Prepared by First Life Financial Company. I SUMMARY Social Security Eligibility Retirement Contributions All persons gainfully employed under age 60. Self-employed are covered also. 60M/F To Social Security: 10.4% shared by employer and employee. To Employees Compensation Programme (EC): 1% of the employee s monthly salary. Fully employer paid. To National Health Insurance Programme: 2.5% of monthly salary base, shared equally by employee and employer. Retirement Old Age Pension: Highest amount resulting from 3 different calculations. Benefit guaranteed for 5 years. Disability Death Medical Total and permanent disability with at least one monthly contribution preceding disability. Pension and lump sums depend on years of contributions. Minimum 36 monthly contributions required prior to death. Pensions and/or lump sums depend on years of insurance. Funeral grant is also paid. Hospital, surgical and medical benefits are covered. Minimum 3 monthly contributions are required. Employee Reference Manual 2015-2016 - 1 - Swiss Life Network
Private Benefit Plans Eligibility Retirement Age Contributions Retirement A regular employee who has been with the company for at least 6 months is eligible up to the age of 65. 60M/F Usually non contributory for employees. Retirement Lump Sum: Legal minimum benefit 50% of final monthly salary times service. Usually 1 month s salary times service (legal benefit normally not integrated). Disability Lump sums amounting to accrued retirement benefit. Death Typically same benefit as disability, in addition to lump sum death benefit of 1 to 2 annual salaries. Medical Vesting Private medical plans are normally integrated with state scheme. 100% accrued retirement benefit on involuntary termination; otherwise vesting schedule is used with a maximum vesting period of 20 years. Taxation Employer Contributions Employee Contributions Deductible on all lines of insurance. Not deductible. Life benefits are taxed if beneficiary has no vested right. Otherwise not taxed. Health and disability benefits are not taxed. Retirement benefits are not taxed if plan is qualified under tax laws and employee is at least age 50 with 10 years of service. Employee Reference Manual 2015-2016 - 2 - Swiss Life Network
II INTRODUCTION Country Statistics Population/ growth rate Age structure 0-14 years 15-24 years 25-54 years 55-64 years 65 years and over GDP purchasing power parity/ Real growth rate Agriculture Industry Services Unemployment rate Inflation rate Annual gross salary* Para-professionals Professionals Management Legal minimum wage Exchange rate on February 27, 2015 Currency: Philippine Peso 107,668,231 (July 2014 est.) / 1.81% (2014 est.) 33.7%19.0% 37.0% 5.8% 4.4% (2014 est.) $454.3 billion (2013 est.) 6.8% (2013 est.)11.2%31.6% 57.2% (2013 est.) 7.4% (2013 est.) 2.8% (2013 est.) in,000 PHP General: 258 Skilled: 409 Junior: 650 Senior: 1,031 Lower: 1,963 Upper: 3,384 PHP 466.00 per day (National Capital Region) 1 PHP = 0.0227 1 PHP = 0.0202 EUR *Source: Mercer s International Geographic Salary Differentials, Edition 2015 Legislation and Insurance Market Update in Brief No major changes in 2014. Employee Reference Manual 2015-2016 - 3 - Swiss Life Network
III SOCIAL SECURITY Background Information The Social Security Act was implemented in September 1957 and amended in April 1997 to further strengthen the system. It is now known as Social Security Act of 1997. Social security programmes provide for old age benefits and replacement income for workers in times of disability, death, sickness and maternity. Dependants pensions and funeral benefits are also available. Social Security for private employees is administered by the Social Security System (SSS), while the Government Service Insurance System (GSIS) administers Social Security for workers in the public sector. The SSS administers two programmes namely the Social Security Programme and the Employee Compensation Programme (EC). The EC started in 1975 and provides double compensation to workers when illness, death or accident occurs during work-related activities. EC benefits are limited to employed persons. The National Health Insurance Programme (NHIP), formerly known as Medicare, is a health insurance programme for Social Security System (SSS) members and their dependants. The Philippine Health Insurance Corporation, or PhilHealth, is the mandated administrator of the Medicare programme under the National Health Insurance Act of 1995. The SSS, which administered the Medicare programme for private sector workers, has transferred the administration of the programme to PhilHealth. Eligibility All gainfully employed persons, whether permanent, temporary or provisional, and self-employed persons, aged 60 or below, are compulsorily covered. Contributions