Applicable Laws on Retirement in the Philippines

8/12/2019 Applicable Laws on Retirement in the Philippines

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Applicable Laws on Retirement in the Philippines

Republic Act No. 7641, amending Article 287 of the Labor Code of the Philippines (Retirement

Pay Law 1992), specifically provides for the mandated payment of retirement benefits.

As further explained by the Department of Labor and Employment (1996), the minimumretirement pay formula that must be afforded to any qualified retiring employee shall be one-half month salary shall mean fifteen (15) days plus one twelfth (1/12) of the 13th month pay and

the cash equivalent of not more than five (5) days service incentive leave unless the parties

provide for broader inclusions. Evidently, the law expanded the concept of one-half month

salary from the usual one-month salary divided by two. In reckoning the length of service, the

period of employment with the same employer before the effectivity date of the law on January

7, 1993 should be included. Coverage includes all employees in the private sector, regardless of

their position, designation or status and irrespective of the method by which their wages are paid.However, the law does not cover employees of retail, service and agricultural establishments or

operations regularly employing of not more than ten (10) employees.

In the absence of a retirement plan or other applicable agreement providing for retirementbenefits of employees in an establishment, an employee may retire upon reaching the age of 60

years or more provided that he has served for at least five (5) years in said establishment. The

compulsory retirement age of an employee under the Mandatory Retirement is sixty five (65)years. The minimum length of service in an establishment is five (5) years and shall include

authorized absences and vacations, regular holidays and mandatory fulfillment of a military or

civic duty.

In case of retirement under a collective bargaining agreement or other applicable employment

contract or retirement plan, the employee shall be entitled to such benefits as he may have earned

under such agreements or contracts; provided that in case the benefits are less than that providedby law, the employer shall pay the difference between the amount due the employee and that

provided under the collective or individual agreement or retirement plan.

Where both the employer and the employee contribute to a retirement fund in accordance with an

individual or collective bargaining agreement or other applicable employment contract, the

employers total contribution thereto shall not be less than the total retirement benefits to which

the employee would have been entitled had there been no such retirement fund. In case theemployers contribution is less than the retirement benefits provided under the law, the employer

shall pay the deficiency.

A retirement pay shall not constitute compensation subject to withholding tax if the retirementbenefits received by employees of private firms under a reasonable private benefit plan comply

with the following requirements:

(i) The benefit plan must be approved by the Bureau of Internal Revenue;(ii) The retiring employee must have been in the service of the same employer for at least ten

(10) years and is not less than fifty (50) years of age at the time of retirement; and

(iii) The retiring employee shall not have previously availed of the privilege (of withholding taxexemption) under the retirement benefit plan of the same or another employer.


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Republic Act No. 4917 (An Act Providing That Retirement Benefits Of Employees Of Private

Firms Shall Not Be Subject To Attachment, Levy, Execution, Or Any Tax Whatsoever, 1967)extends twin preferential treatments to retirement benefits accruing from a reasonable retirement

plan, namely: (1) exemption from imposition of all taxes; and (2) not subject to attachment,

garnishment, levy or seizure by or under any legal or equitable process whatsoever. In order toenjoy said treatments, at the time of his retirement, the retiring employee shall have beenemployed by the same employer for at least ten (10) years and is not less than fifty (50) years of

age. In implementing the said law, Felizmenio Jr. (2008, p. 2) reported that the Bureau of

Internal Revenue prescribes the following requisites to tag a retirement benefit plan asreasonable:

a) There must be a definite written program setting forth all provisions essential for

qualifications;b) It must be permanent and continuing program unless sooner terminated by virtue of a valid

business reason;

c) It must cover at least 70% of all officials and employees;d) The employer, officials and employees, or both, shall contribute to a trust fund for the purpose

of distributing the corpus and income of the fund in accordance with the plan;

e) The corpus or income of the trust fund must not be diverted and shall be used exclusively for

the benefit of the said officials or employees;f) The contributions or benefits in the plan shall be non-discriminatory to favor officials or

employees who are officers, shareholders, supervisors, or highly compensated;

g) It must provide for non-forfeitable rights to benefits accrued and to the amounts credited to anaccount of an official and employee at the time of discontinuance or termination of plan.

