The Social Security System (SSS) yesterday reiterated that the accounting net loss shown in its 2021 audited financial statements is primarily due to the presentation of policy reserves in its balance sheets, which does not affect its current cash flow and funding situation.
“In 2021, we recorded an P872 billion change in policy reserves that caused a comprehensive loss of P827 billion in our statement of comprehensive income. The increase in policy reserves includes a P400 billion Margin for Adverse Deviation (MfAD), a one-time initial provision that serves as a buffer for conservatism,” SSS President and CEO Michael G. Regino explained.
The SSS expects the increase in MfAD to be significantly lower in succeeding years.
“We want to add that these policy reserves are not actual cash that went out of the SSS fund but are estimates of the reserves to cover future claims of our members. If we are to look at our income versus expenses without these policy reserves, we registered earnings of P28 billion from our operations last year,” he said.
The recognition of policy reserves, representing Social Benefit Liabilities (SBLs) and MfAD, is in full compliance with Philippine Financial Reporting Standards (PFRS) 4, which the SSS adopted starting with its 2020 financial statements.
According to the Commission on Audit’s (COA’s) 2021 Annual Financial Report for Government Corporations, the change in policy reserves, as required by PFRS 4, was recognized solely by the SSS. This contributed to SSS receiving an unmodified opinion from COA in 2021, which is the most favorable audit rating a government agency can receive.
“We assure our members and their beneficiaries that we remain financially viable in terms of providing benefits. Our last published actuarial valuation shows that our fund life is projected to last until 2054,” Regino said.
“The reason why we are recognizing these future liabilities as early as now is for us to have a clearer view of our long-term financial standing that would guide us and the national government in making wise and informed decisions in managing our fund,” he added.*