Social Security Employee Compensation Programme (EC) Employee Compensation Programme (EC) National Health Insurance Programme Monthly salaries below PHP 15,750 Monthly salaries above PHP 15,750 Min. PHP 100, max. PHP 750 (total) Employer Employee 7.37% of monthly salary 3.63% of monthly salary credit credit PHP 10 - PHP 30-1.25% of monthly salary 1.25% of monthly salary credit credit Social security contributions are based on 29 salary brackets. The maximum monthly salary credit is PHP 16,000. The minimum monthly salary credit is PHP 1,000 as mandated by Act 8282 of the Social Security Act of 1997. EC contributions are fully employer paid. The salary brackets are the same as for Social Security. National Health Insurance Programme contributions are based on 27 salary brackets. The maximum monthly salary credit is PHP 35,000. The minimum monthly salary credit is PHP 7,999.99. Employee Reference Manual 2015-2016 - 4 - Swiss Life Network
Retirement Retirement Age Normal retirement: Late retirement: 60M/F 65M/F Qualifying Conditions At least 120 monthly contributions prior to the semester of retirement, and The individual must have reached age 60, and The individual must have ceased employment, or The individual has reached age 65, whether employed or not. The old age pension is the sum of the monthly pension and the dependants pension. The monthly pension is guaranteed for 60 months and is the highest of the following amounts: PHP 300 + 20% of the average monthly salary credit (AMSC) + 2% of the AMSC for each credited year of service in excess of 10 years 40% of AMSC PHP 1,200 Schedule of payments consists of 13 per year, with the 13th pension equal to the most recent payment. The insured has the option to receive the first 18 monthly pensions as a lump sum discounted at a preferential rate of interest. A dependant s pension is the higher of: 10% of monthly pension PHP 250 The dependant s pension is paid for each dependant child up to a maximum of 5 children. This pension stops when any one of the following occurs to the dependant: Reaches age 21 Marries Finds employment Death The minimum pension under new social security is PHP 1,200 per month if the member has at least 10 years of service, and PHP 2,400 if the member has at least 20 years of service. An employee who does not qualify for a pension is refunded with a lump sum amounting to the total contributions paid (employee and employer) plus interest. Employee Reference Manual 2015-2016 - 5 - Swiss Life Network
Disability Qualifying Conditions A permanently partially or totally disabled member shall be entitled, if at least one monthly contribution has been paid prior to disability. Only totally disabled persons are entitled to a dependant s pension. A monthly cash benefit equal to the old age pension is paid to a qualified permanently and totally disabled member who has paid at least 36 monthly contributions and a lump sum to a member who has not paid the required monthly contributions. The lump sum equals the monthly pension times the number of monthly contributions, or 12 times the monthly pension, whichever is higher. The lowest monthly pension depends on the years of service and amounts to: Calendar Years of Service Monthly Cash Benefit Less than 10 years PHP 1,000 10 20 years PHP 1,200 At least 20 years PHP 2,400 In addition to the monthly pension, a supplementary allowance of PHP 500 is paid to the pensioner with total or partial disability. The allowance will provide additional financial assistance to meet the extra needs arising from the disability. A qualified partially disabled member shall be entitled to the monthly pension which is limited to a certain number of months depending on the degree of disability. Otherwise, the benefit shall be a percentage of the lump sum benefit with regard to the degree of disability as determined by the Commission. The dependant s pension is paid under the same conditions as described in the previous chapter. Death Qualifying Conditions The primary beneficiaries shall be entitled to a monthly pension upon the death of a member who has paid at least 36 monthly contributions prior to the semester of death. A monthly basic pension (13 payments per annum) equal to the old age pension is paid for life to the primary beneficiaries of a deceased member who was qualified. The monthly pension is paid for not less than 60 months and is the highest of the following amounts: PHP 300 + 20% of the average monthly salary credit (AMSC) + 2% of the AMSC for each credited year of service in excess of 10 years 40% of AMSC PHP 1,000 for less than 10 accredited years of service (CYS), PHP 1,200 for 10-20 CYS or PHP 2,400 for more than 20 CYS. If the deceased member had not paid the required 36 months of contributions, the primary or secondary beneficiaries are entitled to a lump sum benefit equivalent to the monthly pension times the number of monthly contributions paid to the social security system, or 12 times the monthly pension, whichever is higher. Employee Reference Manual 2015-2016 - 6 - Swiss Life Network