h) Any forfeited amounts must not be applied to increase the benefits any employee would

otherwise receive under the plan but must be used as soon as possible to reduce the employers

contributions under the plan.Under BIR Revenue Regulation No. 1-83 (1982 s. 1), private companies must submit to the

Bureau of Internal Revenue a copy of the written retirement plan program plus a statement of

actuarial assumption or valuation duly certified by an independent consulting actuary who mustbe a Fellow of the Actuarial Society of the Philippines, before availing of the tax privileges

afforded to pension plans.

Further, the Bureau of Internal Revenue (BIR) required that the retirement fund shall be

administered by a trust. There are no specific limitations with respect to investments of the fund

provided they are permitted by the trust agreement. In fact, the Section 60B of the Tax Reform

Act (1997) specifically states that income derived from employees trust which forms part of apension plan is exempted from income tax. However, the Bureau of Internal Revenue (BIR

Regulations No. 01-68 1968, s. 5) mandated that the exemption of the trust income may be

denied if the trust:

(a) Lends any part of its income or corpus without adequate security and a reasonable rate ofinterest;

(b) Pays any compensation in excess of a reasonable allowance for salaries or other

compensation for personal services actually rendered;(c) Makes any part of its services available on a preferential basis;


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(d) Makes any substantial purchase of securities or any other property for more than adequate

consideration in money or moneys worth;

(e) Sells any substantial part of its securities or other property, for less than an adequate

consideration in money or moneys worth; and

(f) Engages in any other transaction which results in a substantial diversion of its income or

corpus.

A legal opinion has been rendered by Bunag (2004) that if the retirement benefit to be received

by a member of a private benefit plan established by the employer under R.A. No. 4917 and duly

approved by the BIR is equal to or less than the minimum retirement benefit provided by R.A.No. 7641 on compulsory retirement, said benefits shall be exempt from income tax. However, if

the employee receives from the BIR approved plan a retirement benefit in excess of the

minimum retirement benefit provided by R.A. No. 7641 on compulsory retirement, he must

satisfy the requirements or conditions of R.A. No. 4917, which means that he must be at leastfifty (50) years old and must have served the company for at least ten (10) years in order that his

retirement benefits may be tax exempt. Finally, retirement benefits received by employees not

from a BIR approved retirement plan shall be governed by R.A. No. 7641. The opinion stemmedup from a case where several employees of GCHS since January 1, 1998 have been compulsorily

retired after twenty (20) years of service, pursuant to Section 1, Article X of the GCHS

Retirement Plan. These retirees, however, have not reached aged fifty (50). By reason of the

opinion rendered, the benefits received by the retirees who were compulsory retired are taxexempt.

The above opinion should be reconciled with the ruling of the Bureau of Internal Revenue (BIRRuling No. 052-2000 [2000]) which states:

However, the Retirement Plan Rules and Regulations of a Company may provide that the

normal retirement date or early/optional retirement date be more than what is required by the TaxCode. Consequently, in case of conflict between the Tax Code and the Retirement Plan Rules

and Regulations, it is the latter that should prevail.

Such being the case, while Sec. 3 of the Retirement Plan Rules and Regulations provides that

upon the attainment of at least age 55 or upon completion of twenty five (25) years of service the

employee may be retired at the option of the company, the employee availing of theearly/optional retirement must have rendered ten (10) years of service to the company or must be

at least age fifty (50) years of age at the time of retirement, otherwise the retirement benefits to

be paid to him shall be subject to income tax and consequently to withholding tax. In this

particular case, although he is 51 years of age and has rendered 23 years of continuous service tothe company, the retired employee is still not covered under the early/optional retirement for

failure to comply with the conditions as provided in Sec. 3 of the said Plan i.e., attainment of at

least age 55 or completion of twenty five (25) years of service. In fine, the retirement benefits to

be paid to the said employee shall be subject to income tax and withholding tax prescribed underSection 57 (B) of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98.

