than 2010 year-end level of P297.59 billion. This is partly the result of strong investment income that was at its highest levels in the past ten years. SSS investments have also posted higher income-to-revenue ratios since 2008, ranging from 23 to 29 percent.

The strength and quality of SSS investments have resulted in outstanding yield rates, with Return on Investment (ROI) reaching 10.5 percent as of yearend 2011 – outperforming other market benchmarks such as 364-day T-Bills at 2.3 percent. One of the strategies that the SSS employed was the establishment of benchmarks for our investment portfolio to maximize investment incomes. The SSS also consolidated its various business and social loans, and restructured interest rates to make them competitive with commercial loans in the market.

But the most significant part of our financial performance is the fact that, as of yearend 2011, SSS contributions have exceeded benefit payments by P3.21 billion – the highest recorded yearend surplus in the past several years. This means that contributions adequately covered for benefit payments, with a significant amount leftover for the Investment Reserve Fund.

88.0

86.0

84.0

82.0

80.0

78.0

76.0

74.0

Contribution Collections

2010 = 79.3 2011 = 86.0

84.0

83.0

82.0

81.0

80.0

79.0

78.0

77.0

76.0

75.0

74.0

Benefits Payment

2010 = 77.2 2011 = 82.8

30.0

29.5

29.0

28.5

28.0

27.5

27.0

26.5

Investment and Other Income

2010 = 27.8 2011 = 29.8

Reaffirming our Commitment to our Members

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In the meantime, we continue to strengthen our finances through programs and policies that increase membership coverage and strengthen collection efforts. Also on top of our agenda is making sure that the actively-paying members, now numbering at 10 million, increase to 11 million in order to close the gap from the reported 28 million registered members. Part of this challenge is to make more members understand the value of continuing their membership beyond the prescribed minimum qualifying limits.

Equally important is going after delinquent and irresponsible employers who refuse to heed the Social Security Law. In 2011, the SSS collected more than P361 million in overdue contributions from delinquent employers; while the number of cases filed for non-remittance of contributions reached 1,227, involving a total amount of P460.5 million, including penalties of over P217 million. Through increased legal and court actions, some 115 employers were charged for failing to produce records showing their compliance with the SS Law.

Operational Highlights

The higher collections in 2011 were mainly due to the expansion of payment channels geared to shift the manual payment of contributions to electronic means. Members can now pay their contributions through online banking via BancNet, while credit cards and phone banking payments are also being eyed, as the added convenience would encourage members to continuously pay their contributions.

To put more focus on the unique needs of each member, the SSS created the Large Accounts Management Group that would handle employers with at least 100 employees. This allowed our branches to focus on employers with less than 100 employees, the self-employed and informal sector workers. Pioneering the innovative programs to cover these groups is the “TrikanSSSya” that was launched in Las Piñas City. It is a “piggy bank” system that allows tricycle operators and drivers to save daily amounts to fulfill their monthly SSS contributions.

As means to cover more overseas Filipino workers (OFWs), we coordinated with the Department of Labor and Employment (DOLE) and the Philippine Overseas Employment Agency (POEA) for the development and implementation of a revised policy on mandatory coverage of Filipino seafarers. This endeavor will require mandatory registration with the SSS for newly-hired OFWs while re-hires would need to pay at least one-month’s contribution. We also conducted a series of OFW coverage drives in the Middle East and Europe, wherein OFW members and non-members alike were visited by top SSS officials and members of the Social Security Commission to personally address their concerns with SSS, as well as invite them to register with the pension fund. We also expanded our foreign operations by reviewing the manning levels of our international offices to keep them abreast with the growing number of Filipinos working abroad.

Realizing the significance of each benefit paid to every member, we implemented the Loans Penalty Condonation Program for Employees thru Employers from January to June 2011. The condonation program provided delinquent employers the opportunity to update payments of their employees’ loan amortizations with the SSS, so that their employees would regain eligibility to their SSS benefits. More than 9,700 employers availed of the program, with a total collection of P364 million.

Membership Services

Aside from strengthening our capacity to fund the needs of members in times of contingencies, providing access to SSS services and benefits is equally important. Thus, in 2011, the SSS implemented various programs aimed at improving its service delivery to its members, such as the expanded services of its website to include the online certification of Salary Loan applications and submission of Maternity Notifications.

We also announced the new deadline for contribution and loan payments based on the 10th digit of the 13-digit employer number and the last digit of the 10-digit social security number of household employers, self-employed workers and voluntary members. The expanded range of cut-off dates aimed to eliminate long queues during payment deadlines in the branches. In support, the SSS also extended its counter services in selected branches in Metro Manila.

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112011 ANNUAL REPORT

Emilio S. de Quiros, Jr.

Moreover, we expanded the Text SSS facility in a bid to keep the SSS closer to its members. Since its launching in 2010, about 150,000 SSS members have already registered with the innovative facility.

Aside from managing the transactions online and in the branches, we also intensified efforts to keep the members informed about the SSS through the Stakeholders’ Forum that we conducted in Cagayan de Oro, Baguio, Cebu, Naga and Davao.

The SSS also implemented the first phase of the Automated Records Management System or ARMS that is aimed at eliminating paperwork, simplifying transactions in the branches, and ensuring the integrity of member records. In September 2011, the ARMS server, scanners and applications became operational. Aside from maintaining the integrity of members’ records, we also started re-engineering business processes and utilizing appropriate information and communication technologies.

Moreover, the SSS started producing UMID compliant cards in mid-2011 in a bid to fully implement the use of UMID cards for government transactions. Our ID Center was able to produce 705,912 UMID cards that eliminated the backlog of production from 2008 to 2010.

Reorganization and ISO Certification

As an organization, the SSS needs to continually update its structure in order to keep abreast with the developments in the fields of social security and public administration. In 2011, we developed and implemented an appropriate organizational structure that is deemed more responsive to the needs of its members. For example, to ensure standard look and service, we redefined the functions and layout of the 132 branches and categorized them into small, medium and large branches to determine appropriate manning levels and resource allocation.

A Staffing and Training Plan was also developed, coupled with a review of the manning levels to ensure the competence and competitiveness of each SSS employee. We likewise implemented our own Performance Evaluation System that was benchmarked on existing systems of other public and private organizations.

In line with our vision of becoming a world-class institution, the SSS was awarded with the ISO 9001:2008 Certification after a long preparation and assessment process. The formal awarding was held during the SSS 54th Anniversary celebration on 3 September 2011, during which the official ISO Certification for the registration and coverage quality management systems in the SSS Diliman Branch was awarded by AJA Registrars to the SSS President.

Exhortation

Apart from the continuous efforts and dedication of the SSS Management and its employees, the foundation of the stability of the SSS lies on the deep involvement of the Filipino workers and employers. As they attempt to pursue their dreams for themselves and their families, they implicitly promote social justice in the country. Together, the policy of our government to develop and promote a sound and viable tax-exempt social security protection that caters to the needs of the Filipino people truly becomes a national endeavor.

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2011 in Review

JANUARY MARCHFEBRUARY APRIL

CSC CHAIR VISITS SSS. Civil Service Commission (CSC) Chairman Dr. Francisco T. Duque made a surprise visit at the SSS Diliman Branch in Quezon City on February 2, 2011 to check SSS’ compliance to the “No Noon Break Policy” and Anti Red Tape Act (ARTA). Duque was happy to note of SSS’ comfortable branch facilities and effective queuing system. Photo shows CSC Chairman Duque (right) gathering comments from SSS members regarding their satisfaction with SSS services and meeting with SSS senior officials (inset) for feedback on how to improve the delivery of SSS services.

SSS WELCOMES NEW SSC COMMISSIONER. Members of the Social Security Commission (SSC) pose with the newest member of the highest policy-making body of the SSS, former Labor Secretary Bienvenido Laguesma (4th from left) who took his oath of office on March 16, 2011 at the SSS office in Makati. Laguesma, who obtained his Bachelor of Laws from the Ateneo de Manila, served the Department of Labor for twenty-five years in various capacities.

SSS PERFORMANCE REVIEW OF LUZON OPERATIONS GROUP. Heads of the Luzon Operations Group pose with SSS President and CEO Emilio S. de Quiros, Jr. (seated, 4th from left) at their Performance Review held on January 19 at Hotel Stotsenberg, Clark Free Port Zone, Pampanga. Themed as “Quality and Productivity Towards Greater Heights,” the activity aimed to set the directions towards more efficient delivery of services to SSS members in the Luzon area.

EXPLAINING THE FUND SITUATION TO BUSINESSMEN. In a series of consultative meetings with business sector representatives, SSS President de Quiros, Jr. explained the need for SSS to adjust its contribution rates so that it can afford to increase pensions and its members can look forward to higher benefits in the future. In photo below, President de Quiros has informal discussions with officers of the Federation of Filipino-Chinese Chambers of Commerce and Industry before the start of the formal program last April 26, 2011 at the SSS Ramon Magsaysay Hall in Quezon City.

Accomplishments

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MAY JUNE JULY AUGUST

TEXT SSS CITED AT COMPUTERWORLD HONORS PROGRAM. SSS President de Quiros (left) shakes hands with Computerworld Publisher John Amato (right) during the 23rd Computerworld Honor Laureates Medal Ceremony and Gala Awards at the Andrew W. Mellon Auditorium in Washington, D.C. on June 20, 2011.

“RIZAL@150” EXHIBIT AT SSS MUSEUM. SSS President de Quiros exchanged pleasantries with Internal Revenue Commissioner Kim Jacinto-Henares as they viewed the timeline of Rizal”s life and works during the “Rizal@150” exhibit opening last June 9, 2011 at SSS Museum and Library in Quezon City.

SEEkING EMPLOYERS’ SUPPORT. President de Quiros spoke before the Employers Confederation of the Philippines (ECOP) to inform them on the state of the pension fund and to garner employers’ support for needed reform measures aimed at lengthening the fund’s actuarial life to perpetuity. The National Conference of Employers was held on May 4 and 5, 2011 at the Manila Hotel.

SIMULTANEOUS PRESS CONFERENCE. SSS President de Quiros (seated, middle) answered questions from the media during a pre-Anniversary Tele-Press Conference on August 31, 2011 at the SSS Main Office. The president briefed members of media on the status of the pension fund’s operations and finances, as well as the new programs and services in store for SSS members. The Tele-Press Conference allowed officials from SSS Davao, Cebu and Baguio to join in the discussions and answer questions from the press.

TREE PLANTING IN WESTERN VISAYAS.SSS employees planted 2,000 mahogany seedlings at Brgy. Bagong Silang, Don Salvador Benedicto municipality in Negros Occidental on July 9 as part of the agency’s drive to promote enviromental awareness. A total of 150 participants from the SSS Western Visayas Division rode across mountainous terrain and hiked 1.5 kilometers to get to the tree-planting

site 60 kilometers eas t o f Baco lod City. The act ivi ty is in line with the National Greening P r o g r a m u n d e r Executive Order No. 26, which requires every government employee to plant at least 10 seedlings per year from 2011 to 2016. Inset shows S S S A s s i s t a n t Vice President for Western Visayas Division Manoli to Tagalog, who headed the SSS delegation.

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LITTLE SAVINGS A DAY, GO A LONG WAY. The SSS Las Piñas Branch kicked off last December 7, 2011 an “out-of-the-box” solution to cover and collect from self-employed members with irregular income. Tagged as, “Barya-barya sa AlkanSSSya, Kinabukasan ay Sigurado Na”, the program involves the monthly collection by SSS of the social security contr ibut ions of t r icycle drivers, who make deposits of ten to twenty pesos daily in a giant steel box called “TrikanSSSya” that is installed in the center of the tricycle transport terminal. Once a month, SSS Account Officers, with the assistance of the Tricycle Operators and Drivers Association (TODA) officers, would open the individual boxes, count up the amounts saved and deposit these as their SSS contributions.

SSS INFO-CARAVAN TARGETS OFWS IN M.E., EUROPE. Seeking to extend its mantle of protection to more overseas Filipino workers (OFWs), the SSS launched in October 2011 the “OFW Information Caravan” a program to widen SSS coverage in the Middle East and Europe where many OFWs are based. Led by SSS President de Quiros, two teams of SSS officials and Social Security Commissioners visited 10 cities in eight countries in Europe and the Middle East to touch-base with OFWs, and to identify their problems and concerns for the purpose of improving SSS programs and services. A tangible result of the Info-Caravan was the significant increase of contribution collections from OFWs in the countries that were visited. President de Quiros reported that in the period October to December 2010, collections from OFWs based in these Middle Eastern and European countries amounted to P61.6 million. After the Info-Caravan in 2011, this jumped 23 percent to P75.8 million.

V I S I TO R S F R O M S O U T H kOREA. On November 11, 2011, the SSS played host to a group of visiting South Korean government officials, led by their Congressman. During the visit, they were met by SSS Vice President Marissu Bugante (far right) and toured around the SSS Main Office by Ms. Eugenia Dela Cruz, Head of the Member Relations Department (third from left).

SEPTEMBER NOVEMBEROCTOBER DECEMBER

T E A M E F F O R T T O W A R D S I S O C E R T I F I C AT I O N .President de Quiros (front row, 5th from left) pose with SSS officials and Dil iman branch officers to recognize their efforts in achieving the first-ever certification from the International O r g a n i z a t i o n f o r Standardization during a ceremony at the Ramon Magsaysay Hall of the SSS corporate headquarters in Quezon City on September 14. The prestigious ISO 9001:2008 certificate, which was presented to SSS during its 54th anniversary celebration on September 1, states that work processes on registration and coverage of the SSS Diliman branch in Quezon City meet international business standards. Photo shows SSS Diliman branch head Elizabeth Reyes (front row, 4th from right) with SSS’ ISO certificate while the corresponding ISO scope of registration is held by Quality Management Department Head Eleonora Cinco (front row, 3rd from left) and Vice President for Management Services and Planning Division May Ciriaco (front row, 4th from left).

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Since 1957 until today, the Social Security System (SSS) has been keeping its promise to deliver the benefits to qualified members and beneficiaries when these fall due. To stay on course with this promise, financial prudence is carefully observed and the actuarial soundness of the Social Security Fund is continuously monitored. Various measures are also proposed and implemented to maintain or improve the fund’s viability.

In the 2007 Actuarial Valuation, the fund is projected to last until 20391. This represents a lengthening of the fund life by eight years, from 2031 as projected in the 2003 Valuation. This fund life extension is brought about by reforms that are being implemented up to the present. Despite these improvements, the SSS, like most defined-benefit social security schemes, is faced with the reality of a less-than-ideal actuarial fund life, and a considerable level of unfunded liabilities2. From the 2007 Valuation results, the unfunded liability was valued at P749 Billion; this has even increased to P1.08 Trillion as per latest computation in 2011. If the projections are realized and no significant reforms are implemented, leading to the SS Fund eventually being fully exhausted, the government, due to its guarantee on the solvency of the SSS, would have to shoulder the cost of the benefits and pensions in the years thereafter.

The Issues behind a Shortening Fund Life and Unfunded Liabilities

Benefit Program Design. One such issue arises from the benefit program design, specifically in the mismatch of the benefit accrual rate and the contribution rate. From the time when SSS was started in the 1950’s where the contribution rate

was at 6.0% and the benefit accrual rate at 0.5%, adjustments through the years brought these to the present rates of 10.4% and 2.0%, respectively. Hence, the benefit accrual rate quadrupled from its initial value at the instatement of the SSS program, compared to only a nearly doubled value for the contribution rate.

Compliance of Members. Another issue is the compliance of members in the payment of contributions, which may possibly be affected

by the nature of their employment or financial state of their business, their lack of awareness on the benefit program, and the passive collection of their contributions.

Demographic Change. Aside from the first two issues, which could be addressed through program changes, another issue that is of equal importance and has present-day relevance is the global phenomenon of population ageing. Affected countries have a faster growth in the number of people at old age relative to the growth of the younger population. Although the Philippines has relatively high fertility and population growth rates, these are already declining, following the global trend. Along with the increasing life expectancy, these demographic trends would cause population ageing to likewise occur in the country.

