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How SSB Reached the Point of Near Collapse

How SSB Reached the Point of Near Collapse
July 05
12:38 2019

Friday, July 5th. 2019 –

On July 1st, the first in a series of hikes to Social Security contributions to save the fund from total collapse, came into effect, affecting employers, employees and the bottom-lines of most every working person in the country. With many criticizing the protracted inaction of administrations past in addressing the eroding public fund, a number of issues affecting the board’s decision have come to light.

Many have criticized not just this government, but previous governments’ handling of SSB, essentially using the fund as a safety net and often for bad government investments. Certain politicians, senators and members of civil society and the unions have pointed out a deficiency in the systemic management of SSB and have called for legislative reforms to correct issues known to plague the Board.

One former board member told the Reporter that the fund was well designed and would be healthy today were it not for unanticipated politically engineered and inspired shocks. The former board member cited $43 million spent on government’s National Health Insurance (NH) program; $48 million on Non-Contributory Pensions; $8 million on Securitization; an outstanding $5 million owed to the board by Minister Rene Montero for an island previously owned by SSB; $14 million spent on Sunshine Holdings; and housing giveaways as burdens that have played significant roles in deteriorating the fund to the point of equilibrium.

Beyond bad investments, the SSB has been criticized for its lack of commitment to minimizing abuse and fraud and enforcing compliance. In 2016, SSB paid out $536,000 to the government of Belize for sickness benefits to GOB workers. In 2017, this increased to $2.9 Million, an incredible 439 percent increase.

The percentage of employed persons paying contributions fell to its lowest in at least 4 years in 2017 to 69.7 percent, the last year of available data from SSB. “Rather than seeking to collect from these non-compliant parties, SSB is seeking to penalize those who have been compliant by increasing contributions payable by all,” the former board member told the Reporter.

Expense mismanagement has also become a critical issue, which many believe is imperative to address if SSB is to be successful in the long-term. Administrative expenses for 2017 represented over 21 percent of SSB’s total income as operating expenses increased by 15.5 percent over 2016 far exceeding the annual inflation rate which averages around 2 percent per annum. There have also been calls for an evaluation of SSB’s staff. Operating expenses represented almost 29 percent of contribution income in 2017, far in excess of the Caribbean average of 18 percent. “Clearly operating expenses are out of control,” the former board member said.

It is also of note that SSB has pitched the coming contribution raises as being implemented over a three-year period, but with the first increase set to take effect on July 1, 2019 and again in January 2020 then once more in January 2021, that is actually a year-and-a-half window. The former board member also stressed that SSB’s choice of utility investments have largely been determined by political directorate and not based on investment analysis. “GOB cannot continue to pick winners and losers,” he told the Reporter. Certainly there is no magic-bullet solution to fix the myriad issues plaguing SSB, but there is enough data to suggest that stringent reforms are necessary to ensure that the success of the public fund can be ensured for the long-term.

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