REPUBLIC ACT NO. 660 - AN ACT TO AMEND COMMONWEALTH ACT

NUMBERED ONE HUNDRED AND EIGHTY-SIX ENTITLED "AN ACT TO CREATE

AND ESTABLISH A GOVERNMENT SERVICE INSURANCE SYSTEM, TO PROVIDE


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FOR ITS ADMINISTRATION, AND TO APPROPRIATE THE NECESSARY FUNDS

THEREFOR," AND TO PROVIDE RETIREMENT INSURANCE AND FOR OTHER

PURPOSES

Section 1. Subsections (a), (d), and (f) of section two of Commonwealth Act Numbered One

hundred and eighty-six are hereby amended to read as follows and subsection (g) is herebyadded:

"Sec. 2. Definitions. When used in this Act the following terms shall, unless the context

otherwise indicates, have the following respective meanings:

"(a) "Employer" shall mean the National or a local government, an agency, board, orcorporation controlled or owned by the Government. "Employee" shall mean any Filipino citizen

in the service of said "employer".

"(d) "Member" shall mean any person insured in the System.

"(f) "Membership policy" shall mean a life insurance policy for an amount, the monthly

premium of which is equivalent to two, five or six per centum of an employee's monthly salaryor compensation.

"(g) "Regular officer" or "enlisted man" shall mean one whose commission or enlistment is inthe regular force of the Armed Forces of the Philippines and not in the reserve force thereof."

Sec. 2. Section four of Commonwealth Act Numbered One hundred and eighty-six is hereby

amended to read as follows:

"Sec. 4. Scope of application of System.(a) Membership in the System shall be compulsoryupon all regularly and permanently appointed employees, including those whose tenure of office

is fixed or limited by law; upon all teachers except only those who are substitutes; and upon all

regular officers and enlisted men of the Armed Forces of the Philippines: Provided, That it shallbe compulsory upon regularly and permanently appointed employees of a municipal government

below first class only if and when said government has joined the System under such terms and

conditions as the latter may prescribe.

"(b) Membership in the System shall be appointed with an elective official of the National

Government or of a local government that is a member of the System: Provided, That if he

desires to come within the purview of this Act, he must notify the System in writing to that

effect: Provided, further, That he complies with the requirements of the System and that he is inthe Government service when his insurance takes effect: And provided, finally, That after his

admission into the System he shall be entitled to life insurance benefit for which he shall pay

either one per centum or three per centum of his monthly salary, depending on the kind ofinsurance selected by him, and his employer shall likewise pay for him the same amount."


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Sec. 3. Section five of Commonwealth Act Numbered One hundred and eighty-six is hereby


"Sec. 5. (a) Rates of contributions. For the benefits described hereunder, each employee

who is a member of the System and his employer shall pay the monthly rates of premiums

specified in the following schedules:

MONTHLY PREMIUMS___________________________________________________________

Percentage of monthly

Benefits salary payable by Remarks

Employee EmployerI. Life Insurance 1 1 Payment of premiums shall begin

3 3 on the last day of the

5 0 calendar month preceding the

month when one's insurance

takes effect. Except as otherwiseprovided in this Act, the

first rate shall apply to acivilian employee insured on or

after the approval of this Act.

The second rate shall apply toa civilian employee already

insured prior to the approval of

this Act unless he chooses

term insurance in which casethe first rate shall apply. Thethird rate shall apply to a

regular officer or an enlisted man.

II. Retirement

insurance 6 If employee's monthly salary is

P200 or less.5 If employee's monthly salary is

more than P200, but his premium

for this benefit shall notexceed P37.50 per month.

"Payment of premiums for retirement insurance shall begin on the last day of the third calendar

month following the month of this Act was approved or the employee entered the service,whichever is the later date: Provided, however, That such premiums shall not be required of

Justices of the Supreme Court, elective officials, and regular officers and enlisted men, who are

hereby excluded from said benefit.