Population ageing has a profound effect on pension schemes, as demonstrated by declining support ratios. The support ratio of SSS, i.e., the number of working members supporting each pensioner, is expected to be halved from 6.39 in 2007 to 3.28 by 2039, based on the latest valuation. In other words, there may not be enough contributors remitting to pay all the benefits and expenses in the long run, which the valuation estimates to begin by around 2020. Once contributions become insufficient to cover expenditures, investment income will be used to fill this gap. Once revenues are insufficient to cover expenditures, the Reserve Funds3 itself will have to be used to fill the deficiency. When Reserve Funds run out, the government must provide for any benefits and other expenditures that will not be covered by current contributions, as stipulated in R.A. 8282.

Upholding SSS Financial Viability Amidst DecliningPopulation Growth Rates, Increasing Life Expectancies,and Other Issues

Actuarial Report

1By year 2039, only around 40% of yearly member benefits and operating expenses will be funded by yearly contributions.2The term “unfunded liability” refers to the deficit when the present value of future benefits and operating expenses exceed the current assets and present value of future contributions.3The Reserve Fund is built up when Revenues (contributions plus investment income) exceed Expenses (benefits and operating expenses).

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Addressing Issues to Strengthen the Social Security Fund

The recent positive outlook on the country’s economy is expected to ease the impact of issues concerning the Fund and unfunded liabilities. With the relatively high fertility and population growth rates, the working-age population, with an age range of 15 to 59, is expected to increase. This translates to more workers joining the labor force4. This would then lead to more workers contributing to SSS to support the benefits of pensioners. This is a characteristic of defined-benefit schemes such as that of SSS, where the benefits of current pensioners are partly subsidized by the contributions of the current contributing members, who will, in turn, become the next generation of pensioners. As such cycle continues on in a defined-benefit scheme, it is important that a continuous stream of new workers contribute to the scheme, thereby curtailing future funding deficiencies or unfunded liabilities.

Meanwhile, recommendations and reform policies have constantly been formulated by the SSS to address the above issues, particularly population ageing. One of the recommendations of the 2007 Valuation and the studies made based on its result is to raise the retirement age. This is also one of the policy reforms that social security schemes in other countries have been implementing, in response to this demographic change. Such social security schemes include that of South Korea (increase of retirement age from 60 to 65 by 2033), Singapore (from age 62 to 65 by 2012 and eventually to 67), and the United States of America (from age 66 to 67 by 2027).

Under the current SSS program, the minimum retirement age is 60 (average retirement age is at 62). Based on the latest valuation, if retirement is delayed to until age 70, the unfunded liability would come down to only P64-B and would allow the Fund to last beyond 2070 (or an addition of at least 31 years into the fund life). Since members are also able to work for longer years (ideally for 40 to 45 years), the number of required contributing years to be entitled to retirement pension may initially be raised to 15 years from the current 10 years.

This will complement the earlier reform in 2002 of redefining the “credited years of service” (CYS), which rationalized the level of pensions to the actual number of months of contributions, and also addressed the compliance of members in the payment of contributions.

The continued efforts of SSS to improve its coverage of the working population also address the declining support ratio. Foremost candidate for wider coverage is the OFW sector. The billions in annual remittances of OFWs may be tapped by making their membership in SSS mandatory. This will benefit OFWs who are usually not covered by social security schemes of their host countries, or are often left without savings upon returning home from years of work abroad, or whose jobs and benefits from host countries become precarious due to economic instabilities such as the recent financial crises and political turmoil overseas.

Other policy reforms that were implemented, which aimed at improving the SSS benefit program design, include the upgrade of the contribution rate from 9.4% to 10.4% in 2007, with the 1% increase being borne solely by the employer. As this further strengthened the financial position of the Fund, the benefits of members were similarly upgraded, with a 10% across-the-board pension increase. Plans to further increase the pensions by 10% along with raising the contribution rate to 11% have been postponed to give policy makers enough time to assess the effects and hardships that may be caused by the recent financial crises to all stakeholders including the SSS. As the economy has been improving in the recent years, the strategy of addressing both financial viability and benefit adequacy may again be pursued. In addition, the covered salary ceiling may also be adjusted to P20,000 from the current P15,000 to protect a greater part of the members’ income and allow them to save more during good economic times. The salary ceiling was last raised in 2002, from P12,000 to P15,000.

The implementation of these proposed reforms – the increase of the contribution rate to 11%, the increase of the salary ceiling to P20,000, and the 10% across-the-board pension increase – is expected to extend the fund life to 2047 and reduce the unfunded liability to P857-B, while providing higher benefits to pensioners and beneficiaries.

Upholding Financial Viability and Benefit Adequacy

All these reforms which brought benefit upgrades while still extending the fund life originated from recommendations arising from the actuarial valuations and other studies conducted on the fund. Working as a single unit – from recommendations, to policy, to implementation – the SSS vows to come up with further reform packages and other measures that simultaneously address the interest of its stakeholders: benefit adequacy for current pensioners, and financial sustainability for future pensioners, who are now active contributors of the SSS.

4Floyd Whaley, “A Youthful Populace Helps Make the Philippines an Economic Bright Spot in Asia.” New York Times, 27 August 2012.

45.4 %

50.2 %

4.4 %

Age 0-14 Age 15-59 Age 60 & up

33.1 %

60.1 %

6.8 %

23.5 %

62.6 %

13.8 %

Distribution of PhilippinePopulation by Age Group

1965 2010 2040

Source: NSO

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Taking Care Of Our Modern-Day Heroes: OFWs

With news of global conflicts, tragedies, and misfortunes befalling overseas Filipino workers (OFWs), the need for adequate social security protection for them and their families becomes all the more important. This is why the SSS is boosting its efforts to extend membership coverage to even more OFWs. As of December 2011, the SSS has over 738,000 OFW-members who benefit from financial security in times of sickness, maternity, disability, retirement and death.

To ensure that OFWs and Filipino citizens around the globe have access to SSS and its services, bilateral social security agreements (SSA) with host countries are continuously explored and signed. In 2011, the Philippine panel, with SSS as lead agency, finalized negotiations of the SSAs with Denmark and Portugal for the mutual benefit of their respective citizens, their dependents and beneficiaries.

The SSS also helps OFWs plan their financial future through the SSS Flexi-Fund Program. Launched in August 2001 as a supplementary voluntary provident fund and adopted in July 2002 as the National Provident Fund for OFWs, the Flexi-Fund doubles up as savings program that yields high returns. To build up their Flexi-Fund during active overseas employment, OFW-members must contribute to the regular SSS program at the maximum salary credit, with any excess amount not less than P200 credited to their Flexi-Fund account. All amounts accumulated in the Fund, including interest, accrue solely to the Flexi-Fund member. The program provides tax-free, guaranteed returns. As of December 2011, the Flexi-Fund stands at P308 million, representing the accumulated contributions of its over 36,000 members.

Reaching Out

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Inasmuch as coverage of OFWs remains on a voluntary basis under the SS Law, the SSS continues to reach out to Filipino migrant workers, convincing them of the benefits of active SSS membership even when they are overseas, as well as meeting their needs for future benefits. This is the primary reason why the SSS launched in October 2011 the “OFW Information Caravan” – a program to widen SSS coverage in the Middle East and Europe where many OFWs are based.

Led by SSS President and CEO Emilio de Quiros, Jr. and Social Security Commissioner Diana Pardo-Aguilar, two management teams visited ten cities in eight countries in Europe and the Middle East to touch-base with OFWs, and to identify their problems and concerns for the purpose of improving SSS programs and services. The teams conducted SSS Kapihan events attended by OFW leaders to generate greater awareness about the importance of SSS coverage; provided on-site SSS services such as member registration, online verifcation of contributions and claims status; data capture for those applying for the Unifed Multi-Purpose Identifcation (UMID) card; and inspected operations and facilities of SSS representative offices and of its various collection partners abroad. In the course of the two-week Info-Caravan, more than 4,500 OFWs transacted with the SSS teams and attended its events.

In the Middle East, the Caravan covered Abu Dhabi and Dubai in the United Arab Emirates; Kuwait; Doha in Qatar; Riyadh in Saudi Arabia; and in Europe, London; Rome and Milan in Italy; and Paris, France. The group also stopped at Brussels to conduct an orientation with OFWs on the Philippine-Belgian SSA.

Discussions with OFWs during the Caravan raised the issue of the adequacy of the manning levels of SSS foreign offices, and the need, if ever, to establish more offices in other countries. As a result, the SSS management decided to include in its 2012 plans and programs the opening of at least two new SSS representative offices and the fielding of additional personnel to select posts. Plans for the enhancement of the Flexi-Fund Program and the launching of a “Member-Get-Member” promotion in 2012 were also discussed, which aimed to tap existing OFW-members in encouraging their fellow Filipinos abroad to become or resume being active SSS members.

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A Fresh Start for both Employers and Employees

Loan Penalty Condonation Program

The SSS Salary Loan Program, started in 1994, serves primarily to provide members financial assistance in times of need under concessional terms. For the SSS, the Salary Loan Program is a form of investment, albeit the returns are minimal due to the low interest rate provided.

Precisely because it was a soft credit line, the Salary Loan became very popular among members, as indicated by the growing number of borrowers each year. However, because of poor credit payments, the loan program’s popularity turned into a liability for the SSS.

Decreasing the Debt Burden

From September 2003 to December 2009, the SSS offered several rounds of loan penalty condonation programs to individual members as a way to decrease the System’s loan exposure and for members to regain their full eligibility to SSS benefits. These programs were met with modest rates of success.

However, the defaults are not caused by individual members alone. There are also employers who have either collected the loan payments of their employees but failed to remit these to SSS, or did not comply at all with this responsibility due to ignorance or deliberate neglect. To remedy this situation, the SSS implemented in 2011 the Member Loan Penalty Condonation Program for Employers, with the following objectives:1. To help increase loans collection and investment income;

2. To reduce loan delinquency and improve the quality of loan portfolio;3. To reconcile records of employers vis-à-vis the records of SSS; and4. To serve as an incentive for employers to settle their obligation and put the company and the member- employees’ accounts in order.

Records as of 12 December 2011 show that 13,776 employers, covering 144,945 employees, availed themselves of the Program. They paid the amount of P1.088 billion representing principal, interest and penalties collectible, while penalties condoned amounted to P716.69 million.

Employers Take Advantage of a Clean Slate

Three employers based in Mindanao have significant stories to tell regarding the benefits their companies and employees were able to enjoy as a result of their participation under the Loan Penalty Condonation Program.

Southern Mindanao College (SMC) is a private, non-sectarian educational institution located at Pagadian City in Zamboanga del Sur. Established in 1940, SMC is currently headed by Dr. Romeo C. Hofileña, M.D. as President. SMC focuses mainly on Engineering and Business courses, with programs ranging from vocational-technical, to undergraduate to Ph.D. programs. It has a workforce of about 292 employees.

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In June 2011, SMC applied for condonation of the accummulated l o a n p e n a l t i e s f o r s e v e n o f its employees. According to Ms. Bernardita F. Olitres, SMC’s bookkeeper, the school management decided to fully settle the total a m o u n t o f P 8 4 , 0 4 0 . 8 2 , a delinquency which had long plagued SMC and its employees who were not allowed to apply for salary loans. For SMC, the Condonation Program was an opportunity to regain a clean slate with SSS and be “untagged” as a delinquent employer.

In Va lenc ia C i t y, Ma layba lay Polymedic General Hospital applied to the SSS Condonation Program. A secondary hospital with a 100-bed capacity, it employs a total of 63 personnel, doctors, and nurses. The hospital is owned and managed by Dr. Melquisedes L. Po.

When Hospital Administrator Charity Marie Locsin learned of the Condonation Program, she immediately asked for application forms and list of requirements.

According to Ms. Locsin, the program is beneficial for employers, as they are able to reduce liabilities resulting from unsettled loan obligations of their employees.

“The company’s SSS records were cleaned and updated, while the employees were able to submit immediately their application for a renewal of their salary loans. In this way, the company was able to help employees in meeting their short-term financial needs,” Ms. Locsin said.

Ciudad Medical Zamboanga (CMZ) is the biggest tertiary private hospital in Zamboanga City, and is owned and operated by Zamboanga Polymedic Hospital. Since October 2003, CMZ has significantly grown, from 31 to 160 beds, and from 45 employees to 486.

CMZ management – headed by President Dr. Joven M. Monsanto and chaired by Edwin G. To – decided to avail itself of the SSS Loan Penalty Condonation Program

in June 2011 and approved a budget for this availment. CMZ paid in full the amount of P213,080.41 for its 27 employees who had delinquent loans. The effect upon full settlement was the restoration of the short-term loan privileges of its employees.

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Ensuring Compliance Thru Legal Efforts

Legal

The year 2011 was characterized by intensive and fruitful legal actions to enforce compliance with the Social Security Law (SS Law). The SSS through its legal arm – primarily, the Office of the Chief Legal Counsel, with the Corporate Legal, Operations Legal and Fraud Investigation departments under it – continues to ensure that the rights, interests and assets of the System are protected by law, and that its members are secured against the hazards of disability, sickness, maternity, old-age, death and other contingencies.

Over the years, efforts to improve collections have been intensified to penalize those who violate the SS Law. Through the combined actions of all units under the Office of the Chief Legal Counsel, the SSS collected more than P361 million in overdue contributions from delinquent employers in 2011, adding up to the P979 million it collected in 2010.

The coordination between the account officers in SSS branches and lawyers in the Cluster Legal Units (CLU) also resulted in penalizing more erring employers. In 2011, the number of cases filed for non-remittance of contributions swelled to 1,227 from only 740 in 2010, involving a total amount of P460.52 million, including penalties of over P217 million. Through increased legal and court actions, some 115 employers were charged for failing to produce records showing their compliance with the SS Law, with the consequent conviction of three employers for non-compliance with the SS Law between 2010 and 2011.

Investigations of fraud cases were also sustained, with particular focus on fraud containment and deterrence. In 2010, a total of 443 fact-finding investigations of

fraudulent cases were conducted, with 59 of those cases subsequently referred to the Corporate Legal Department (CLD) for case build-up and prosecution. In 2011, a total of 362 fact-finding investigations were settled by the Fraud Investigation Department (FID), 51 of which were referred to the CLD for legal action. Of these 51 cases, 29 were filed to recover fraudulent claims amounting to P6.19 million, in addition to the 37 cases pending preliminary investigation at the Prosecutor’s Office.

Legal actions were further enhanced when in February 2011, the Manual of Procedures for the CLUs was issued, thereby documenting and establishing the legal aspect of SSS operations to make them more efficient. In March, the Office of the Chief Legal Counsel and the Operations Legal conducted a two-day planning session in Clark, Pampanga to come up with new strategies to speed up the prosecution and resolution of collection cases.

These legal developments were spearheaded by SVP Amador M. Monteiro who retired on November 27, 2011 after serving the SSS for more than 35 years, 13 of which as its Chief Legal Counsel.

The soundness and viability of SSS funds, as well as the entitlement to and amount of benefits and privileges due its members, are adversely affected by the non-compliance of employer-members, especially by the non-remittance of their contributions. With this in mind, the Office of the Chief Legal Counsel remains vigilant in safeguarding the rights of the working class, boosting compliance mechanisms, and strengthening the reach of the SS Law.

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Automated Records Management System (ARMS)

Information Technology

The Automated Records Management System (ARMS) Project, conceptualized during the late 1990s, aims to consolidate and leverage on the gains of two previous imaging projects; namely, the Pensions Document Management System using Imaging Technology (known as DMS-IT and implemented in 1990) and the Salary Loans Data Management System (or SLDMS and set up in 1993).

Prior to the DMS-IT and SLDMS, processing of SSS applications was done manually and tediously. However, the imaging and workflow capabilities of these two projects showed the viability of implementing a consolidated solution on a much wider scale and across various application systems.

Thus, after several years of looking for a partner that can provide the appropriate solution to SSS requirements, the ARMS Project was finally awarded by the SSS to a joint

venture company with known expertise on information technology management on January 14, 2011.

Under the ARMS, hundreds of thousands of members’ documents were scanned and digitized, with the aim of preserving and retrieving records at the least possible time, effort and cost. In the long run, the ARMS will eliminate the paperwork burden of SSS and its members, thus simplifying and speeding up transactions processing and decision making, as well as improving the security and integrity of SSS records.