PHP 20,000 is granted to help defray funeral expenses upon the death of a member, including permanently totally disabled members or retirees. Sickness Qualifying Conditions A member who has paid at least 3 monthly contributions in the 12 months immediately preceding sickness or injury, and is confined for more than 3 days in a hospital or elsewhere with the Commission s approval, is entitled to this benefit. Temporary disability (sickness) benefit is payable for up to 120 days per calendar year, not to exceed 240 days for the same illness. It amounts to 90% of the average daily salary credit. The maximum covered earning or compensation is PHP 15,000 per month. Medical/Health Qualifying Conditions The National Health Insurance Programme covers the following and their legal dependants: Employed members all those employed in the government and private sector Individually paying members self-employed, overseas Filipino workers, professionals in private practice Non-paying members retirees and pensioners of the government Service Insurance System (GSIS) and SSS (including permanent total disability and survivorship pensioners of the SSS) prior to the effective date of the Republic Act 7875 on March 4, 1995 Indigent members. The benefit package includes the following categories of personal health services: Inpatient hospital care Room and board Services of health care professionals Diagnostic, laboratory and other medical examination services, including use of surgical or medical equipment and facilities Prescription drugs, subject of the limitations stated in Section 27 of RA 7875 and Inpatient education packages. Outpatient care Services of health care professionals Diagnostic, laboratory and other medical examination services Personal preventive services Prescription drugs, subject to the limitations described in Section 27 of RA 7875 and Emergency and transfer services. Employee Reference Manual 2015-2016 - 7 - Swiss Life Network
Work Injury Qualifying Conditions The Employees Compensation (EC) programme aims to assist workers and their dependants in the events of employment-related injury, sickness, disability or death. The benefits under this programme may be enjoyed simultaneously with benefits under the social security programme. Medical services are limited to accredited hospital and physician ward services. Ward services consist of all services an in-patient would ordinarily receive in a hospital. Rehabilitation services consist of medical, surgical and hospital treatment. Income cash benefits are provided for: Temporary Total Disability or Sickness: The income benefit is 90% of the average daily salary credit with a maximum of PHP 200 per day for private workers and PHP 90 per day for government employees. It is payable for a period of maximum 120 consecutive days for the same disability, but may be extended for 240 days if additional treatment is required. Permanent Total Disability: This provides a monthly pension until death plus 10% for each child, up to 5 dependant children, beginning with the youngest. The monthly pension is the greater of 1.15 times the SSS basic monthly pension or PHP 2,000. Benefit is suspended if the employee is gainfully employed, recovers or fails to show up for examination. Permanent Partial Disability: EC provides a monthly pension equivalent to the pension for permanent total disability, limited to the number of months designated by law for a particular disability. Death Benefit: A monthly pension, equal to the monthly income benefit paid for permanent total disability, is provided to the deceased member s primary beneficiaries guaranteed for 5 years plus 10% of such benefit for each child, up to 5 dependant children. In the absence of primary beneficiaries, the secondary beneficiaries are entitled to 60 times the monthly pension, but not less than PHP 15,000, paid as a monthly pension. The monthly pension is the greater of 1.15 times the SSS monthly pension or PHP 2,000. Funeral Grant: Primary beneficiaries, or any other person who takes responsibility for funeral costs, will also receive a funeral benefit of PHP 10,000. Unemployment There is no provision for unemployment benefits under Philippine law. Employee Reference Manual 2015-2016 - 8 - Swiss Life Network