"(b) Premiums for optional insurance.The amount of premium on one's optional insurance

described in section ten hereof shall be as provided in his policy. The premiums on this optional


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insurance shall be entirely borne by the insured.

"(c) Premiums for optional retirement annuity.Each employee may at his option and undersuch rules and conditions as the System may prescribe deposit additional amounts from time to

time, the total of which shall not exceed ten per cent of the total salaries he has received from his

employer prior to his retirement. These deposits shall be credited with interest of three percentum per annum, compounded monthly, and together with said interest shall at the date of his

retirement be available to purchase in addition to the annuity described in section eleven hereof

such an annuity as he will elect and the System will offer. In the event of his death or separationbefore becoming eligible for retirement, the total amount so deposited, with interest, shall be

refunded to him or his beneficiaries as recorded in his application for optional retirement annuity

filed with the System.

"(d) Collection and remittance of premiums. Each employer concerned shall at the end of

each month deduct and withhold from the monthly salary of every employee in its service the

premiums payable by him in accordance with the preceding schedule plus the additional

premiums, if any, required in section seven hereof. It shall advance and remit to the Systembeginning April 1 of each year and quarterly thereafter the monthly premiums for the current

quarter, together with its corresponding shares as described in the said schedule, plus extra

premiums and additional amounts, if any, as required in the following sections: Provided, That ifsuch employee is separated from the service, then any premiums not due and payable shall be

refunded or credited to his employer. A member no longer in the service may pay his premiums

directly to the System or as provided herein below.

"Except as otherwise specified herein, payment of any premium on one's optional insurance

and/or retirement annuity in the System may be made to an employer whose location isconvenient to the member, and such employer is hereby authorized and required to accept such

payment, issue receipt therefor, and remit the same immediately to the System."

Sec. 4. Section six of Commonwealth Act Numbered One hundred and eighty-six is hereby


"Sec. 6. Employer's premiums.Each employer shall include in its annual appropriation and

remit to the System the necessary amounts for its corresponding shares of the premiumsdescribed in subsection (a) of section five, plus any extra premiums that may be required on

account of the hazards or risks of its employees' occupations, plus the additional amounts, if any,

required in the next following section: Provided, however, That if one's compulsory membership

policy matures, the employer's premium for his life insurance shall cease until he acquires a new

membership policy, which, however, shall be granted only upon satisfactory evidence ofinsurability: And provided, finally, That in case of transfer of an employee from one employer to

another, the former employer shall be relieved of paying further premiums for him and the newemployer whether or not it has joined the System, shall assume the same, appropriating therefor

the necessary amount.

"The Board shall have the full power and authority to adopt rules and regulations for the

collection and remittance of premiums or other amounts payable as provided in this Act and/or


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any indebtedness to the System, and impose a fine not exceeding the loss or damage that the

System may suffer on the official or officials responsible for the delay or failure in collecting or

remitting said premiums or indebtedness without prejudice to such other punishment as may beimposed in accordance with existing Civil Service rules and regulations. Notwithstanding any

law to the contrary, the Board may give extra remuneration to officials in charge of collecting

and remitting said premiums, amounts, or indebtedness, if by so doing the best interest of theSystem shall be advanced."

Sec. 5. Section seven of Commonwealth Act Numbered One hundred and eighty-six is herebyamended to read as follows:

"Sec. 7. Additional premiums. (a) For the amount of annuity corresponding to the services

rendered by an employer prior to the approval of this Act, his employer shall pay under suchrules and regulations as the System may prescribe the necessary additional amounts or

premiums.

"(b) The Board is hereby authorized and empowered, in carrying out the provisions of this Act,to supplement the individual premiums of members with moneys received in the form of

donations, gifts, legacies, or bequests, or otherwise, and to receive and deposit to the credit of the

System, and invest all moneys which may be donated by private individuals, organizations, orcorporations.

"(c) All savings in appropriations for salaries and wages that may be realized by each employerduring each fiscal year shall be transferred by said employer to the System which shall use the

same for the payment of benefits provided in this Act.