The scope of the ARMS Project includes the design and installation of a Records Management System (RMS), a workflow for archival and web-based retrieval of all document images, a Computer Output to Electronic Media (COEM), and an enhanced Death-Disability-Retirement (DDR) claims workflow.

ARMS Branch/Department Scanning

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Automated Records Management System (ARMS)

Death, Disabi l i ty and Ret irement (DDR) Workflow System

The SSS Death, Disability and Retirement (DDR) Workflow System was the very first major application that made use of the ARMS infrastructure, and served as part of the Project’s main deliverables. Development of this system required a comprehensive integration between the SSS-developed legacy DDR application systems and the new ARMS Workflow.

The most radical feature of the DDR Workflow system is the screening and document compliance module. This SSS-developed application incorporates a matrix of conditions with the corresponding documentary requirements, and provides an online “guide” at the branch counter levels for consistent implementation and interpretation of the DDR application screening and receiving process. The module directly interfaces with the ARMS workflow’s scanning, indexing and routing capabilities to automatically forward valid (or invalid) death, disability and retirement applications to the pre-identified claims processors or senior analysts, wherever they may be stationed.

Other features of the module is the capability to automatically route to the Records and Information Management Department (RIMD) a request for retrieval of membership records of the applicants (Forms E1 or E4). The screening and document compliance module can also generate a pro-forma letter that provides feedback to applicants on the list of documents received or not yet received by the SSS.

With the transmission of digital images to and from the source branch to the inbox of the claims processors,

evaluation of claims is now done via appreciation of images vis-a-vis SSS online data. The physical transport of paper files between the receiving branches and processing centers is eliminated, resulting in monetary savings, and faster transmission of documents. Requests for other supporting documents to other SSS units are also now incorporated in the DDR Workflow.

The final innovations to the SSS-developed DDR application interfacing with the ARMS workflow system are the digital prooflist and a three-level online review by branch officials, depending on the amount of the claim.

These features are expected to cut down in half the processing time of all DDR transactions. This translates to a 10-day turn-around time, from the filing and completion of DDR application by the member at the branches, until the confirmation of payment.

ARMS Output

As of December 31, 2011, ARMS digitized a total of 557,695 pages of paper documents and 391 microfilm rolls, equivalent to about 958,716 images. Below is the distribution of the digital images scanned by SSS Branches and Departments from September to December 2011.

377,130

Branch Scans

RIMD Scans

Others

145,92034,645

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One of the most important mandates of SSS is to provide fast, accessible and accurate service and information to its members wherever they may be. There are five main information and communication channels through which members can reach the SSS, namely: the SSS Website, Call Center, Text-SSS, E-Mail, and the SSS Facebook Page.

The My.SSS portal in the SSS Website, for example, provides members exclusive access to their contributions and membership records and allows them to perform transactions online and set appointments with their nearest SSS branch. To access My.SSS, individual or employer members must register in the SSS website to get their unique user ID and password.

Since its debut in 2004, the SSS website has continued to expand its capabilities. Today, transactions and collection reports – such as salary loan applications, maternity notifications, employment report (SS Form R1-A), contributions collection list (SS Form R-3), and loans collection list (SS Form ML-2) – can be submitted online. As of December 31, 2011, almost 1.4 million members and around 20,300 employers have registered in the SSS Web. About 1.2 million, or 86% of them, are employed individuals. The SSS continuously monitors feedback from member/employer web users and implements system changes to ensure better service delivery.

“With SSS, my benefits are just a click away!” Mr. Eddie “Jojo” Nabor, Senior Assistant Manager for Human Resources of China Bank, shares how SSS’ e-Services made his work easier and faster. For Jojo, getting that job done the easiest and fastest way possible is an important and tough mandate. Aside from processing the monthly compensation of China Bank’s total workforce of 4,946 from close to 300 branches nationwide (including the branches of the Bank’s thrift subsidiary, China Bank Savings), he also has to facilitate

and monitor the benefits due the employees, particularly during times of emergencies and unexpected situations. He recalled the times when he actually worked at the SSS office to encode all the reports that they have to submit to SSS.

“There were times that I would spend the day at the SSS office encoding the required reports. They allowed me to use their computer there, and almost everything was still done manually,” he added. “That’s why I am very grateful that there are efforts now to automate some, if not all, the transactions with the SSS. It has made my team’s workload so much easier.” He welcomed the idea of shifting to electronic SSS services mainly because of the convenience it can bring to the company and to his own HR staff. Being affiliated with BancNet, the country’s largest ATM network, China Bank can upload and submit documents to SSS late at night and even on weekends, and expect results in just a few days time. Posting of contributions and salary loan repayments only takes a few days to reflect those payments in the member’s individual records. Accuracy is also assured as there is no need for manual re-encoding of submitted data. These advantages of the e-service, he says, allow their employees to avail of their SSS benefits whenever they need it. “The SSS website is user-friendly, even first-timers can easily follow the procedures and understand what it’s all about,” he stated. “I believe this is a very useful tool for employers like us. I have also encouraged my wife, who works for a private school, to use the SSS website for simple transactions, because everything’s there already,” Jojo added. “With SSS, my benefits are just a click away!”

e-Service means Speed, Accuracy, Convenience

Information Technology

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e-Service means Speed, Accuracy, Convenience

In 2011, a total of 19 typhoons ravaged various parts of the Philippines, with the most destructive ones occurring in the latter part of the year: ‘Pedring’ (in September), ‘Quiel’ (also in September) and ‘Sendong’ (in December). In response to the destruction wrought by these three typhoons on lives and properties, the Social Security System (SSS) in 2011 offered various ‘relief’ programs to help its members cope with their losses.

For the victims of ‘Pedring’ and ‘Quiel’ – who were mainly residents of Isabela, Cagayan, Olongapo, Tarlac, Bulacan, Cavite and parts of Metro Manila – a six-month moratorium on monthly payments for salary and housing loans from December 2011 to May 2012 was implemented. Moreover, the fixed interest rate under the SSS Direct Loans for House Repairs and Improvement was lowered from 13 to eight percent, for new loans aimed at repairing houses damaged by ‘Pedring’ and ’Quiel’.

Then in December 2011, typhoon ‘Sendong’ ravaged northern Mindanao, particularly Iligan and Cagayan de

Oro, with torrential rain and flashfloods that resulted in a death toll of over 685 and hundreds more missings.

Again, the SSS provided a calamity relief package for its members and pensioners in Cagayan de Oro and Iligan. Those with existing SSS loans – whether salary, housing or business loans – were given the option to apply for a six-month suspension of their loan payments, without penalties, and with an extension of their amortization term by six months. They could also alternatively avail themselves of an early renewal of their salary loans, with the balance of the existing loan to be deducted from the proceeds of their new loan. Direct Loans for House Repairs and Improvement were again offered at a lowered interest rate of eight percent.

For pensioners in Cagayan de Oro and Iligan, the SSS automatically advanced their pensions for February to April 2012, the total amounts of which were credited to the pensioners’ bank accounts in January 2012.

Corporate Social Responsibility

A Member’s Harrowing Experience

Mrs. Florence A. Gamao of Quinasanghan, Iponan in Cagayan de Oro (CDO) remembers the events of December 2011 vividly. Typhoon Sendong had been pouring torrential rain over CDO the entire day of December 16. Florence had called her elderly parents to join her and her two small children at their house so they could be together whatever happened. Unfortunately, her husband, Florencio C. Gamao III, was still in Manila due to his job at the Presidential Security Group at Malacañan Palace. The family had to fend for themselves as thunderous rains lashed outside. Florence was aware that the house’s small attic – a mere eight feet above the ground floor – may not be high enough if the overflowing Cagayan River reached mammoth heights.

By the early morning of December 17, the flood was waist-high in front of their house. Florence, her two boys and her parents scrambled to grab whatever they could up the attic. In less than three hours, the waters were already neck-deep and rising higher. They had no choice but to climb out of the attic window and scamper up the roof.

“Nakakatakot yung tubig! Parang malaking ahas na kakain ng tao,” Florence recalled. “Nakakatakot lalo yung malalaking troso sa rumaragasang tubig kasi pwedeng magiba ang bahay namin kapag natamaan ng troso!”

Rebuilding from the Ruins of “Sendong”

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The waters were still waist-deep by that afternoon, but the adults decided to come down from the roof to save whatever belongings they could find. Their refrigerator was lodged by their fence and luckily, Florence was able to find in it some clean drinking water and a few biscuits to sustain them. Her bag, containing her wallet and ATM cards, was found near their fence.

It was a heartbreaking time, especially with Christmas just around the corner. Fortunately, her ATM card was still working and the company Christmas bonus was already credited to her account so she was able to buy fast food takeout and new clothes for the kids. Over the Christmas break, they slowly cleaned up their house and tried to get their lives back in order.

Relief from the SSS

Florence’s officemates at the Liceo de Cagayan University learned of what happened to her and her family. They suggested that she apply for an SSS salary loan to help with the expenses. However, she still had an existing salary loan on which she had just paid only a few months amortization.

They told her of the Sendong Relief Package that the SSS was offering, particularly the Salary Loan Early Renewal Program (SLERP). She availed herself of the SLERP and in the process repaid her existing P21,000 salary loan while taking out a new one. Her final check amount was about P5,700.

“OK lang sa akin kahit maliit lang ang nakuha ko na salary loan,” Florence said. “Nabayaran naman yung dati kong loan at kahit papaano may natira pa sa bagong loan para pampaayos ng bahay. Kahit papaano, nakatulong din iyung nakuha ko. Nagpapasalamat pa rin ako sa SSS.”

Her pensioner parents also benefited from the SSS, as they received three months advanced pensions, automatically credited to their bank accounts. This helped them with their medical needs.

She also learned about the lowered interest rate for Housing Loans for Repair and Improvement. She plans to apply for that in the future, so that they can totally fix their house. In the meantime, Florence and her family are slowly rebuilding what they can. She remains grateful to SSS.

“Nagpapasalamat kami sa SSS at naiintindihan nila ang pangangailangan naming mga biktima ni ‘Sendong’. Napakalaking tulong talaga sa amin ang SSS,” Florence noted with a smile.

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Paving the Way Towards World-Class Excellence

ISO 9001:2008

In 2007, the SSS was identified as one of the priority government agencies for installation of an ISO 9001:2008 certifiable Quality Management System (QMS), primarily due to the nature of its operations that focuses on frontline services, such as government-to-business and government-to-customer transactions. The coverage and registration processes of SSS were identified as the initial scope for the Certification Project as these were among the critical processes in terms of government and business efficiency. The SSS Diliman Branch was also chosen as the initial site for QMS installation, as approved by the Social Security Commission in June 2008.

Following an intensive assessment process and extensive development of its quality management system, the SSS was pronounced “ISO-Certified” by Anglo-Japanese American (AJA) Registrars, Inc. in July 2011.

The official Certification for the Registration and Coverage QMS of the Diliman Branch was awarded by AJA Registrars to SSS President and CEO Emilio S. de Quiros, Jr. during the SSS 54th Anniversary in September 2011.

No less than President Benigno S. Aquino III later conferred recognition to SSS for having been ISO 9001:2008 certified. The ceremony was held in Malacañang in January 2012, with the SSS President and CEO accepting the trophy.

The conferment of the ISO certification is not the end of the Quality journey. The implementation of the QMS continues to be reviewed by SSS management at every process level and at planned intervals as required by ISO standards. The review allows for assessing opportunities for improvement as well as changes to the QMS itself, if warranted.

The ISO 9001:2008 Certification earned for Diliman Branch’s registration and coverage work processes is a testimony of how collaborative efforts, passion and dedication were put to work. But this is just the first step. Forthcoming is the expansion of the scope of the Registration and Coverage QMS to selected branches that account for a large share of SSS transactions

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Financial Statements

Statement of Management’s Responsibility for

SOCIAL SECURITY SYSTEM

The Management of the Social Security System is responsible for all information and representations contained in the consolidated financial statements as of December 31, 2011 and 2010. The financial statements have been prepared in conformity with the accounting principles generally accepted in the Philippines, and reflect amounts that are based on the best estimates and informed judgement of Management with an appropriate consideration to materiality.

In this regard, management maintains a system of accounting and reporting which provides for the necessary internal controls to ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition, and liabilities are recognized.

The Social Security Commission reviews the consolidated financial statements before such statements are approved and submitted to the President of the Philippines and to the Congress of the Philippines.

JUAN B. SANTOS EMILIO S. DE QUIROS, JR. ELVIRA G. ALCANTARA-RESAREChairman, SS Commission President and CEO Assistant Vice President Financial & Budget Division

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Statement of Management’s Responsibility for

The Financial Statements

State Auditor’s Report on

The Social Security CommissionSocial Security System East Avenue, Diliman, Quezon City

We have audited the accompanying financial statements of Social Security System, which comprise the statement of financial position as at December 31, 2011, and the statement of comprehensive income, statement of changes in reserves and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Reponsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Bases for Qualified Opinion

As reported in Observation Nos. 1, 4, and 6 to 8 of the audit report, the accuracy of the Receivable - Member Loans, Receivable - Housing Loans, Cash in Bank (CIB), and Receivable - Collecting Banks/Agents (CB/CA) accounts with balances of P43.230 billion, P3.864 billion, P1.363 billion, and P2.853 billion, respectively, cannot be ascertained due to, among others:

• UnpostedcollectionsofP3.468billion;overpostingofP1.540billion;doublerecordingofpostedcollectionsofP1.039billion;andthevariancebetweenthegeneralandsubsidiarybalancesamountingtoP1.027billion;

• UnpostedRealEstateLoan(REL)repaymentstotalingP920.691million;unadjustedrestructuredloanaccountsofP480.033millionidentifiedin2009;andtheabsenceofschedulestosupporttheyear-endbalance;

• Unaccountedmigrationvariance,reconcilingitemscoveringprioryearsthevalidityofwhichnotyetestablished;dishonoredcheckcollections;andchargesamountingtoanetofP266.636million;aswellasthecontributionsandloanamortizationsofOverseasFilipinoWorkers(OFW)totalingP294.320millionremainunmatchedwithPaymentReturnForms(PRFs);and

• NegativebalancetotalingP106.232milliononreceivablesfromsevenCB/CAduetorejectedcollectiondatafiles.

Opinion

In our opinion, except for the effects of the matter described in the Bases for Qualified Opinion paragraph, the financial statements present fairly, in all material respects, the financial position of the Social Security System as at December 31, 2011, and its financial performance and its cash flows for the year then ended in accordance with Philippine Financial Reporting Standards.

COMMISSION ON AUDIT

DELIA D. AGATEPState Auditor VSupervising Auditor

29 June 2012

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Financial Position

Statement of

(All amounts in Philippine peso unless otherwise stated)

Note 2011 2010

ASSETS Current Assets Cash and cash equivalents 3 15,261,264,976 7,378,656,013 Held-to-maturity investments 4 1,111,085,699 7,397,607,090 Held-for-trading financial assets 5 3,955,564,933 3,330,769,671 Receivables 6 6,423,095,798 6,999,366,607 Other current assets 7 128,802,211 88,945,464 26,879,813,617 25,195,344,845 Non-Current Assets Financial assets 8 273,388,894,994 250,408,102,813 Investment property 9 12,350,543,727 12,129,126,734 Property and equipment-net 10 3,218,487,660 3,318,749,960 Intangible assets-net 11 221,846,364 208,582,776 Non-current assets held for sale 12 5,705,054,683 5,771,908,785 Other non-current assets 13 615,259,021 559,524,623 295,500,086,449 272,395,995,691 TOTAL ASSETS 322,379,900,066 297,591,340,536 LIABILITIES Current Liabilities Accounts payable and accrued expenses 14 2,791,539,369 3,238,381,868 Funds held in trust 15 670,290,124 778,135,832 Deferred income 16 53,412,065 83,210,203 Other current liabilities 17 2,268,055,558 3,002,051,161 5,783,297,116 7,101,779,064 Non Current Liabilities Accrued retirement benefits 18 1,506,595,044 1,384,768,341 Rent payable 19 8,583,540 9,759,875 Non-current deferred income 20 408,592,192 - 1,923,770,776 1,394,528,216 TOTAL LIABILITIES 7,707,067,892 8,496,307,280 RESERVES 21 314,672,832,174 289,095,033,256 TOTAL LIABILITIES AND RESERVES 322,379,900,066 297,591,340,536

The notes on pages 34 to 44 form part of these financial statements.