Other Maternity Maternity benefit is 100% of average daily wage payable for 60 days or 78 days in case of caesarean delivery. It will be paid only for the first 4 children. A member is entitled to a maternity benefit if her employer has paid at least 3 monthly maternity contributions in the 12 months immediately preceding the semester of childbirth or miscarriage. Taxation Employer contributions to Social Security are tax-deductible provided that certain conditions are met. These conditions include rules covering eligibility for benefits, discrimination and non-forfeiture. Employee contributions are not tax-deductible with the exception of medical insurance premiums. Social Security benefits are tax free. Other Information Reciprocal Social Security Agreements Austria, Belgium, Canada, France, the Netherlands, Northern Ireland, Norway, Spain, Switzerland, the United Kingdom and the United States of America. Employee Reference Manual 2015-2016 - 9 - Swiss Life Network
IV PRIVATE BENEFIT PLANS Background Information The Labour Code requires employers to grant certain minimum lump sum retirement benefits to employees (50% of 1 month s final salary for each year of service). Typical voluntary occupational retirement plans are final salary defined benefit plans, linked to the length of service, but generally not integrated with social security. Eligibility A regular employee who has been with the company for at least 6 months is eligible up to the age of 65. Contributions Usually non-contributory for employees. Retirement Retirement Age Normal retirement: Early retirement: Late retirement: 60M/F At least 50 years of age and 10 years of service 65M/F A common benefit basis is one that provides a lump sum of one month s basic salary for every year of service based on final basic salary. Vesting An occupational retirement plan will normally provide lump sum benefits on voluntary termination, according to a vesting scale applied to the accrued retirement benefits. This benefit can be used to offset the required termination indemnities. Disability 100% of retirement benefits accrued to date of disability. Benefit is paid as a lump sum. Permanent disability riders are often attached to the basic group life policy provided by employers. Death Typical life and accidental death and dismemberment coverage is one to two times annual salary. In addition, 100% of accrued old age benefits (same as disability benefit). Employee Reference Manual 2015-2016 - 10 - Swiss Life Network
Sickness and Work Injury Accidental death, dismemberment and permanent disability riders are often attached to the basic group life scheme provided by employers. Medical/Health Plans for daily allowance, surgery, in-hospital doctor s visits and maternity are offered. Supplementary major medical plans are available. Private medical plans are usually integrated with the social security Medicare programme. Instead of indemnity plans, some companies provide for employee membership in Health Maintenance Organisations (HMOs). The majority of these plans are non-contributory for the employee s benefits, but the employee pays 50% for dependants benefits. Other Termination Involuntary termination: Voluntary termination: Accrued old age benefits. According to vesting schedule with full vesting after 20 years. Taxation There is a 2% premium tax on all lines of insurance as well as a stamp duty (documentary stamp tax, DST) based on the value of the insurance policy. Contributions Employer contributions are tax-deductible, whereas employee contributions are not. Life benefits are taxable if the beneficiary does not have vested rights, but are not taxable if the beneficiary does. Health and disability benefits are not taxable. For company-sponsored employee benefit plans under a trust arrangement, death, disability and involuntary termination benefits are not taxable. Old age benefits are not taxable if the retirement programme is qualified under tax laws and the employee is at least 50 years old and with at least 10 years of service. Double Taxation Agreements Australia, Austria, Bahrain, Bangladesh, Belgium, Brazil, Canada, China, the Czech Republic, Denmark, Finland, France, Germany, Hungary, India, Indonesia, Israel, Italy, Japan, Korea (Republic), Kuwait, Malaysia, the Netherlands, New Zealand, Nigeria, Norway, Pakistan, Poland, Qatar, Romania, Russia, Singapore, Spain, Sri Lanka, Sweden, Switzerland, Thailand, the United Arab Emirates, the United Kingdom, the United States of America and Vietnam. Employee Reference Manual 2015-2016 - 11 - Swiss Life Network
Other Information Funding Methods Usually retirement benefits are funded through trust arrangements made by a plan sponsor. The following funding methods are found: Unit credit (accrued benefit cost method) Entry-age normal Attained-age normal Individual level premium Aggregate cost method The unit credit method and its modifications are very common. Pensionable Salary Final salary. Employee Reference Manual 2015-2016 - 12 - Swiss Life Network