Sec. 6. Section eight of Commonwealth Act Numbered One hundred and eight-six is hereby


I Life Insurance Benefit

Sec. 8. (a) Compulsory membership insurance. An employee whose membership in the

System is compulsory shall be automatically insured on the first day of the seventh calendar

month following the month he was appointed or on the first day of the sixth calendar month ifthe date of his appointment is the first day of the month: Provided, That his medical examination,

if required, has been approved by the System.

(b) Optional membership insurance.The life insurance of an employee whose membership

in the System is optional shall take effect, if he is alive, on the first day of the calendar monthfollowing the calendar month during which the first premium thereon was paid to the System:

Provided, That his application for membership and his medical examination, if required, havebeen approved by the System.

(c) Amount and kind of insurance. Compulsory membership insurance shall be terminsurance of an amount equal to the employee's current annual salary: Provided, however, That

this subsection shall not apply to any civilian employee who prior to the approval of this Act is


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already insured in the System nor to a regular officer or an enlisted man: And provided, further,

That upon his request a civilian employee may have his old membership insurance changed into

a paid-up endowment insurance and be reinsured under a term insurance on submission ofsatisfactory evidence of insurability unless such request be made within one year from the date

of approval of this Act. Optional membership insurance shall be, as he may select, either the

term insurance described above or an endowment insurance whose amount shall be whatever thesix per centum monthly premium will buy.

Sec. 7. Section ten of Commonwealth Act Numbered One hundred and eighty-six is herebyamended to read as follows:

"Section 10. Optional insurance.Upon application to the Board and on satisfactory evidenceof insurability, each member may obtain, at any time, additional life insurance as he may desire,

subject to the provision of section fourteen hereof: Provided, That the amount of said additional

life insurance shall be in multiple of one hundred pesos and that its aggregate amount shall not

exceed an amount, to the nearest hundred pesos, equal to his current annual salary: And

provided, further, That the full amount of the premiums on such additional insurance shall bepaid by said member, and the amount thereof may be deducted from his pay or compensation,

when expressly authorized by him.

Sec. 8. The following new sections are hereby inserted in Commonwealth Act Numbered Onehundred and eighty-six:

II.Retirement Insurance Benefit

"Section 11. (a) Amount of annuity. Upon retirement a member shall be automatically

entitled to a life annuity payable monthly for at least five years and thereafter as long as he live.

The amount of the monthly annuity at the age of fifty-seven years shall be twenty pesos, plus, for

each year of service rendered after the approval of this Act, one and six-tenths per centum of theaverage monthly salary received by him during the last five years of service, plus, for each year

of service rendered prior to the approval of this Act, if said service was at least seven years, oneand two-tenths per centum of said average monthly salary: Provided, That this amount shall be

adjusted actuarially if retirement be at an age other than fifty-seven years: Provided, further, That

the maximum amount of monthly annuity at age fifty-seven shall not in any case exceed two-

thirds of said average monthly salary or five hundred pesos, whichever is the smaller amount:And provided, finally, That retirement benefit shall be paid not earlier than one year after the

approval of this Act. In lieu of this annuity, he may prior to his retirement elect one of the

following equivalent benefits:

"(1) Monthly annuity during his lifetime;

"(2) Monthly annuity during the joint-lives of the employee and his wife or other designatedbeneficiary, which annuity, however, shall be reduced upon the death of either to one-half and be

paid to the survivor;

"(3) For those who are at least sixty-five years of age, lump sum payment of present value of

annuity for first five years and future annuity to be paid monthly; or


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"(4) Such other benefit as may be approved by the System.

"(b) Survivors benefit. Upon death before he becomes eligible for retirement, his

beneficiaries as recorded in the application of retirement annuity filed with the System shall be

paid his own premiums with interest of three per centum per annum, compounded monthly. If onhis death he is eligible for retirement, then the automatic retirement annuity or the annuity

chosen by him previously shall be paid accordingly.