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Comprehensive Income

Statement of



Note 2011 2010 REVENUES Members’ contribution 85,971,475,153 79,272,860,300 Investment and other income 22 29,865,376,731 27,847,894,686 115,836,851,884 107,120,754,986 EXPENDITURES Benefit Payments 23 Retirement 41,563,400,606 38,226,764,028 Death 29,433,297,692 27,648,690,657 Maternity 3,803,005,955 3,634,831,332 Disability 3,466,980,064 3,362,393,087 Funeral grant 2,590,896,997 2,488,203,147 Sickness 1,867,931,187 1,777,593,577 Medical services 34,206,447 35,565,635 Rehabilitation services 129,232 115,985 82,759,848,180 77,174,157,448 Operating Expenses Personal services 24 5,430,462,232 5,271,665,639 Maintenance and other operating expenses 25 2,091,840,221 1,842,745,190 7,522,302,453 7,114,410,829

90,282,150,633 84,288,568,277 NET REVENUES 25,554,701,251 22,832,186,709

OTHER COMPREHENSIVE INCOME/(LOSS) Available-for-sale financial assets Reclassification adjustments (3,715,763,322) (6,497,262,229) Gain on fair value adjustment 3,846,223,202 7,555,937,265 130,459,880 1,058,675,036 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 25,685,161,131 23,890,861,745

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Changes in Reserves

Statement of

Investments Property

revaluation valuation Contingent Donated

Note Reserve fund reserve reserve surplus property Total reserves

Balance , 1 January 2011 260,164,974,705 27,406,102,250 1,505,523,674 7,040,647 11,391,980 289,095,033,256

Corporate operating budget of Employees’

Compensation Commission and

Occupational Safety and Health Center (107,362,213) - - - - (107,362,213)

Total comprehensive income for the year 25,554,701,251 130,459,880 - - - 25,685,161,131

BALANCE , 31 DECEMBER 2011 21 285,612,313,743 27,536,562,130 1,505,523,674 7,040,647 11,391,980 314,672,832,174

BALANCE, 31 DECEMBER 2010 21 260,164,974,705 27,406,102,250 1,505,523,674 7,040,647 11,391,980 289,095,033,256


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Cash Flows

Statement of

Note 2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES Members’ contribution 85,971,475,153 79,272,860,300 Investment and other income 22 21,100,837,695 16,099,119,714 Payments to members and beneficiaries (82,764,320,618) (77,278,979,616)Payments for operations (6,923,813,251) (7,154,956,505) Operating income before changes in operating assets and liabilities 17,384,178,979 10,938,043,893 (Increase)/decrease in operating assets Held-for-trading financial assets (443,783,179) (835,334,809)Receivables 6 752,366,064 (991,909,512)Other operating assets (208,494,015) (458,135,984) Increase/(decrease) in operating liabilities Funds held in trust (107,845,708) 154,845,656 Other current liabilities (733,995,603) 1,055,012,999 Net cash generated from operating activities 16,642,426,538 9,862,522,243 CASH FLOWS FROM INVESTING ACTIVITIES Loan releases and other investment purchases, net (8,342,515,270) (11,147,603,134)Acquisition of property and equipment, net 10 (212,773,615) (158,721,227)Acquisition of intangible assets, net 11 (97,166,477) (47,298,033) Net cash used in investing activities (8,652,455,362) (11,353,622,394) CASH FLOWS FROM FINANCING ACTIVITIES Corporate operating budget of Employees’ Compensation Commission and Occupational Safety and Health Center (107,362,213 (125,646,327)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 7,882,608,963 (1,616,746,478) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3 7,378,656,013 8,995,402,491 CASH AND CASH EQUIVALENTS AT END OF YEAR 3 15,261,264,976 7,378,656,013


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Notes to

1. REPORTING ENTITY

The Social Security System (SSS) administers social security protection to workers in the private sector. Social security provides replacement income for workers in times of death, disability, sickness, maternity and old age. On 1 September 1957, the Social Security Act of 1954 was implemented. Thereafter, the coverage and benefits given by SSS have been expanded and enhanced through the enactment of various laws. On 1 May 1997, Republic Act (RA) No. 8282, otherwise known as the “Social Security Act of 1997”, was enacted to further strengthen theSSS.UnderthisAct,thegovernmentacceptsgeneralresponsibilityfor the solvency of the SSS and guarantees that prescribed benefits shall not be diminished. Section 16 of the Social Security Act of 1954 as amended by RA 8282 (SS Law) exempts the SSS and all its benefit payments from all kinds of taxes, fees or charges, customs or import duty.

The SSS is a financial institution in the Philippines. Its principal office is in East Avenue, Quezon City.

The financial statements include the accounts of Employees’ Compensation and State Insurance Fund, which is being administered by the SSS, as provided for by Presidential Decree No. 626, as amended. All inter-fund accounts have been eliminated.

The accompanying financial statements were approved and authorized for issue by the Social Security Commission (SSC) on 21 March 2012 under its Resolution No. 256-s.2012.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies that have been used in the preparation of these financial statements are summarized below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

a. Statement of compliance

The financial statements of the SSS have been prepared in accordance with Philippine Financial Reporting Standards (PFRS), where practicable. PFRS includes all applicable PFRS, Philippine Accounting Standards (PAS) and Philippine Interpretations issued by the Financial Reporting Standards Council (FRSC).

b. Basis of measurement

The financial statements have been prepared on the historical cost basis except for the following items:

• financial assets at fair value through profit or loss are measured at fair value

• marketable securities classified as available-for-sale are measured at fair value

• investmentpropertiesaremeasuredatfairvalue • land under property and equipment are measured at

revalued amount

c. Estimates and judgments

The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the affected asset or liability in the future.

Judgments, estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

2.2 New standards, interpretations and amendments to published standards

a. Effective in 2011 that are relevant to SSS

a.1 Amendments to PAS 1 Presentation of Financial Statements (as part of Improvements to PFRSs issued in 2010)

The amendments to PAS 1 clarify that an entity may choose to disclose an analysis of other comprehensive income by item in the statement of changes in reserves or in the notes to the financial statements. In the current year, for each component of reserves, the SSS has chosen to present such an analysis in the notes to financial statements, with a single-line presentation of other comprehensive income in the statement of changes in reserves. Such amendments have been applied retrospectively, and hence the disclosures in these financial statements have been modified to reflect the change.

b. Effective subsequent to 2011 that are relevant to SSS but not adopted early

b.1PFRS 9 Financial Instruments

Issued in November 2009 and amended in October 2010, PFRS 9 introduces new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition.

PFRS 9 requires all recognized financial assets that are within the scope of PAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows and that have contractual cash flows from solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods.


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Equity instruments that are held for trading will be measured at fair value through profit or loss. For all other equity investments, an irrevocable election can be made at initial recognition, to recognize unrealized and realized fair value gains and losses through other comprehensive income rather than profit or loss. There shall be no recycling of fair value gains and losses to profit or loss. This election may be made on an instrument-by-instrument basis. Dividends are to be presented in profit or loss as long as they represent a return on investment.

While adoption of PFRS 9 is mandatory from 1 January 2015, earlier application is permitted. The SSS has yet to assess PFRS 9’s full impact and it is not practicable to provide reasonable estimate of the effect until a detailed review has been completed.

b.2PFRS 13 Fair Value Measurement

PFRS 13 does not affect which items are required to be fair-valued, but clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. It is applicable for annual periods beginning on or after 1 January 2013. The SSS has yet to assess the impact of this new standard.

2.3 Financial assets

a. Date of recognition

The SSS initially recognizes loans and receivables and deposits on the date that they are originated. All other financial assets are recognized initially on the trade date at which the SSS becomes a party to the contractual provisions of the instrument.

b. Initial recognition

The SSS initially recognizes a financial asset at fair value. Transaction costs are included in the initial measurement, except for financial assets measured at fair value through profit or loss.

c. Determination of fair value

The fair value of investments that are actively traded in organized financial markets is determined by reference to quoted market bid prices. When current bid prices are not available, the price of the most recent transaction provides evidence of the current fair value as long as there has not been a significant change in economic circumstances since the time of the transaction.

For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s-length market transactions, reference to the current market value of another instrument, which is substantially the same, discounted cash flow analysis and option pricing models.

d. Classification d.1. Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss consist of held-for-trading financial assets. Held-for-trading financial assets are financial assets acquired or held for the purpose of selling in the short term or for which there is a recent pattern of short-term profit taking.

Uponinitialrecognition,attributabletransactioncosts

are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein are recognized in profit or loss.

d.2. Held-to-maturity financial assets

Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity for which there is the positive intention and ability to hold to maturity. They are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition held-to-maturity investments are measured at amortized cost using the effective interest method, less any impairment in value.

Gains and losses are recognized in profit or loss when the held-to-maturity financial assets are derecognized or impaired, as well as through the amortization process.

d.3. Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at cost or amortized cost less impairment in value.

A loan or receivable is deemed impaired when it is considered that it will probably not be possible to recover all the amounts due according to the contractual terms, or equivalent value. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default or delinquency in payments are considered indicators that such loans and receivables are impaired.

The SSS provides an allowance for impairment loss for five years and above delinquent member loan accounts. It adopts the Bangko Sentral ng Pilipinas (BSP) Circulars 210 Series of 1999 and 313 Series of 2001 in identifying and monitoring problem loans and risk assets and setting up of allowance for probable losses. BSP outlines the following rates for the setting up of allowance for probable losses:

Classification Allowances Unclassified 0% Loansespeciallymentioned 5% Substandard Secured 10% Unsecured 25% Doubtful 50% Loss 100%

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Member loan accounts that are subjected to impairment fall under substandard, which is defined as loans or portions thereof which appear to involve a substantial and unreasonable degree of risk to the institution because of unfavorable record or unsatisfactory characteristics. They are secured/backed by members’ equity and benefits (i.e. all outstanding obligations of members at the time of their application for final claim are being deducted from their claim proceeds).

d.4. Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in any of the other categories. Subsequent to initial recognition, available-for-sale financial assets are carried at fair value in the statement of financial position. Changes in the fair value of such assets are recognized in other comprehensive income and presented within reserves in the unrealized gain or loss on available-for-sale financial assets portion. When an available-for-sale financial asset is derecognized, the cumulative gains or losses are transferred to profit or loss and presented as a reclassification adjustment within the statement of comprehensive income. Dividends on available-for-sale equity instruments are recognized in profit or loss when the right to receive payments is established.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortization) and its current fair value, less any impairment loss previously recognized in profit or loss, is transferred from reserves to profit or loss and presented as a reclassification adjustment within the statement of comprehensive income. Reversals in respect of equity instruments classified as available-for-sale are not recognized in profit or loss.

e. Derecognition of financial assets

Financial assets are derecognized when the rights to receive cash flows from the asset have expired or have been transferred and the SSS either has transferred substantially all risks and rewards of ownership or has neither transferred nor retained substantially all the risks and rewards of ownership, but has transferred control of the asset.

f. Derivative financial instrument

The SSS enters into a derivative financial instrument to manage its exposure to foreign exchange risk. Derivatives are initially recognized at fair value at the date the derivative contract is entered into and is subsequently remeasured to their fair value at the end of each reporting period.

g. Hedge accounting

The SSS designates derivative financial instrument as fair value hedges in respect of foreign exchange risk on foreign currency denominated investment portfolio.

At the inception of the hedge relationship, the SSS documents the relationship between the hedging instrument and the hedge item, along with its risk management objectives and its strategy for undertaking

hedge transaction. Furthermore, at the inception of the hedge and on an on-going basis, the SSS documents whether the hedging instrument is highly effective in offsetting fair values of the hedge item attributable to the hedged risk.

g.1 Fair value hedges

Changes in fair value of derivative financial instrument that are designated and qualify as fair value hedge is

recognized in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

Hedge accounting is discontinued when the SSS revokes the hedging relationship, when the hedging instrument expires or is sold, terminated or exercised or when it no longer qualifies for hedge accounting.

2.4 Cash equivalents

Cash equivalents comprise short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of 90 days or less and are subject to an insignificant risk of change in value.

2.5 Supplies and materials

Supplies and materials are valued at cost using the weighted average method.

2.6 Investment property

Investment property account consists of property held to earn rentals and/or for capital appreciation.

An investment property is initially measured at cost, including transaction costs. Such cost should not include start-up costs, abnormal waste, or initial operating losses incurred before the investment property achieves the planned level of occupancy. After initial recognition, it is measured at fair value with any change therein recognized in profit or loss.

Transfers to or from investment property are made when there is a change in use, evidenced by: • commencementofowner-occupation• endofowner-occupation• commencementofanoperatingleasetoanotherparty

2.7 Property and equipment

Property and equipment, except land, are stated at cost less accumulated depreciation, amortization and any impairment in value. Land is carried at revalued amount. Increase in value as a result of revaluation is credited to reserves under property valuation reserve unless it represents the reversal of a revaluation decrease of the same asset previously recognized as an expense, in which case it is recognized as income. On the other hand, a decrease arising as a result of a revaluation is recognized as an expense to the extent that it exceeds any amount previously credited to property valuation reserve relating to the same asset.

Cost includes all costs necessary to bring the asset to working condition for its intended use. This would include not only its original purchase price but also costs of site preparation, delivery and handling, installation, related professional fees for architects and engineers, and the estimated cost of dismantling and removing the asset and restoring the site.

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The cost of replacing a part of an item of property and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the SSS, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property and equipment are recognized in profit or loss as incurred.

Depreciation is calculated over the depreciable amount less its residual value. It is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property and equipment.

The estimated useful lives of property and equipment are as follows:

Assets Life Building/ building improvements 10-30 years Furniture and equipment/ computer hardware 5-10 years Land improvements 10 years Transportation equipment 7 years Leasehold improvements 10-30 years (or the term

of lease whichever is shorter)

Building and building improvements have residual value equivalent to 10 percent of the acquisition/appraised value while other items of property and equipment except land have one peso as their residual value.

Construction in progress (CIP) represents building and building/leasehold improvements under construction and is stated at cost. CIP is not depreciated until such time as the relevant assets are completed and put into operational use.

2.8 Intangible assets

Acquired computer software/licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. Computer software/licenses with finite lives are amortized on a straight-line basis over their estimated useful lives, while those with indefinite useful lives or those used perpetually or for as long as there are computers compatible with them are carried at cost and tested annually for impairment.

2.9 Non-current assets held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met when the sale is highly probable and the asset is available for immediate sale in its present condition.

Assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Any excess of carrying amount over fair value less costs to sell is an impairment loss. No depreciation is recognized for these assets while classified as held for sale.

Non-current assets held for sale include real and other properties acquired (ROPA) in settlement of contribution and member/housing/other loan delinquencies through foreclosure or dation in payment. They are initially booked at the carrying amount of the contribution/loan delinquency plus transaction costs incurred upon acquisition. When the booked amount of ROPA exceeds the appraised value of the acquired property, an allowance for impairment loss equivalent to the excess of the amount booked over the appraised value is set up.

2.10 Impairment of non-financial assets

The carrying amount of non-financial assets, other than investment property and non-current assets held for sale is assessed to determine whether there is any indication of impairment or an impairment previously recognized may no longer exist or may have decreased. If any such indication exists, then the asset’s recoverable amount is estimated. Recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use.

Impairment loss is recognized if the carrying amount of an asset exceeds its estimated recoverable amount. The carrying amount of the asset is reduced through the use of an allowance account and the amount of loss is recognized in profit or loss unless it relates to a revalued asset where the value changes are recognized in other comprehensive income/loss and presented within reserves in the property valuation reserve portion. Depreciation and amortization charge for future periods is adjusted.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized in prior years.

