Guidelines for the Penalty Condonation Program for Unremitted or Delinquent Loan Amortizations of Employees by Employers

What is the basis of implementation of the program?

The President of the Philippines approved on June 03, 2010, the program condoning penalties for unremitted or delinquent loan amortizations of employees by employers based on the recommendation of the Social Security Commission (SSC) under Resolution No, 238 s. 2010.

What is the eligibility requirement?

Employers must be updated in the payment of their employees’ contributions. Employers who are delinquent in the payment of their SSS contributions must first settle their delinquency in full through outright payment or submission of an installment proposal.

Who can avail of the Program?

Employers who are delinquent in the remittance of their employees’ loan amortizations (salary, calamity, emergency, educational, special educational loan for Y2k conversion, stock investment and privatization fund), including those with pending or approved proposal under the Installment Payment Scheme of the SSS; those with pending or approved applications under the Program for Acceptance of Properties Offered through Dacion en Pago of the SSS, and those with pending cases before the SSC, Courts or the Office of the Prosecutor can avail of the program.
Employers of Employees with delinquent loans granted under the current or previous employer or whose loans were granted as self-employed/ voluntary-paying members (SE/VM).

What is condoned under the program?

The program shall condone only penalties on unremitted or delinquent loan amortizations. The outstanding loan obligation is composed of the principal and interest due on or before April 01, 2010.

When is the availment period of the program?

The availment period of the program is six (6 months) from January 2011 to June 30 2011.

What is the effect of the program on the loan privileges of employees?

Upon the remittance of the delinquent loan amortizations in full or approval of the installment proposal of the employer under this Program, the short-term member loan privileges of their employees shall be restored, subject to the existing guidelines on salary loan granting. However, said privileges shall again be suspended in the event of violation of any of the terms and conditions of the installment proposal.

Are arrears in loan amortization paid before the effectivity of the program also covered by the Condonation?

No, employers who settled all their loan amortization arrears before the effectivity of the Program shall no longer be subject of Condonation.
Those who settled their arrears partially before the effectivity of the program should pay the balance in full or in installment under the Program in order that accrued penalties corresponding to the balance can be condoned.

Will this have an effect on pending or approved proposals under the Installment Payment Scheme of the SSS or under the Program for Acceptance of Properties offered through Dacion en Pago of the SSS?

Yes, upon the remittance of the delinquent loan amortizations in full or approval of the installment proposal of the employer under this program, a pending or approved proposal submitted under the rules issued by the SSC allowing employer’s to pay their loan delinquencies in installment shall be considered withdrawn and the corresponding post-dates checks submitted shall be returned.
A pending application submitted under other rules issued by SSC allowing employers to settle their loan delinquencies through Dacion en Pago shall be modified to cover only contributions.
Further, upon submission of an installment proposal by an employer under this program, an approved Dacion en Pago application for settlement under such other rules shall be considered annulled if the title to the property has not yet been transferred to the SSS.

What if an employer fails to remit in full the required delinquent loan amortizations or defaults in the payment of any installment?

In case the employer fails in full the loan amortizations or defaults in the payment of any installment within period provided in the approved installment proposal, the penalties and shall continue to accrue until the delinquent account is paid in full.

What are the modes of payment under the program?

The employer has two (2) options in settling the delinquency”

1. Full Payment

Pay within the period of effectivity of the program the full amount of the delinquent loan (principal and interest) through any SSS Branch with tellering facilities or authorized collection agent of the SSS.

Interest is computed up to the settlement of the loan and is based on the prevailing interest rate at that time the loan was approved.

2. Installment Payment

Submit a proposal to pay the amount of delinquent loan (principal and interest) in installment to the SSS Branch having jurisdiction over its place of business.

Interest is computed up to the approval of the installment proposal and is based on the prevailing interest rate at the time the loan was approved. An additional interest (3%) per annum is imposed on the monthly installments.

The proposal shall indicate the amount and number of months to pay.

• Accomplished Application for Member Loan Penalty Condonation Program for Employers
• Loan Delinquency report signed by the employer in the “conforme” portion.

Installment Payment

• Accomplished Application for Member Loan Penalty Condonation Program for employers.
• Loan delinquency report signed by the employer in the “conforme” portion
• Agreed installment payment computation
• Installment proposal signed by the authorized signatory of the company
• Secretary’s certificate, in case the corporation is operational or equivalent instrument in case of an incorporated employer, authorizing such officer to sign the proposal in behalf of the employer.

What are the terms and conditions on Installment Proposal?