"(c) Disability benefit.If he becomes permanently and totally disabled and his services are

no longer desirable, he shall be discharged and paid his own contributions with interest of three

per centum per annum, compounded monthly, if he has served less than five years; if he has

served at least five years but less than fifteen years, he shall be paid also the correspondingemployer's premiums, without interest, described in subsection (a) of section five hereof; and if

he has served at least fifteen years he shall be retired and be entitled to the benefit provided

under subsection (a) of this section.

"(d) Upon dismissal for cause or on voluntary separation, he shall be entitled only to his own

premiums and voluntary deposits, if any, plus interest of three per centum per annum,

compounded monthly.

"Section 12. Conditions for retirement. (a) On completion of thirty years of total services

and attainment of age fifty-seven years, a member shall have the option to retire. In all cases, thelast three years of service before the retirement must be continuous, and he has made

contributions for at least five years, which contributions may, upon his request approved by the

Board, be deducted from his life annuity under such terms and conditions as the Board mayprescribe. In the case of those who are at least fifty-seven years of age a period of service shorter

than thirty years may be allowed, provided that each year decrease in service shall becompensated by one-half year increase in age over fifty-seven years. A younger age of

retirement may be permitted provided that each year decrease below fifty-seven years shall be

compensated by one year increase in service over thirty years. If an employee is a laborer or onewhose work is mostly manual, the ages mentioned above may be declared by not more than five

years at the discretion of the System. In all cases no one shall be entitled to retirement benefit if

his age is below fifty-two years or his total service is less than fifteen years.

"(b) The employer concerned may request the retirement of any such employee described in

the preceding subsection who, by reason of a disqualification, is unable to perform satisfactorily

and efficiently the duties of his position or some other position of the same grade or class as that

occupied by the employee and to which he could be assigned, but such request shall be submittedto the Civil Service Board of Appeals only after the said employee had been notified in writing

of the proposed retirement. No such employee, however, shall be so retired unless the CivilService Board of Appeals has given him a hearing and found him after examination that he is so

disqualified. The decision of the Civil Service Board of Appeals as to whether or not the said

employee shall be retired under this sub-section shall be final and conclusive.

"(c) Retirement shall be automatic and compulsory at the age of sixty-five years, if he has


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completed fifteen years of service, and if he has not, he shall be allowed to continue in the

service until he shall have completed fifteen years unless he is otherwise eligible for disability

retirement. This clause shall not apply to members of the judiciary and constitutional officerswhose tenure of office is guaranteed. Upon specific approval of the President of the Philippines,

an employee may be allowed to continue to serve after the age of sixty-five years if he possesses

special qualifications and his services are needed. It shall be the duty of the employer concernedto notify each such employee under its direction of the date of his automatic separation from the

service at least sixty days in advance thereof.

"(d) An employee separated from the service who is receiving an annuity described under

section eleven shall not be eligible again to appointment to any appointive position or

employment under any "employer" unless the appointing authority determines that he is

possessed of special qualifications and his medical examination has been approved by theSystem, in which event payment of his annuity shall be suspended during the period of his new

employment: Provided, however, That nothing in this Act shall be so construed as to affect the

rights of the annuitant's beneficiary if the annuitant has been receiving or had elected, and was

otherwise entitled to, a reduced annuity under subsection (a) of section eleven: And provided,further, That upon the termination of his new appointment, the payment of the annuity which

was suspended shall be resumed.

"(e) If an employee who is not receiving the annuity mentioned in the next preceding

subsection be reinstated in the service, he shall be given full credit for services rendered by him

prior to the approval of this Act for the purpose of determining the amount of annuity undersection eleven hereof to which he may be entitled: Provided however, That said credit shall not

be given if the employee shall not refund to the System any amount he received therefrom with

interest of three per centum per annum compounded monthly from the date he received them upto the date of their payment, or any gratuity or benefit he received under any pension or

retirement plan of an employer unless expressly exempted by law from refunding said gratuity orpension: Provided, further, That if separated before, and reinstated after, the approval of this Act,

only three-fourths of said prior services shall be credited to the employee after complying with

the condition stated above.