2.11 Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the SSS and the amount of revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized:

a. Member’s contribution

Revenue is recognized upon collection.

b. Interest income

Revenue is recognized as the interest accrues, taking into account the effective yield on the asset.

c. Dividend income

Dividend income is recognized at the time the right to receive the payment is established.

d. Rental income

Rental income is recognized on a straight-line basis over the lease term.

2.12 Expense recognition

Expenses are recognized in the statement of comprehensive income upon utilization of the service or at the date they are incurred.

2.13 Operating Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

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a. SSS as lessee

Leases which do not transfer to the SSS substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as expense on a straight-line basis over the lease term.

b. SSS as lessor

Leases where the SSS does not transfer to the lessee substantially all the risk and benefits of ownership of the asset are classified as operating leases. Lease income from operating leases is recognized as income on a straight-line basis over the lease term.

3. CASH AND CASH EQUIVALENTS

2011 2010 Cash on hand and in bank 1,694,008,860 1,599,637,243 Time and special savings deposits 13,567,256,116 5,779,018,770 15,261,264,976 7,378,656,013

Cash in banks earn interest at the respective bank deposit rates. Time and special savings deposits are made for varying periods of up to 90 days depending on the immediate cash requirements of SSS and earn interest at the prevailing time and special savings deposit rates.

In consideration of the banks’ making their deposit pick up facility

available to the SSS, the latter agreed to maintain an average daily balance of P1 million in a non-drawing interest bearing current account/savings account (CASA) with each of the banks’ servicing branches. As at 31 December 2011, P94 million is being maintained in several banks for such purpose.

4. HELD-TO-MATURITY INVESTMENTS

2011 2010 Short-term money placements 1,111,085,699 6,174,075,669 Treasury bills - 1,223,531,421 1,111,085,699 7,397,607,090 Short-term money placements are short-term investments with

original maturities of more than 90 days.

5. HELD-FOR-TRADING FINANCIAL ASSETS

The cost of held-for-trading financial assets as at 31 December 2011 and 2010 are P2,316.29 million and P1,872.51 million, respectively.

6. RECEIVABLES 2011 2010 Collecting banks/agents/ bayad center 2,852,568,315 3,483,825,943 Interest receivable 2,761,790,363 2,564,234,272 Other receivables 808,737,120 951,306,392 6,423,095,798 6,999,366,607

The carrying amount of available-for-sale financial assets is as follows:

2011 2010 Marketable securities Cost 57,695,035,546 49,523,683,085 Unrealizedgain 27,536,562,130 27,406,102,250 85,231,597,676 76,929,785,335 Ordinary and preference shares Cost 1,208,931,785 1,208,710,857 Accumulated impairment loss (723,612,480) (723,612,480) 485,319,305 485,098,377 85,716,916,981 77,414,883,712

The current portion of held-to-maturity government notes and bonds as at 31 December 2011 and 2010 are P2.80 billion and P3.61 billion, respectively.

In July 2011, the SSS participated in the Republic of the Philippines’ Domestic Debt Consolidation Program (Bond Swap) 2011, wherein eligible bonds offered for exchange have been accepted/cancelled and replaced by new Benchmark Bonds. No Day 1 profit or loss has been recognized. Any unrealized gains or losses have been amortized over the term of the new Benchmark Bonds.

7. OTHER CURRENT ASSETS 2011 2010 Supplies and materials inventory 115,911,742 77,551,114 Advances-officials and employees 6,609,821 4,396,305 Prepaid expenses 5,311,990 5,975,871 Revolving fund 968,658 1,022,174 128,802,211 88,945,464

8. FINANCIAL ASSETS 2011 2010 Available-for-sale financial assets 85,716,916,981 77,414,883,712 Held-to-maturity investments Notes and bonds 125,069,677,575 105,676,840,914 Accumulated impairment loss (809,701,706) (809,701,706) 124,259,975,869 104,867,139,208 Loans and receivables- Member loans 45,026,434,193 43,292,288,927 Loan to National Home Mortgage Finance Corporation 13,157,132,170 14,003,355,778 Housing loans 4,500,887,509 4,620,116,641 Sales contract receivable 2,743,033,246 5,262,750,215

Loan to Home Development Mutual Fund - 2,739,484,368 Commercial and industrial loans 521,319,890 681,392,501 Loan to other government agencies 96,520,608 110,086,039 Program MADE 17,219,220 17,219,220 66,062,546,836 70,726,693,689 Accumulated impairment loss (2,650,544,692) (2,600,613,796) 63,412,002,144 68,126,079,893 273,388,894,994 250,408,102,813

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9. INVESTMENT PROPERTY

Land Building Development cost TotalFair value, 01 January 2011 8,896,905,200 3,222,535,696 9,685,838 12,129,126,734 Additions - 1,045,000 - 1,045,000 Cancellation of contract - 761,940 - 761,940 Disposals (173,740,000) (2,016,900) - (175,756,900)Fair value gain/(loss) (175,954,940) 571,321,893 - 395,366,953 Fair value, 31 December 2011 8,547,210,260 3,793,647,629 9,685,838 12,350,543,727 Fair value, 31 December 2010 8,896,905,200 3,222,535,696 9,685,838 12,129,126,734

The costs of investment property as at 31 December 2011 and 2010 stood at P7.41 billion and P7.58 billion, respectively.

The fair value of investment property is determined based on valuations performed by independent appraisers.

The following amounts are recognized in the statement of comprehensive income:

2011 2010Rental income 485,958,163 458,511,931 Gain on fair value adjustment 395,366,953 1,372,694,820 Gain on sale/disposal 27,571,040 63,132,286 Penalty on rentals 3,098,633 2,170,411 Direct operating expenses (74,868,135) (70,943,396) 837,126,654 1,825,566,052

10. PROPERTY AND EQUIPMENT- NET

Furniture and equipment, transportation equipment, Land, buildings and computer land/building/leasehold hardware and Construction improvements others in progress Total

Gross carrying amount 01 January 2011 3,317,070,581 3,528,268,293 46,337,348 6,891,676,222Additions - 118,884,407 25,399,292 144,283,699Transfers 41,032,470 (5,100,000) (41,032,470) (5,100,000)Retirement/disposals/cancellation (238,864) (330,131,777) - (330,370,641)31 December 2011 3,357,864,187 3,311,920,923 30,704,170 6,700,489,280Accumulated depreciation/amortization 01 January 2011 668,826,737 2,847,375,775 - 3,516,202,512Charge for the period 47,549,044 189,475,941 - 237,024,985Retirement/disposals/cancellation - (327,949,627) - (327,949,627)31 December 2011 716,375,781 2,708,902,089 - 3,425,277,870Accumulated impairment loss 01 January 2011 56,723,750 - 56,723,75031 December 2011 56,723,750 - 56,723,750Net book value, 31 December 2011 2,584,764,656 603,018,834 30,704,170 3,218,487,660Net book value, 31 December 2010 2,591,520,094 680,892,518 46,337,348 3,318,749,960

On 28 November 2011, the SSS entered into a USD/PHP RangeForward (Cash-Settled) with Metropolitan Bank and Trust Company tomitigateitsforeignexchangeriskonUSDdenominatedportfolio(with notional amount of USD10million). On 28 December 2011(expiry date), upon determination of the fixing rate, either party incurred no obligation.

Using the BSP guidelines in identifying and monitoring problemloans and risk assets and setting up of allowance for probable losses, impairment provision amounting to P52.84 million and P1.75 billion was recognized in 2011 and 2010 for five years and above delinquent member loan accounts, respectively.

On 3 June 2010, the President of the Philippines approved the Penalty Condonation Program for Unremitted or DelinquentLoan Amortizations of Employees of Employers. The program ran for six months from 3 January 2011 to 30 June 2011. It covered employers who are delinquent in the remittance of their employees’ loan amortizations (salary, calamity, emergency, educational, special educational loan for Y2K conversion, stock investment and privatization fund) and employers of employees with delinquent loans granted under the current or previous employer or whose loans were granted as self-employed/voluntary-paying members and applies only to penalties on unremitted or delinquent loan amortizations (principal and interest) due on or before 1 April 2010.

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Land, buildings and building improvements were last revalued in December 2009 by independent valuers. Valuations were made on the basis of market value.

If land, buildings and building improvements were stated on the historical cost basis, the carrying amount would be as follows:

2011 2010Cost 1,734,987,735 1,694,194,129 Accumulated depreciation (590,007,838) (548,450,914) 1,144,979,897 1,145,743,215

Rental income-operating assets amounting to P13.21 million and P12.63 million for the year ended 31 December 2011 and 2010, respectively were included in the statement of comprehensive income.

11. INTANGIBLE ASSETS- NET

Licenses Software TotalCost 01 January 2011 214,663,621 220,429,853 435,093,474 Additions 7,820,931 62,733,234 70,554,165 Transfers - 5,100,000 5,100,00031 December 2011 222,484,552 288,263,087 510,747,639 Accumulated amortization 01 January 2011 52,291,526 52,971,645 105,263,171 Amortization charge for the period 25,669,199 36,721,378 62,390,577 31 December 2011 77,960,725 89,693,023 167,653,748 Accumulated impairment loss 01 January 2011 76,301,127 44,946,400 121,247,527 31 December 2011 76,301,127 44,946,400 121,247,527 Net book value, 31 December 2011 68,222,700 153,623,664 221,846,364 Net book value, 31 December 2010 86,070,968 122,511,808 208,582,776

The carrying amount of intangible assets with indefinite lives as at 31 December 2011 amounted to P36.66 million.

12. NON-CURRENT ASSETS HELD FOR SALE

Acquired assets/ Land Building registered TotalCarrying amount, 01 January 2011 5,284,278,441 158,902,621 351,746,941 5,794,928,003 Accumulated impairment loss (5,182,312) (15,173,429) (2,663,477) (23,019,218)Net carrying amount, 01 January 2011 5,279,096,129 143,729,192 349,083,464 5,771,908,785 Additions 65,901,620 - 54,577,957 120,479,577 Disposals (919,728) - (131,625,184) (132,544,912)Impairment (loss)/recovery (60,939,633) 6,899,000 (748,134) (54,788,767)Carrying amount, 31 December 2011 5,283,138,388 150,628,192 271,288,103 5,705,054,683 Carrying amount, 31 December 2010 5,279,096,129 143,729,192 349,083,464 5,771,908,785

The non-current interest receivable from loan to NHMFC represents portion of the total restructured loan amount that SSS and NHMFC have allocated to unpaid interest and penalty as of cut-off date, 31 March 2002, payment of which shall be sourced from the residuals of the cash flows of the remaining accounts upon full payment of low, moderate and high delinquency outstanding obligations.

14. ACCOUNTS PAYABLE AND ACCRUED EXPENSES 2011 2010 Accounts payable 1,599,945,135 2,135,812,426 Accrued expenses 1,191,594,234 1,102,569,442 2,791,539,369 3,238,381,868

15. FUNDS HELD IN TRUST

This account includes among others bidders’ deposits, withholding taxes and retention withheld from suppliers and creditors to answer for defective deliveries or services, contributions to GSIS, PHIC, HDMF and SSS Provident Fund and equity of Flexi-fund members.

13. OTHER NON-CURRENT ASSETS 2011 2010 Receivable-collecting banks 97,009,466 - Accumulated impairment loss (97,009,466) - - - Interest receivable proceedings 12,723,297,007 12,708,798,008 Accumulated impairment loss (12,707,637,955) (12,707,637,955) 15,659,052 1,160,053 Advances-fire/MRI/ foreclosure proceedings/RPT 184,045,370 165,588,834 Accumulated impairment loss (332,318) (953,811) 183,713,052 164,635,023 Others 932,036,418 909,879,048 Accumulated impairment loss (516,149,501) (516,149,501) 415,886,917 393,729,547 615,259,021 559,524,623

Non-current interest receivable includes those originated from Home Guaranty Corporation (HGC) guaranteed corporate notes and loan to National Home Mortgage Finance Corporation (NHMFC) amounting to P120.44 million and P12.59 billion, respectively.

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can be monetized once a year and the balance payable upon resignation/retirement.

18.3 Retirement incentive award

Employees with at least 20 years of creditable service are entitled to P2,000 for every year of service upon retirement.

The accrued retirement benefits of employees at 31 December 2011 and 2010 are as follows:

2011 2010 Terminal leave pay 748,996,445 621,563,865 Retirement benefits/gratuity 663,768,594 673,544,852 Retirement incentive award 93,830,005 89,659,624 1,506,595,044 1,384,768,341

19. RENT PAYABLE

This account represents future rent payments for lease contracts entered by the SSS for its various branches.

20. NON-CURRENT DEFERRED INCOME

This account represents unrealized gains or losses from SSS participation in the Republic of the Philippines’ Domestic Debt Consolidation Program (Bond Swap) 2011.

21. RESERVES

21.1 Investment reserve fund (IRF)

All revenues of the SSS that are not needed to meet the current administrative and operational expenses are accumulated in the reserve fund. Such portion of the reserve fund as are not needed to meet the current benefit obligations is known as the IRF which the SSC manages and invests with the skill, care, prudence and diligence necessary under the circumstances then prevailing that a prudent man acting in like capacity and familiar with such matters would exercise in the conduct of an enterprise of a like character and with similar aims, subject to prescribed ceilings under Section 26 of the SS Law.

No portion of the IRF or income thereof shall accrue to the general fund of the National Government or to any of its agencies or instrumentalities, including government-owned or controlled corporations, except as may be allowed under the SS Law. It also provides that no portion of the IRF shall be invested for any purpose or in any instrument, institution or industry over and above the prescribed cumulative ceilings as follows: 40 percent in private securities, 35 percent in housing, 30 percent in real estate related investments, 10 percent in short and medium-term member loans, 30 percent in government financial institutions and corporations, 30 percent in infrastructure projects, 15 percent in any particular industry and 7.5 percent in foreign-currency denominated investments.

In its Resolution No. 402 s. 2007, the SSC, adopted the use of acquisition cost of shares of stock as the basis for computing the 30 percent limit in equity investments, based on the opinion dated 25 June 2007 of the Legal and Adjudication Sector of COA.

21.2 Actuarial valuation of the reserve fund of the SSS

The SS Law requires the Actuary of the System to submit a valuation report every four years, or more frequently as may be

necessary, to determine the actuarial soundness of the reserve fund of the SSS and to recommend measures on how to improve its viability.

Breakdown as follows:

2011 2010 Flexi-fund 304,295,602 269,057,470 Borrowers and other payors 132,620,503 120,522,057 Officials and employees 129,963,730 130,020,909 Suppliers and creditors 62,042,791 48,020,831 Due to other government units 24,276,833 94,043,739 Dividend - stock investment loan program 15,501,904 15,501,904 Educational loan fund - DECS 1,588,761 1,576,846 Unifiedmulti-purposeIDfund - 99,392,076 670,290,124 778,135,832 The Flexi-fund represents equities of members under the voluntary

supplementary benefits program of the SSS for Overseas Filipino Workers and authorized under Section 4.a.2 of the SS Law. The Social Security Commission (SSC), in its Resolution No. 288 dated 18 April 2001, approved the establishment of this supplementary benefits program.

The unified multi-purpose ID (UMID) fund represents amountprovided by the National Statistics Office (NSO), which will be used to pay all direct and indirect costs of the central verification and enrollment system for theUMIDaswell asall costsnecessaryandincidental thereto, including all expenses to be incurred related to the formulation, drafting recommendation and approval of the project implementation and information campaign plans.

16. DEFERRED INCOME

This account represents advance rental payments from tenants of SSS property.

17. OTHER CURRENT LIABILITIES

This account includes among others collections credited to the accounts pending receipt of collecting agencies’ documents and actual distribution of collections and payments whose nature are not indicated by payors.

2011 2010 Member loans (ML) collection 1,536,462,937 1,380,694,777 OFW collections 294,319,583 265,672,623 Undistributedcollection 191,575,890 428,831,056 ML collection deducted from benefits payments 169,951,995 330,410,838 Real estate loan collection 42,500,041 534,281,784 Sales contract receivable 31,500,767 61,091,057 Rental receivable 1,123,664 855,145 Employees’ housing loan program 524,027 117,227 Express padala 96,654 96,654 2,268,055,558 3,002,051,161

18. ACCRUED RETIREMENT BENEFITS

18.1 Retirement benefits

Retirement benefits are available to qualified employees under any one of RA 1616, RA 660 and RA 8291.

