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Tuesday, January 03, 2006
House bill to set up educational funds pushed
With the pre-need industry in crisis, an educator turned lawmaker has sought the swift passage of new legislation that would establish a special education trust fund (ETF) for members of the Social Security System (SSS) and the Government Service Insurance System (GSIS).
“If the private sector cannot adequately support the hopes and dreams of Filipino families to send their children to college, then the two state-run pension funds should be encouraged to sell their own brands of voluntary education plans,” Rep. Eduardo Gullas (Cebu, 1st district) said.
Gullas said a bill in Congress proposes to require the SSS and the GSIS to establish an ETF, which would be supported by fresh voluntary member contributions.
He said SSS and GSIS members, regardless of civil status and with or without a child or grantee, may opt to invest in the ETF.
“Participation in the ETF is strictly voluntary. Those who are willing to pay the premiums by way of new deductible contributions, may enroll,” Gullas said.
He said the ETF would be similar to the education trust funds of private pre-need providers, except that the SSS and the GSIS would be required to put into the trust fund up to 100 percent of the voluntary contributions.
At present, only 51 percent of the contributions of planholders of the private pre-need industry go to the trust fund.
Tax-exempt
The balance of 49 percent is used to pay for the commissions of sales agents and the pre-need firm’s operating expenses.
Gullas said the SSS and GSIS would be in a position to offer cheaper education plans with larger benefit payments because both pension funds are tax-exempt.
He noted that SSS and GSIS members, just like most Filipinos, spend a substantial amount of their income to support the college education of their children.
A number of pre-need firms are in deep financial trouble.
At least three of them— College Assurance Plans Phils. Inc., Pacific Plans Inc. and Platinum Plans Inc.—have rushed to the courts to seek relief from their obligations.
A recent Pulse Asia Inc. survey showed that 70 percent of Filipino families have lost interest in, and become wary of buying pre-need plans.
As a result, from January to October 2005, pre-need industry sales plunged nearly 50 percent to P17.42 billion from P32.16 billion over the same period in 2004.
The industry sold just 265,530 new plans in the first 10 months of 2005 against 436,097 plans sold in the same period of 2004.
Last week, the Securities and Exchange Commission (SEC) acknowledged that “the worst is not yet over for the pre-need industry.”
The SEC said it expects more pre-need firms, particularly those that sold open-ended education plans, to encounter financial difficulties once they start paying their plan obligations.
Open-ended education plans guarantee the payment of the full tuition, regardless of the amount billed by the school.
With the uncontrolled annual increases in tuition, the SEC has since banned the sale of open-ended education plans.
Preneed firms may now sell only fixed-value education plans that guarantee a pre-determined amount of benefits. (PR)
For Bisaya stories from Cebu. Click here. (January 3, 2006 issue)
Write letter to the editor.Click here.
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