1. Submit application form together with the installment proposal and promissory note to pay the balance of the delinquency in equal monthly installment within a period not exceeding twenty-four (24) months from the date of the approval of the proposal.
2. The first monthly installment shall be paid in the 10th day of the succeeding month after the approval of the proposal.
3. The total amount due shall bear an interest rate of (3%) per annum. The monthly installment payments shall be computed using the Amortization Factor Table.
4. Current contributions and loan amortizations of its employees shall be paid every month as they fall due.
5. The managing head, director or partner shall sign the proposal and the promissory note if the employer is an association, partnership, corporation or any other institution.
6. The managing head, director or partner shall sign the proposal and the promissory note if the employer ceased operations.
7. Upon arrival of the proposal, the employer shall issue corresponding post-dated checks payable to the SSS to cover all monthly installments. The checks shall be under the corporate’s name, if the company is a corporation, or under the business name/ name of owner, if single proprietorship.

(The employer shall replace post-dated checks whenever necessary (e.g. change in check signatory/ies, closure of account, etc.

8. Failure by the employer to comply with the above requirements shall automatically terminate the approved proposal and shall have the same effect as in case of default in the payment or any installment.

What are the forms to accomplish?

• Application for Member Loan Penalty Condonation Program for Employers shall be accomplished by an employer who applies for the penalty Condonation.
• Installment proposal shall be accomplished by an employer who applies for the penalty Condonation thru installment.
• Promissory note shall be accomplished by an employer who promises to pay the SSS the amount representing their unremitted loan amortization and interest within a number of months (stating the start and end date of payment). It should be notarized and submitted by the employer together with the installment proposal.

ADOPTION OF THE SIMPLIFIED PRINCIPLES IN THE PHILIPPINE FINANCIAL REPORTING STANDARDS (PFRS) FOR SMALL AND MEDIUM ENTITIES

In January 2010, mandatory adoption of the simplified principles in the Philippine Financial Reporting Standards (PFRS) for recognizing assets, liabilities, income and expenses of the Small and Medium Entities (SMEs) was implemented. Topics not related to SMEs have been omitted and its required disclosures have been significantly reduced.

For entities which opted to adopt a full PFRS although they qualify as Non-Publicly Accountable Entities (NPAEs) may now adopt the PFRS for SMEs as “first time adopters”.

The complete set of the Financial Statements of an entity reporting under the PFRS for SMEs is similar to that provided for by full PFRS.  The transition of NPAEs from PAS 101 to PFRS for SMEs are applicable to entities which qualify as NPAE and SME; those entities with assets worth 250M Pesos. The NPAEs which currently use PAS 101 may not qualify as SMEs under the PFRS for SMEs and the Securities and Exchange Commission (SEC Resolution) particularly those entities that crossed the ceiling threshold of total assets of 350M Pesos.

Micro- business entities are not mandated of any financial reporting framework. They simply have the option to use the full PFRS, PFRS for SMEs or another acceptable basis of accounting.

If an entity opts to apply early the PFRS for SMEs, it shall apply the size criteria using the entity’s audited financial statements for the immediate preceding calendar year. An SME whose accounting period begins on a date other than January 1, 2010, it shall apply the size criteria using the entity’s AFS for the immediate preceding fiscal year.

The events related to cases of breach of floor or ceiling after FY 2009 should be determined whether “significant and continuing” or not. If caused by “significant and continuing” event, the entity should transition to the applicable financial reporting framework (i.e. full PFRS if the ceiling threshold is breached, or another acceptable accounting basis if the floor threshold is breached) in the next accounting period. If the event is not considered “significant and continuing”, the entity can continue to use the same financial reporting framework it currently uses.

 The subsidiaries of a parent company that qualify as SMEs under the PFRS for SMEs and the SEC Resolution may use the PFRS for SMEs even if their parent company uses full PFRS. Appropriate adjustments should be made in the financial statements of the subsidiary in the preparation of the consolidated financial preparation of the consolidated financial statements for uniformity of accounting policies. An SME may use full PFRS if required by its parent company as the group’s policy.

PFRS for SMEs shall be effective for the periods beginning January 1, 2010. An SME had the option to adopt the PFRS for SMEs provided that it is capable, in terms of systems and resources, to efficiently do the transition to PFRS to SMEs for their financial statements as of December 31, 2009 and it shall discuss in its financial statements the impact of such early adoption.
The required disclosures for first time adopters of SMEs include an explanation on the transition to the PFRS for SMEs and reconciliations (Section 35 of the PFRS for SMEs). If an SME does not opt to make an early application of the PFRS for SMEs, the SME should disclose the impact on its financial statements of the future adoption or the application of the PFRS for SMEs.