18.2 Terminal leave benefits

This represents the cash value of the accumulated vacation and sick leave credits of employees, 50 percent of which

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The investments revaluation reserve represents the cumulative gains and losses arising on the revaluation of available-for-sale financial assets that have been recognized in other comprehensive income, net of amounts reclassified to profit or loss when those assets have been disposed of or are determined to be impaired.

22. INVESTMENT AND OTHER INCOME 2011 2010 Investment income Income from current investments Held-to-maturity investments Interest income 224,523,581 452,568,941 Held-for-trading financial assets Gain on sale/disposal 379,222,272 459,704,837 Gain on fair value adjustment 181,012,084 1,515,595,442 Dividend income 51,796,228 25,923,712 Investments expense (28,758,803) (24,191,069) 583,271,781 1,977,032,922 807,795,362 2,429,601,863 Income from non-current investments Available-for-sale financial assets Gain on sale/disposal 8,142,212,785 10,066,595,622 Dividend income 3,966,202,634 3,414,379,491 Investment expense (4,403,534) (1,473,850) Impairment loss (165,140,119) - 11,938,871,766 13,479,501,263 Held-to-maturity investments Interest income 9,464,819,105 7,634,139,077 Penalty on pre-payment/ pre-termination 16,485,000 - Gain on sale/disposal 9,345,552 - Penalty on overdue amortization 338 608 Investment expense (578,542) (604,162) 9,490,071,453 7,633,535,523 Loans and receivable Interest income 4,120,575,226 2,908,825,689 Penalty on overdue amortization 1,868,319,461 807,264,456 Investment expense (337,424) (303,060) Impairment loss (52,838,998) (1,746,332,726) 5,935,718,265 1,969,454,359 Investment property 837,126,654 1,825,566,052 29,009,583,500 27,337,659,060 Other income Interest income from cash in bank and cash equivalents 433,653,489 389,047,630 Service fee - salary loan 157,750,098 111,066,521 Director’s fee 49,386,884 23,359,055 Non-current assets held for sale: Gain on sale/disposal 84,938,218 86,756,509 Related expense (12,578,982) (5,668,009) Impairment loss (89,432,898) (1,479,330) Rental income 46,954,646 35,089,798 Reversal of impairment loss/revaluation decrease 37,634,732 108,710,662 Others-net 147,487,044 (236,647,210) 855,793,231 510,235,626 Total investment and other income 29,865,376,731 27,847,894,686

23. BENEFIT PAYMENTS

This account represents payments to members and their beneficiaries in the event of disability, sickness, maternity, old age, death and other contingencies resulting in loss of income or financial burden.

The reserve fund is affected by (a) changes in demographic factors (such as increased life expectancy, ageing of population, declining fertility level and delay in retirement) and (b) the economic conditions of the country. Taking into account the uncertainty of future events, economic assumptions on interest rates, inflation rates and salary wage increases, among others, are projected.

In the 1999 actuarial valuation, the Social Security Fund (SSF) was projected to last until 2015. Since then, parametric measures (e.g. increases in the contribution rate from 8.4 percent to 9.4 percent

in March 2003 and to 10.4 percent in January 2007, increase in the maximum salary base for contributions from P12,000 to P15,000 and the redefinition of Credited Years of Service (CYS) and operational developments (e.g. Tellering System, more accounts officers, cost saving measures, improved investment portfolio and management, etc.) were implemented to strengthen the SSF.

The System’s concerted efforts have resulted in improved actuarial soundness. Results of the 2003 Actuarial Valuation indicate an extension on the life of the fund by sixteen years, from 2015 to 2031.

An update of the 2003 Actuarial Valuation was later undertaken, to include the effect of the increase in the contribution rate to 10.4 percent effective January 2007, and the grant of 10 percent across-the-board increases in pension effective September 2006 and September 2007. This update showed that the actuarial life of the SSF has extended further to 2036.

The results of the latest valuation (2007 Actuarial Valuation), as well as the results of the previous 2003 Valuation, are

presented in the table below. There are two columns under 2003 Valuation: (1) the original results as published in the 2003 ActuarialValuationreport;and(2)theupdatedresultsthattake into consideration the across-the-board pension increases in 2006 and 2007 and the contribution rate increase at the start of 2007.

Actuarial ValuationComparison of Key Projection Results2007 Valuation versus 2003 Valuation

Under the Baseline Scenario

Key Projection Results 2003 Valuation 2007 Valuation Original * Updated ** No Across-the- Year Fund Will Last 2031 2036 2039Board Increase Year Net Revenue

2022 2026 2030in Pensions Becomes Negative * As published in the 2003 Actuarial Valuation Report**Updatedresultsaftertheincreaseincontributionrateto10.4%in January2007andthe10%across-the-boardpensionincreasesin 2006 and 2007

It can be seen from the table that the actuarial life of the SSF has improved further by eight years, from 2031 to 2039, compared to the original2003Valuation;orbythreeyears,from2036to2039,whencompared to the updated 2003 Valuation.

21.3 Investments revaluation reserve 2011 2010 Balance at beginning of year 27,406,102,250 26,347,427,214 Net gain arising on revaluation of available-for-sale financial assets 3,846,223,202 7,555,937,265 Cumulative (gain)/loss reclassified to profit or loss on sale/disposal of available- for-sale financial assets (3,741,628,642) (6,497,262,229)

Cumulative loss reclassified to profit or loss on impairment of available- for-sale financial assets 25,865,320 - 27,536,562,130 27,406,102,250

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24. PERSONAL SERVICES 2011 2010 Salaries and wages 2,251,944,373 2,207,761,858 Mandatory contributions 1,202,491,828 1,178,847,346 Incentive award 785,379,907 749,088,274 Bonus and rice grant 524,828,071 506,303,033 Allowances 248,122,459 352,977,335 Terminal leave pay 245,235,513 119,173,700 Other personal services 172,460,081 157,514,093

5,430,462,232 5,271,665,639

Provident fund (part of mandatory contributions) is a defined contribution plan made by both the SSS and its officers and employees. The affairs and business of the fund are directed, managedandadministeredbyaBoardofTrustees.Uponretirement,death or resignation, the employee or his heirs will receive from the fund payments equivalent to his contributions, his proportionate share of the SSS’ contributions and investment earnings thereon. However, effective 28 January 2005, retired and separated members have the option to retain part or all of his total equity in the fund for a maximum period of five years.

25. MAINTENANCE AND OTHER OPERATING EXPENSES 2011 2010 Depreciation /amortization expense 299,415,562 292,793,085 Maintenance and repairs - building/leased offices 278,321,450 280,436,866 Light and water 187,262,359 178,527,241 Maintenance and repairs - furniture and equipment 179,166,632 164,366,293 Communication expenses 158,879,958 127,171,098 Service bureau expenses 131,498,910 138,001,528 Office space rentals 131,208,427 128,000,180 Supplies and materials 107,015,111 106,884,216 Impairment loss - operating assets 97,009,466 - COA audit services 44,341,772 37,843,695 Maintenance and repairs - transportation equipment 28,579,485 24,935,126 Special Project 24,705,225 24,914,484 Other operating expenses 424,435,864 338,871,378 2,091,840,221 1,842,745,190

26. OPERATING LEASE COMMITMENTS

26.1 SSS as lessee

The SSS leases offices for its various branches under cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights.

26.2 SSS as lessor

The SSS leases out portion of its office space to various tenants under cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights.

27. FINANCIAL RISK MANAGEMENT

The SSC and SSS management are active in the evaluation, scrutiny and credit approval process on all investments being undertaken by the SSS. The SSC has adopted adequate policies on investment procedures, risk assessment and measurement and risk monitoring by strict observance on the statutory limit provided under the SSS Law and compliance to the investment guidelines. Internal controls are also in place and comprehensive audit is being done by Internal Audit Services.

The main risk arising from the SSS’ financial instruments are interest rate risk, credit risk, liquidity risk, market price risk and foreign exchange risk. The SSC and SSS management review and agree on the policies for managing these risks as summarized below.

27.1 Interest rate risk

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates.

The SSS strictly adheres to the provisions of Section 26 of the SSS Law which states that the funds invested in various corporate notes/bonds, loan exposures and other financial instruments shall earn an annual income not less than the average rates of treasury bills or any acceptable market yield indicator. Currently, the SSS has achieved a mix of financial investments with interest rates that are within acceptable level. Significant investments in said instruments have fixed interest rates while repricing rates of investments in corporate notes/bonds that carry floating interest rates are always based on acceptable yield (i.e. prevailing 3 months Philippine Dealing SystemTransaction-FixingRateplusaspreadofnotlessthan0.50%).

27.2 Credit risk

Credit risk is the risk of suffering financial loss should any of the SSS’ counterparties fail to fulfill its contractual obligations to the SSS. This includes risk of non-payment by issuers and borrowers, failed settlement of transactions and default on outstanding contracts.

The SSS implements structured and standardized evaluation guidelines, credit ratings and approval processes. Investments undergo technical evaluation to determine their viability/acceptability. Due diligence process (i.e. credit analysis, evaluation of the financial performance of the issuer/borrower to determine financial capability to pay obligations when due, etc.) and information from third party (e.g. CIBI Information, Inc., banks and other institutions) are used to determine if counterparties are credit-worthy.

With respect to stockbrokers, the SSS has adopted the following mitigating measures:

a. Minimum requirements for stockbroker evaluation

a.1 Stockbroker is a Member of Good Standing of the Exchange as defined under Rule 3(g) of the Securities Regulation Code.

a.2 The stockbroker shall have a minimum capitalization of fifteen million pesos.

a.3 The stockbroker shall be profitable for three of the last five years of operation. However, stockbrokers not able to meet the profitability requirement may be qualified provided that capitalization is at least thirty million pesos for those with losses.

a.4 The stockbroker shall have a positive track record of service to other institutional clients.

b. Stockbroker transactions, allocations and limits

b.1 Total daily transactions, excluding block transactions, per stockbroker shall not exceed 50 percent of stockbroker capitalization/stockholder’s equity, whichever is lower.

b.2 Total transactions, excluding negotiated block transactions, for each of the accredited stockbrokers, during the accreditation period, shall not exceed 15 percent of total SSS transactions.

b.3 Transactions, excluding negotiated block transactions, with the SSS by the stockbroker, within the year of accreditation, shall not exceed 40 percent of its total market transactions. This ensures that the stockbroker does not rely heavily on SSS for its business.

To avoid significant concentrations of exposures to specific industries or group of issuers and borrowers, SSS investments are regularly monitored so that in no time shall they exceed the prescribed cumulative ceilings specified in Section 26 of the RA 8282.

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The following table shows the latest aging analysis of some financial assets:

2011 Past due but not impaired (Age in months) Neither past due nor impaired 3-12 13-36 37-48 49-60 Over 60 Expired Impaired Total (In Millions)Held-for-trading financial assets 3,956 - - - - - - - 3,956Available-for-sale financial assets 85,717 - - - - - - 724 86,441Held-to-maturity investments: Short-term money placements 1,111 - - - - - - - 1,111 Corporate notes and bonds 11,663 - - - - - - 810 12,473 Government notes and bonds 112,597 - - - - - - - 112,597Loans and receivable: National Home Mortgage Finance Corporation 13,021 - - - - - - 136 13,157 Home Development Mutual Fund - - - - - - - - - Commercial and industrial loans 439 4 - - - 8 6 64 521 Program MADE - - - - - - - 17 17 Other government agencies 97 - - - - - - - 97 Sales contract receivable Available-for-sale financial assets 1,999 - - - - - - - 1,999 230,600 4 - - - 8 6 1,751 232,369

2010 (Restated) Past due but not impaired (Age in months) Neither past due nor impaired 3-12 13-36 37-48 49-60 Over 60 Expired Impaired Total (In Millions)Held-for-trading financial assets 3,331 - - - - - - - 3,331Available-for-sale financial assets 77,415 - - - - - - 723 78,138Held-to-maturity investments: Short-term money placements 6,174 - - - - - - - 6,174 Treasury bills 1,224 - - - - - - - 1,224 Corporate notes and bonds 12,349 - - - - - - 810 13,159 Government notes and bonds 92,518 - - - - - - - 92,518Loans and receivable: National Home Mortgage Finance Corporation 13,867 - - - - - - 136 14,003 Home Development Mutual Fund 2,739 - - - - - - - 2,739 Commercial and industrial loans 602 - - - 2 8 4 65 681 Program MADE - - - - - - - 17 17 Other government agencies 110 - - - - - - - 110 Sales contract receivable Available-for-sale financial assets 4,535 - - - - - - - 4,535 214,864 - - - 2 8 4 1,751 216,629

27.3 Liquidity risk

Liquidity risk arises from the possibility that the SSS may encounter difficulties in raising funds to meet its payment obligations (i.e. payment of benefits, working capital requirements and planned capital expenditures) when they fall due. The SSS manages this risk through daily monitoring of cash flows in consideration of future payment due dates and daily collection amounts. The SSS also maintains sufficient portfolio of highly marketable assets that can easily be liquidated as protection against unforeseen interruption to cash flow.

27.4 Market price risk

The SSS’ market price risk arises from its investments carried at fair value (fair value through profit or loss and available-for-sale financial assets). It manages this risk by monitoring the changes in the market price of the investments.

27.5 Foreign exchange risk

The SSS undertakes transactions denominated in foreign currencies;consequently,exposurestoexchangeratefluctuationsarise. Exchange rate transactions are managed within approved policy parameters which include utilizing derivative financial instrument for risk mitigation.

28. OTHER MATTERS

28.1 Commitments

Amount authorized but not yet disbursed for capital expenditures as of 31 December 2011 is approximately P338.10 million.

28.2 Tax compliance

The amount of taxes withheld for the year 2011 amounted to P859,234,866, as follows:

Income taxes withheld on compensation 702,193,200 Value added tax 91,738,239

Expanded withholding tax 65,068,408 Final tax 235,019 859,234,866

Income taxes withheld on compensation and expanded withholding tax are remitted on or before the 15th day of the following month except those withheld for the month of December which should be remitted on or before the 20th day of January of the following year. On the other hand, value added taxes and final income taxes withheld are remitted on or before the 10th day of the following month. Of the total taxes withheld by SSS, P792,097,051 (net of P4,792,347 adjustment) was remitted to the Bureau of Internal Revenue (BIR) in 2011, while the balance of P62,345,468 was remitted in 2012.

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Citius, Altius, Fortius must be the aim of an institution like the Social Security System (SSS) that has been in existence for more than half a century. Faster services. Higher standards. Stronger pension fund. These are the three principal objectives that management must aim for so that SSS continues to be relevant to its 29 million members, as well as become more competitive with other players in the industry.

As SSS operations become more complex with the passing of time, internal auditing is likewise transformed by employing a multi-disciplined approach to cope with the challenge of evaluating the operations of an institution with 132 local branches and 13 foreign offices. Current directions of the Internal Audit Service (IAS) are based on what it considers to be “the maximum risks” and it charts the audit plan along those parameters. The IAS partners with management in ensuring that SSS operations are efficient, effective, economical and ethical.

Based on completed and submitted audit reports for 2011, below are the most significant observations:

1. Correcting unpostable contribution and loan records and cleaning up the SSS database have long been recognized as “musts” in ensuring appropriate and correct payment of benefit amounts and loan grants. A records system that does not provide the right information when needed is an injustice to members who count on SSS for much needed help when contingency arises. While there have been efforts made in correcting and posting certain records, resulting in partial database clean up, the IAS believes that there should be no let up toward this end. The creation of a Task Force that will address this concern is an affirmation by management that the integrity and accuracy of SSS records will not and cannot be compromised.

2. Tapping the services of electronic payment service providers for collection of contributions and loan amortizations here and abroad is the correct way to go. These e-payment facilities are intended to augment existing infrastructure to provide more convenience to paying members. However, SSS must see to it that these service providers comply with the terms of agreement, particularly on the uploading of collection data and remittance of collections. Sanctions should be imposed on service providers in case of infraction, while controls must be strengthened to ensure completeness and accuracy of collections. In this vein, the IAS recommended the development and approval of a Manual of Procedures on the accounting, reconciliation and monitoring of e-payment transactions.

