Government offices urged to remit EC premiums

Unless government agencies promptly remit their Employee Compensation (EC) contributions, the EC fund will no longer be able to settle claims for death benefits, disability and work-related injuries filed by state employees.

The Government Service Insurance System (GSIS) sounded out this alarm saying the EC has become a sinking ship because of heavy indebtedness arising from unrealistic monthly contributions and huge payment of claims. The problem has become worse with the failure of several government agencies to remit EC contributions for state employees to the GSIS. It appealed to the administrators of all government agencies to quickly remit their contributions to the EC as mandated by PD 626.

The GSIS also underscored the need for the ECC to review the P30-monthly contribution per employee as allocated by the law, saying the amount has been rendered unrealistic by prevailing economic conditions. The GSIS explained that the Employees Compensation Commission (ECC), the policy-making body of the EC Fund, has the power to fix the rate of contributions and the responsibility to ascertain the actuarial stability of the EC Fund.

The contributions of the employer-agencies are remitted to the EC where the GSIS draws funds to pay pension claims, medical, death and disability benefits.

GSIS officials said they have resorted to "inter-fund borrowings" from its subsidiaries such as the Optional Life Insurance Fund (LIF) and the General Insurance Fund (GIF) to enable the EC to meet its obligations to state workers whose aggregate claims exceeded remittances. The imbalance has forced the GSIS to manage the EC despite heavy losses since 1987. Its losses have reached the P432-million mark as of last year.

As of Dec. 31, 2001, the amount advanced by the GSIS to the EC Fund has hit P2.4 billion excluding interest amounting to P822 million. The total indebtedness of the EC Fund to GSIS has reached more than P3.2 billion.

The GSIS lamented that the ECC has not acted on its recommendation to adjust the P30-per employee monthly contribution to the EC. The Pension Fund emphasized that the recommendation, along with a number of the proposed remedial measures, was submitted to the ECC several years ago, but no action has been taken until now.

Oddly enough, the Department of Budget and Management (DBM) has been identified as one of the most delinquent agencies insofar as contribution remittances to the EC are concerned. DBM reportedly owes the EC P588 million in unremitted EC premiums covering the period 1993 to 1997 alone.

"Although payment for this amount has been covered by a memorandum of agreement signed in May last year, the accord has yet to be implemented," the GSIS said.

Other alleged delinquent agencies are the Armed Forces of the Philippines, the Philippine National Police, the Education Department and local government units whose indebtedness to the EC totaled P926 million as of last year.

Meanwhile, the GSIS was forced to take drastic moves such as stopping inter-fund borrowings for the EC to prevent an imminent collapse of the OLIF and the GIF effective last month.

The GSIS board also rules that payment of EC benefits would be done based on actual collections, although normal processing of claims will continue. The GSIS leadership, however, gave assurances that it has taken steps to prevent reduction of EC pensions and ensure prompt payment of benefit claims.