3. The 94 branches with tellering facilities set up in major areas in the National Capital Region, Luzon, Visayas and Mindanao are aimed to give members the convenience to make direct payments to SSS. Understandably, there are risks to be factored in this strategy, such as the loss of funds due to human error. Save for a few isolated incidents, the IAS found SSS tellering personnel nationwide to be honest and dedicated civil servants. The IAS noted, at the same time, a disparity in the distribution of tellers. Thus, there is need to standardize branch tellering operations for equitable distribution of work load.

In 2012, IAS will focus on new audit directions such as Property Management, Infrastructure Projects, Delinquency of Employer Accounts, among others, even as it will continue to monitor Branch Tellering.

ANTONETTE L. FERNANDEZAssistant Vice President

Internal Auditor’s Report

sssar1.indd 45 1/9/13 9:34 AM


Historical Data

CONSOLIDATED GROWTH OF ASSETS, RESERVES & INVESTMENTS

SSS COVERAGE AND PERSONNEL FORCE

SSS Coverage and Personnel WorkforceAs of December 31

(in thousands)

Year Worker Employer SSS Personnel

2007 27,241.2 803.3 4.1

2008 27,761.2 830.4 4.2

2009 28,217.9 850.4 4.9

2010 28,766.1 879.8 5.1

2011 29,269.1 889.0 5.1

Consolidated Growth of Assets, Reserves and Investments(Amount in Billion Pesos)

Year Assets Assets %inc./(dec.)

Reserves Reserves %inc./(dec.)

Investments Investments %inc./(dec.)

2007 247.7 8.4 243.0 8.0 225.6 9.9

2008 233.1 (5.9) 225.6 (7.2) 211.4 (6.3)

2009 272.6 16.9 265.3 17.6 248.6 17.6

2010 297.6 9.2 289.1 9.0 273.3 9.9

2011 322.4 8.3 314.7 8.8 290.8 6.4

35,000.0

30,000.0

25,000.0

20,000.0

15,000.0

10,000.0

5,000.0

0.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

Cov

erag

e

Pers

onn

el W

orkf

orce

SSS Coverage and Personnel WorkforceAs of December 31

(in thousands)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Worker 23,532.7 24,308.0 25,051.2 25,666.4 26,739.3 26,227.6 27,241.2 27,761.2 28,217.9 28,766.1 29,269.1

Employer 633.3 668.0 702.6 734.8 781.8 758.0 803.3 830.4 850.4 879.8 889.0

SSS Personnel* 3.9 3.9 4.1 4.0 4.1 4.2 4.1 4.2 4.9 5.1 5.1

350.0

300.0

250.0

200.0

150.0

100.0

50.0

0.0

20.0

15.0

10.0

5.0

0.0

-5.0

-10.0

-15.0

Am

oun

t in

bill

ion

pes

os

%in

c./(

dec

.)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Assets 163.1 162.6 170.9 179.1 199.7 228.4 247.7 233.1 272.6 297.6 322.4

Reserves 161.2 159.5 168.1 176.4 196.3 225.9 243.0 225.6 265.3 289.1 314.7

Investments 151.0 149.2 155.9 160.5 181.8 205.2 225.6 211.4 248.6 273.3 290.8

Assets, %inc./(dec.) (10.2) (0.3) 5.1 4.8 11.5 14.4 8.4 (5.9) 16.9 9.2 8.3

Reserves, %inc./(dec.) (5.4) (1.0) 5.4 4.9 11.3 14.6 8.0 (7.2) 17.6 9.0 8.8

Investments, %inc./(dec.) (9.1) (1.2) 4.5 2.9 13.3 12.9 9.9 (6.3) 17.6 9.9 6.4

CONSOLIDATED GROWTH OF ASSETS, RESERVES AND INVESTMENTS

*Regular SSS employees only

sssar1.indd 46 1/9/13 9:34 AM


100.0

90.0

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

1200.0

1000.0

800.0

600.0

400.0

200.0

0.0

(200.0)

Am

oun

t in

bill

ion

pes

osA

mou

nt

in b

illio

n p

esos

%in

c./(

dec

.)

Consolidated Contributions, Investment & Other Income Benefits, and Operating Expenses & Others

CONSOLIDATED PROGRESS OF OPERATIONS

Consolidated Contributions, Investment & Other Income Benefits, and Operating Expenses & Others

(Amount in Billion Pesos)

Year Contributions Investment & Other Income

Benefits Operating Expenses & Others

2007 61.8 17.9 60.7 6.8

2008 68.9 29.1 67.9 6.7

2009 72.4 23.0 72.0 7.1

2010 79.3 27.8 77.2 7.1

2011 86.0 29.9 82.8 7.5

Consolidated Net Revenue(Amount in Billion Pesos)

Year Amount %inc./(dec.)

2007 12.1 97.3

2008 23.3 92.1

2009 16.2 (30.4)

2010 22.8 40.8

2011 25.6 11.9

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Contributions 31.4 34.2 39.4 43.9 47.5 52.5 61.8 68.9 72.4 79.3 86.0

Investment & Other Income 14.2 11.7 12.8 8.9 12.3 12.1 17.9 29.1 23 27.8 29.9

Benefits 39.0 40.9 42.8 44.9 46.3 52.1 60.7 67.9 72 77.2 82.8

Operating Expenses & Others 4.4 4.6 4.8 5.3 5.6 6.4 6.8 6.7 7.1 7.1 7.5

Consolidated Net Revenue

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Amount %inc./(dec.)

2.14.6

2.6

7.912.1

23.3 22.825.6

16.2

6.1

0.4

sssar1.indd 47 1/9/13 9:34 AM


SSS GROWTH OF ASSETS, RESERVES & INVESTMENTS

SSS Growth of Assets, Reserves and Investments(Amount in Billion Pesos)


Reserves Reserves%inc./(dec.)

Investments Investments%inc./(dec.)

2007 224.9 9.3 220.1 8.8 211.2 12.5

2008 209.5 (6.8) 201.9 (8.3) 192.7 (8.8)

2009 247.9 18.3 240.5 19.1 228.9 18.8

2010 271.3 9.4 262.7 9.2 252.6 10.4

2011 294.8 8.7 287.0 9.3 276.7 9.5

350.0

300.0

250.0

200.0

150.0

100.0

50.0

0.0

20.0

15.0

10.0

5.0

0.0

-5.0

-10.0

-15.0

Am

oun

t in

bill

ion

pes

os

%in

c./(

dec

.)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Assets 144.8 143.1 150.6 158.0 177.7 205.9 224.9 209.5 247.9 271.3 294.8

Reserves 142.0 139.7 147.7 155.2 174.1 202.3 220.1 201.9 240.5 262.7 287.0

Investments 134.5 131.0 138.9 143.3 166.5 187.8 211.2 192.7 228.9 252.6 276.7

Assets, %inc./(dec.) (11.3) (1.2) 5.3 4.9 12.5 15.8 9.3 (6.8) 18.3 9.4 8.7

Reserves, %inc./(dec.) (6.6) (1.6) 5.8 5.0 12.2 16.2 8.8 (8.3) 19.1 9.2 9.3

Investments, %inc./(dec.) (9.9) (2.6) 6.1 3.2 16.2 12.7 12.5 (8.8) 18.8 10.4 9.5

SSS GROWTH OF ASSETS, RESERVES AND INVESTMENTS

SSS PROGRESS OF OPERATIONS

SSS Contributions, Investment & Other Income Benefits, and Operating Expenses & Others


Year Contributions Investments & Other Income

Benefits Operating Expenses & Others

2007 60.8 17.1 59.7 6.7

2008 67.7 27.8 66.8 6.6

2009 71.2 22.0 71.0 7.0

2010 78.0 27.0 76.1 7.0

2011 84.6 28.6 81.7 7.4

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Contributions 30.9 33.7 38.6 43.1 46.7 51.6 60.8 67.7 71.2 78.0 84.6

Investments and Other Income

12.4 9.9 11.7 7.5 10.9 11 17.1 27.8 22 27 28.6

Benefits 37.8 39.6 41.6 43.7 45.2 51.1 59.7 66.8 71 76.1 81.7

Operating Expenses & Others

4.2 4.3 4.6 5.2 5.5 6.2 6.7 6.6 7.0 7.0 7.4

SSS Contributions, Investment & Other Income Benefits, and Operating Expenses & Others

90.0

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

Am

oun

t in

bill

ion

pes

os

sssar1.indd 48 1/9/13 9:34 AM


EMPLOYEES’ COMPENSATION AND STATE INSURANCE FUND GROWTH OF ASSETS, RESERVES & INVESTMENTS

EC Growth of Assets, Reserves and Investments(Amount in Billion Pesos)


Reserves Reserves%inc./(dec.)

Investments Investments%inc./(dec.)

2007 22.9 1.1 22.9 1.1 14.4 (17.6)

2008 23.7 3.4 23.7 3.4 18.7 29.8

2009 24.8 4.8 24.8 4.8 19.7 5.5

2010 28.4 6.5 28.4 6.5 20.6 4.6

2011 27.7 4.8 27.7 4.8 14.1 (31.9)

40.0

30.0

20.0

10.0

0.0

(10.0)

(20.0)

(30,0)

(40.0)

%in

c./(

dec

.)

30.0

25.0

20.0

15.0

10.0

5.0

0.0

Am

oun

t in

bill

ion

pes

os

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Assets 19.3 19.5 20.4 21.2 22.1 22.7 22.9 23.7 24.8 26.4 27.7

Reserves 19.3 19.9 20.4 21.2 22.1 22.7 22.9 23.7 24.8 26.4 27.7

Investments 16.5 18.2 17.0 17.2 15.2 17.5 14.4 18.7 19.7 20.6 14.1

Assets, %inc./(dec.) 4.8 1.1 4.6 4.0 4.3 2.4 1.1 3.4 4.8 6.5 4.8

Reserves, %inc./(dec.) 4.7 3.2 2.6 4.0 4.3 2.4 1.1 3.4 4.8 6.5 4.8

Investments, %inc./(dec.) (2.7) 10.6 (6.7) 1.0 (11.4) 14.6 (17.6) 29.8 5.5 4.6 (31.9)

SSS GROWTH OF ASSETS, RESERVES AND INVESTMENTS

30.0

25.0

20.0

15.0

10.0

5.0

0.0

(5.0)

400.0

200.0

0.0

(200.0)

(400.0)

(600.0)

(800.0)

(1,000.0)

(1,200.0)

(1,400.0)

(1,600.0) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Amount %inc./(dec.)

1.3 1.7

6.84.1 5.3

11.5

15.2

22.1 21.0

24.1

(0.3)

SSS Net Revenue

Am

oun

t in

bill

ion

pes

os

%in

c./(

dec

.)

SSS Net Revenue(Amount in Billion Pesos)


2007 11.5 118.0

2008 22.1 91.4

2009 15.2 (31.0)

2010 21.9 43.7

2011 24.1 10.0

sssar1.indd 49 1/9/13 9:34 AM


EMPLOYEES’ COMPENSATION AND STATE INSURANCE FUND PROGRESS OF OPERATIONS

EC Contributions, Investment & Other IncomeBenefits, and Operating Expenses & Others


Year Contributions Investment & Other Income

Benefits Operating Expenses& Others

2007 1.06 0.75 1.08 0.12

2008 1.21 1.24 1.10 0.11

2009 1.18 1.00 1.09 0.11

2010 1.32 0.83 1.09 0.10

2011 1.37 1.30 1.08 0.10

0.87 0.86

1.11

1.50

0.610.73

0.54

0.960.99

2.0

1.5

1.0

0.5

0.0

1.5

1.0

0.5

0.0

(0.5)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Amount %inc./(dec.)

EC Net Revenue

1.25

0.90

2.001.801.601.401.201.000.800.600.400.200.00

Am

oun

t in

bill

ion

pes

os

Contributions

Benefits

Investment & Other Income

Operating Expense & Others

2001

0.46

1.85

1.20

0.24

2010

1.32

0.83

1.09

0.10

2009

1.18

1.00

1.09

0.11

2008

1.21

1.24

1.10

0.11

2007

1.06

0.75

1.08

0.12

2006

0.91

1.15

1.07

0.13

2005

0.85

1.44

1.09

0.13

2004

0.85

1.32

1.14

0.14

2003

0.79

1.07

1.18

0.13

2002

0.49

1.80

1.31

0.25

EC Contributions, Investment & Other Income, Benefits, and Operating Expenses & Others

2011

1.37

1.30

1.08

0.10


2007 0.61 (0.29)

2008 1.25 1.04

2009 0.99 (0.21)

2010 0.96 (0.03)

2011 1.50 0.56

EC Net Revenue(Amount in Billion Pesos)

sssar1.indd 50 1/9/13 9:34 AM


Juan B. Santos Chairman

Emilio S. de Quiros, Jr.Vice Chairman

Social Security Commission

sssar1.indd 51 1/9/13 9:35 AM


Marianita O. MendozaCommissioner

Bienvenido E. LaguesmaCommissioner

Diana B. Pardo-AguilarCommissioner

Ibarra A. MalonzoCommissioner

Eliza Bettina R. AntoninoCommissioner

Daniel L. EdralinCommissioner

Rosalinda Dimapilis-BaldozEx-Officio Member, Secretary of Labor and Employment

Social Security Commission

sssar1.indd 52 1/9/13 9:35 AM


Emilio S. de Quiros, Jr.

PRESIDENT AND CHIEF EXECUTIVE OFFICER

Marissu G. Bugante

Amador M. Monteiro

Antonio S. Argabioso

Miguel E. Roca, Jr.

Nicholas C. Balbuena Jesse J. Caberoy

EXECUTIVE VICE PRESIDENT

Edgar B. Solilapsi

SENIOR VICE PRESIDENT & EQUIVALENT RANK

VICE PRESIDENT & EQUIVALENT RANK

Jose B. Bautista Eddie A. Jara

Judy Frances A. See

Social Security System

sssar1.indd 53 1/9/13 9:36 AM


Milagros M. Pagayatan

Mario R. Sibucao

Santiago Dionisio R. Agdeppa

Agnes A. San Jose

Gwen Marie Judy D. Samontina

Alfredo S. Villasanta

Gamelin Z. Oczon

Alberto C. AlburoVilma P. Agapito Elvira G. Alcantara-Resare

Maria Lourdes N. Mendoza

Naciancino L. Monreal


May Catherine C. CiriacoRizaldy T. Capulong Antonio G. Maralit

ASSISTANT VICE PRESIDENT, DIVISION HEAD & EQUIVALENT RANK

sssar1.indd 54 1/9/13 9:38 AM


Renato M. Custodio

Antonette L. Fernandez

Hidelza B. CastilloConsolacion M. Cancio Nilo D. Despuig

Rodrigo B. Filoteo Josefina O. Fornilos

Renato N. Malto

Reynaldo C. OrielLuis V. Olais

Ma. Luz C. Generoso

Johnsy L. Mangundayao

Joel P. PalaciosLeticia B. Ong

Josie G. MaganaEdmund P. Lee


sssar1.indd 55 1/9/13 9:39 AM


Mariano Pablo S. Tolentino Emmanuel A. Trinidad Joselito A. Vivit

Juanita L. ReyesEmmanuel R. Palma

Helen C. SolitoAida V. Rubia (Retired)

Daisy S. Real

Manolito C. Tagalog


sssar1.indd 56 1/9/13 9:40 AM


SSC & SSS

SOCIAL SECURITY COMMISSION

JUAN B. SANTOSChairman

EMILIO S. DE QUIROS, JR.Vice- Chairman

DIANA PARDO-AGUILARELIZA R. ANTONINOROSALINDA D. BALDOZDANIEL L. EDRALINBIENVENIDO E. LAGUESMAIBARRA A. MALONZOMARIANITA O. MENDOZAMembers

SSS MANAGEMENT

PRESIDENT and CEO

EMILIO S. DE QUIROS, JR.President and Chief Executive Officer

EXECUTIVE VICE PRESIDENT

EDGAR B. SOLILAPSIInvestments Sector

SENIOR VICE PRESIDENT AND EQUIVALENT RANK

JOSE B. BAUTISTALuzon Operations Group

EDDIE A. JARAVisayas and Mindanao Operations Group

AMADOR M. MONTEIROLegal Services Division

MIGUEL E. ROCA, JR.Information Technology Management Group

JUDY FRANCES A. SEEAccount Management Group and Concurrent Head, International Operations Division

VICE PRESIDENT AND EQUIVALENT RANK

ANTONIO S. ARGABIOSOLarge Accounts Management Division and OIC, NCR Large Accounts Management Department

NICHOLAS C. BALBUENAPlanning and Research Division

MARISSU G. BUGANTEPublic Affairs and Special Events Division

JESSE J. CABEROYHuman Resource Management Division

RIZALDY T. CAPULONGCapital Market Division/Actuarial Department

MAY CATHERINE C. CIRIACOManagement Services and Planning Division and Concurrent Head, Corporate Policy and Planning Department

ANTONIO G. MARALITTechnical Support Division

MARIA LOURDES N. MENDOZAOffice of the President and CEO

NACIANCINO L. MONREALNCR Operations Group

GAMELIN Z. OCZONTreasury Division

MILAGROS M. PAGAYATANOffice of the Commission Secretary

GWEN MARIE JUDY D. SAMONTINAComputer Operations Division

AGNES E. SAN JOSEBenefits Administration Division

MARIO R. SIBUCAOMember Services Division

ALFREDO S. VILLASANTAGeneral Services Division

ASSISTANT VICE PRESIDENT, DIVISION HEAD AND EQUIVALENT RANK

VILMA P. AGAPITOLuzon Central Division

SANTIAGO DIONISIO R. AGDEPPAOperations Legal Department

ALBERTO C. ALBURONCR Central Division

ELVIRA G. ALCANTARA-RESAREFinancial and Budget Division

CONSOLACION M. CANCIO NCR South Division and Concurrent Head, Central Processing Division

HIDELZA B. CASTILLOApplication Systems Division

RENATO M. CUSTODIO Commission Legal Department I

NILO D. DESPUIGBicol Division

ANTONETTE L. FERNANDEZInternal Audit Services Division

RODRIGO B. FILOTEOWestern Mindanao Division

JOSEFINA O. FORNILOS Northern Mindanao Division

MA. LUZ C. GENEROSOLending and Asset Management Division

EDMUND P. LEEOffice of the President and CEO

JOSIE G. MAGANANCR North Division

RENATO N. MALTORecord and Information Management Department

JOHNSY L. MANGUNDAYAOOperations Accounting Division

LUIS V. OLAIS Luzon North Division

LETICIA B. ONGMedical Program Department

REYNALDO C. ORIELBranch Operations Sector

JOEL P. PALACIOSMedia Affairs Department

EMMANUEL R. PALMASouthern Mindanao Division

DAISY S. REAL Human Resource Staffing and Development Department

JUANITA L. REYESOffice of the President and CEO

AIDA D. RUBIALuzon South Division

HELEN C. SOLITOCentral Visayas Division

MANOLITO C. TAGALOGWestern Visayas Division

MARIANO PABLO S. TOLENTINOAsset Management Department

EMMANUEL A. TRINIDADCash Department

JOSELITO A. VIVITCorporate Legal Department OIC, Legal Services Division

DEPARTMENT HEAD AND OFFICER-IN-CHARGE

LEO CALIXTO C. ABAYONNetwork and CommunicationsDepartment

NAOMI A. ANTAZO*Commission Legal Department II

RITA G. BALOY*Pensions Administration Department

MELANIE O. BARCELONA*Luzon Large Accounts Department

ROBERTO B. BAUTISTAInternational Affairs Department

AUREA G. BAYBranch Systems and Procedures Department

MARILOU M. BETICInvestments Accounting Department

LILIAN T. BORGOñAProfessional Sector Department

REGINALD G. CANDELARIA*Equities Department

FELIPE R. CABAÑERO Computer Resource Management Department

ELEONORA Y. CINCOQuality Management Department

ROBERT B. CLEMENTE*Applications Development and Maintenance Department V

ROSA T. CRISOSTOMOApplications Development and Maintenance Department IV

CYNTHIA C. CRUZ*Retirement, Death and Funeral Department

GLORIA Y. CUISIABranch Evaluation Services Department

CELSO C. CUNANANData Center Operations Department

ELPIDIO S. DE CHAVEZBranch Support Services Department

MARIE ADA ANGELIQUE T. DE SILVAHousing and Business Loans Department

EUGENIA D. DELA CRUZMember Relations Department

NORMITA M. DOCTORSickness, Maternity and Disability Department

BELINDA B. ELLAGeneral Accounting Department

JOCELYN M. EVANGELISTABranch Operations Audit Department

ROGELIO A. FUNTELARTechnical Support Department I

SONIA P. GUINTO*Corporate Communications Department

NEIL F. HERNAEZ Visayas-Mindanao Large Accounts Department

STELLA C. JOSEF*IT Governance and Standards Department

JEAN V. LAGRADA Budget Department

ROGELIO V. LANUZA*Technical Support Department II

FIEL LUIS R. LOMUNTAD*Technology Research Department

ROSALINA C. MANANSALACollection Data Processing and Reconciliation Department

MARY ANN R. MANDAPCommission Secretariat Department

NORA M. MERCADOCooperatives and Informal Sector Department

MIRIAM J. MILAN*Member Loan Department VAN RENE M. ORPILLAApplications Development and Maintenance Department I

ALAN GENE O. PADILLAApplications Development and Maintenance Department III

VENUS D. PASCUAL Branch Accounting Department

VICTORIA U. POQIUZ Health Care Department

DAMIANA A. QUEZONApplications Development and Maintenance Department II

CECILIA S. ROA*Contributions Accounting Department

HYDEE R. RAQUID Support Services Audit Department

REYNALDO S. RASCO*Investments Research and Support Department

NESTOR R. SACAYANEngineering and Maintenance Department

MA. SALOME E. ROMANOInformation Systems Security Department

JOSE ANTONIO L. SALAZAR ID Card Production Department

FLORITA E. SANTARROMANA*Medical Operations Department

CARMEN O. SORIANOManagement Support Services Department

SYLVETTE C. SYBICOForeign Branch Expansion and Monitoring Department

Management Directory

sssar1.indd 57 1/9/13 9:40 AM


MARISSA L. TIZON Human Resource Services Department

ARNOLD A. TOLENTINOManagement Information Services Department

IKE A. TUBIOFraud Investigation Department

GUILLERMO M. URBANO, JR.*Corporate Bonds and Loans Department

JOY A. VILLACORTA Overseas Filipino Workers Department

MARIVIC S. VILLARAMATechnical Support Department III

ANITA A. VILLENA Office Services Department

BRANCH HEAD/OFFICER-IN-CHARGE

NATIONAL CAPITAL REGION (NCR) OPERATIONS GROUP

NCR CENTRAL DIVISION

ARTHUR O. ABARYNovaliches Branch

JOCELYN Q. GARCIASan Francisco Del Monte Branch

JOSEFINA EDITA F. MATACommonwealth Branch

ELIZABETH C. REYES Diliman Branch

LORELEI B. SOLIDUMCubao Branch

NCR NORTH DIVISION

CYNTHIA O. BARCELONPasig Shaw Branch

AVELINA M. BAUTISTA Valenzuela Branch

VIRGINIA F. CALASAHANLegarda Branch

MILAGROS N. CASUGA Kalookan Branch

JUANILLO S. DESCALZO III*Malabon Branch

ZARA M. DIZON San Mateo Branch

BERLITA F. FABRERO Antipolo Branch

AMELIA A. GUILLERMO Welcome Branch

LUZVIMINDA J. LIMCAUCO Binondo Branch

PRISCILA F. MARALITCainta Branch

FELIZARDO B. MINOR, JR.Pasig-Palatiw Branch

FERNANDO O. NICOLAS *Marikina Branch

LORETO D. SUMANGIL*Manila Branch

NCR SOUTH DIVISION

HELEN L. ABOLENCIA Makati II - JP Rizal Branch

MARIA RITA S. AGUJAMakati III - Ayala Branch

TERESITA L. ARAOSPasay-Roxas Boulevard Branch

LETICIA G. BARBERS Alabang Branch

RHODORA G. BONITA Pasay-Taft Branch

EDMOND G. CHAN*Mandaluyong Branch

MA. LOURDES T. FLORESMakati I - Gil PuyatBranch

CHRISTINE GRACE B. FRANCISCO Parañaque Branch

FE MARIE F. GERALDO Taguig Branch

LIBERTY A. GORDOVEZ*San Juan Branch

AMALIA N. TOLENTINO Las Piñas Branch

LUZON OPERATIONS GROUP

LUZON NORTH DIVISION

JOSEPHINE C. ABRIL La Union Branch

ESTRELLA R. ARAGONCauayan, Isabela Branch

PORFIRIO M. BALATICOTuguegarao Branch

JANET D. CANILLAS Vigan Branch

BENEDICTA B. GARCIA Bangued Branch

BENJAMIN R. LOPEZ Baguio Branch

ROMEO E. REYES Santiago, Isabela Branch

NANCY M. UMOSOLaoag Branch

ABELARDO C. YOGYOG Bontoc Branch

LUZON CENTRAL DIVISION

JOSE ALVIN M. ALTREUrdaneta BranchTemporarily Reassigned to Luzon Central Cluster Office

SIMPLICIA M. BANIAGO Malolos Branch

NORMITA M. CRUZMariveles –BEPZ Branch

MARITES A. DALOPESta. Maria Branch

PABLITA A. DAVIDMeycauayan Branch

CORITA M. GADUANGPampanga Branch

ELIZABETH R. GARCIA Balanga Branch

ROLANDO C. MENDOZA Baler Branch

MARIA MAXIMA C. MACARAEGOlongapo Branch

ALBINA LEAH C. MANAHAN Baliuag Branch

LAURA M. MARIANO Angeles Branch

NARCISO M. MARTINEZ, JR.Alaminos Branch

MONALISA C. NARDO Camiling Branch

CEASAR P. SALUDO Dagupan Branch & Urdaneta Branch (in concurrent capacity)

MARILOU M. SANTOS*Iba Branch

MIRIAM M. TAGLE*Cabanatuan

GUILLERMO S. TARUC Tarlac Branch

LUZON SOUTH DIVISION

GREGORIO P. ASENDIDO Calapan Branch

SANTISIMA ROSARIO C. BAACPalawan Branch

CORAZON L. BALAGBIS Batangas Branch

ROMAN R. BELENBoac Branch

VICTORINA G. CARLOS Tagaytay Branch

VIRGINA S. CRUZ Bacoor Branch

JOSEPHINE S. HIPOLITOSta. Cruz Branch

NELSON P. IBARRA Calamba Branch

VICTORIA A. LIWANAGLucena Branch

GENARA G. MARASIGAN*Carmona Branch

ROBERT D. MARCELO San Jose, Occ. Mindoro Branch

ROBERTO S. PAGAYUNANLipa Branch

EXEQUIEL O. PANGANIBAN Rosario - EPZA Branch

MARINA PAULINA G. PANTE Infanta Branch

ANTONIO V. SORIANO Biñan Branch

WENCESLAO G. VIRTUCIO, JR.San Pablo Branch

BICOL DIVISION

NILO D. ALMOSERAMasbate Branch

DIVINA T. AVILAVirac Branch

ALBERTO R. BONAFE, JR.Sorsogon Branch

ANTONIO A. CASIMIROTabaco Branch

BEATRIZ C. GUMABAOGoa Branch

CLARIBEL L. REBUENONaga Branch

ELENITA S. SAMBLERO Legaspi Branch

VIRGILIO A. SANTIAGO Daet Branch

PRISCO S. SORSONAIriga Branch

VISAYAS AND MINDANAO OPERATIONS GROUP

CENTRAL VISAYAS DIVISION

GEMMA C. CABERTE Ormoc Branch

LILIBETH A. CAJUCOM Tacloban Branch

NICETA M. CARRETAS Cabalogan Branch

ERIC A. CORONADOToledo Branch

MARIO V. CORROCebu Branch

RODRIGO B. GREGANAMaasin Branch

ALBERTO L. MONTALBO Lapu-Lapu Branch

BENJAMIN A. POMBOCalbayog Branch

MARINO B. TALICTIC Tagbiliran Branch

WESTERN VISAYAS DIVISION

ELVIRA B. BANICO Iloilo Branch

LILANI B. BENEDIAN Bais Branch

RAUL A. CASIANOBacolod Branch

EVA J. CURA* San Jose, Antique Branch

ISAAC P. CIOCON, JR.Kalibo Branch

FELICITAS A. DEMANDANTE Sagay Branch

REYNALDO V. ESPINOSA Roxas Branch

SOCORRO B. FERRER Kabankalan Branch

JANE T. GARGOLESVictorias Branch

VICTOR M. NICOR Bago Branch

EMILIA B. SOLINAP San Carlos Branch

IRENEO T. VILLAFLOR Dumaguete Branch

NORTHERN MINDANAO DIVISION

EDWIN M. ALOCagayan De Oro Branch

PERKINS B. CALIXTRO Camiguin Branch

BENIGNO J. DAGANI JR.Surigao Branch

ANTONIO B. FABIA Valencia Branch

ANNA PEARL J. FUENTESOzamis Branch

JOSE ROEL J. HERBIETOOroquieta Branch

MA. RAINE L. JAMERO Butuan Branch

CHERYL V. JARIOL Iligan Branch

OSWALDO B. MONTENEGROTandag Branch

MARILYN O. TAMAYOGingoog Branch

SOUTHERN MINDANAO DIVISION

JOSE S. CATOTO, JR.General Santos City Branch

JOVE L. COLASITODavao Branch

RIZALITO ALBERTO C. DE LEONToril Branch

SERAFIN G. HINGCO Kidapawan Branch

EDGAR P. JUANICH Digos Branch

SUKARNO D. PENDALIDAYCotabato Branch

ROSELANE B. PLAZAMati Branch

SUZETTE H. PURIFICACION Tacurong Branch

REDENTOR S. VIOLA Koronadal Branch

JULIOUS J. WALES Bislig Branch

VALERIANO P. WENCESLAO, JR.Tagum Branch

WESTERN MINDANAO DIVISION

JAMES B. BUCKLY Pagadian Branch

ELIZABETH G. CABATINGAN Zamboanga Branch

JAIME S. CASUMPANG Basilan Branch

RUDY M. LACANDALOIpil Branch

GODOFREDO M. MARTINEZ Dipolog Branch

FERDAUSI A. SALASAJolo Branch

SSS FOREIGN REPRESENTATIVE OFFICES

FOREIGN BRANCH EXPANSION MONITORING DEPARTMENT & POEA

FLOCERFIDA R. PALMEROSSS POEA Office

ASIA

ROBERTO V. ROLDANHong Kong Representative Office

LESLIE P. DE LEON Taipei, Taiwan Representative Office

MARY JESSIELYN M. CABUNGCAGBrunei Darussalam Representative Office

MARITES C. MARINSingapore Representative Office

RANULFO B. TANQUEZONKuala Lumpur, Malaysia Representative Office

MIDDLE EAST

LYDIA E. CABAGNOTDubai, UAE Representative Office

MICHAEL D. INGALDoha, Qatar Representative Office

WILMA M. ORTIZ Abu Dhabi, UAE Representative Office

DANILO Q. CALAPERiyadh, KSA Representative Office

JOHN L. SIBBALUCAJeddah, KSA Representative Office

MARK ROUE N. OLIVAAl-Khobar, KSA Representative Office

JUAN D. ERIBAL, JR.Kuwait Representative Office

EUROPE

JONNAH A. CRUZADARome, Italy Representative Office

THELMA V. VENTURANZAMilan, Italy Representative Office

ALFREDO JOSE I. RECIO, JR.London, UK Representative Office

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SOCIAL SECURITY SYSTEMSSS Building, East Avenue, Diliman

Quezon City, PhilippinesTel. Nos. 920-6401 / 920-6446

E-mail: [email protected]

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SOCIAL SECURITY SYSTEM ANNUAL REPORT

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