"Section 13. Computation of service.The aggregate period of service which forms the basis

for retirement and calculating the amount of annuity described in section eleven hereof shall becomputed from the date of original employment, whether as a classified or unclassified employee

in the service of an "employer", including periods of service at different times and under one or

more employers, and also periods of service performed overseas under the authority of the

Republic of the Philippines and periods of honorable service in the Armed Forces of the

Philippines prior to the approval of this Act, and periods of honorable service in the Philippinesunder the authority of the United States Government if rendered prior to July fourth nineteen

hundred and forty-six: Provided, however, That in the case of an employee who is eligible forand receives retirement pay on account of military or naval service or on account of disability

incurred therein, the period of service upon which such retirement pay is based shall be

excluded: Provided, also, That periods of service rendered after the approval of this Act duringwhich premiums are not required shall be excluded, unless the premiums corresponding to said

service be later on paid to the System with interest: And provided, further, That the period


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February twenty-eight nineteen hundred and forty-five and from January first nineteen hundred

and forty-two to any period not exceeding one year at a time during which an officer or

employee had been thereafter out of the service to the date of his reinstatement or reappointmentbefore the approval of this Act shall be included for those who were in the service on December

eight, nineteen hundred and forty-one, except those who were separated prior to Japanese

occupation, in the computation of total service, the annuity mentioned herein, and payment ofpremiums therefor."

Sec. 9. Section eleven of Commonwealth Act Numbered One hundred and eighty-six is hereby

changed to section fourteen and is amended to read as follows:

"Section 14. Special rights attached to life insurance policy. Any life insurance policy

issued under the provisions of this Act shall not be assignable, except to the System, and shall be

entitled to participation in the surplus, as provided in section twenty-five hereof. It shall continue

in force, except as otherwise provided, herein, whether the member is in or out of the service, solong as he complies with the provisions and conditions thereof. Such policy and the proceeds

thereof shall be exempted from all taxes, and shall not be considered a gratuity."

Section 10. Section twelve of Commonwealth Act Numbered One hundred and eighty-six is

hereby changed to section fifteen.

Section 11. Section thirteen of Commonwealth Act Numbered One hundred and eighty-six is

hereby changed to section sixteen and is amended to read as follows:

"Section 16. Administration of the System. The System shall be a non-stock corporation,

with its principal place of business in Manila, Philippines. It shall be managed by a Board of

Trustees to consist of five members to be appointed by the President of the Philippines with the

consent of the Commission on Appointments. The trustees shall elect from among themselves a

chairman and a vice-chairman. Each trustee shall hold office for three years or until his successoris duly qualified, except that of the Board first appointed, one shall hold office for one year, two

for two years, and two for three years. At the expiration of their respective terms, a successorsshall be appointed for the term of three years from the date of such expiration. All vacancies,

except through the expiration of the terms, shall be filled for the unexpired term only. The

trustees shall be entitled to a per diem of twenty-five pesos for each day of actual attendance in

session."

Section 12. Section fourteen of Commonwealth Act Numbered One hundred and eighty-six is

hereby changed to section seventeen and is amended to read as follows:

"Section 17. General powers of the Board.The Board shall have the powers specified in thisAct and the usual general corporate powers. Among others, it shall have the following exclusive

powers and authority: (a) to adopt by-laws, rules and regulations for the administration of the

System and the transaction of its business; (b) to adopt from time to time a budget ofexpenditures, including salaries of personnel, and appropriate therefor the necessary amounts; (c)

to set up its accounting unit and provide the necessary personnel therefor; (d) to invest its funds

directly or indirectly; to discount pensions guaranteed under this act at such rate of discount it

may prescribe; (e) to establish branches of the System whenever and wherever it may be


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expedient or necessary, fix their domiciles and in general prescribe the other complementary

rules of organization which this Act imposes; (f) to lease, purchase, construct or otherwise

acquire real property and/or buildings and such facilities which may be necessary or expedient tothe effective execution of the purposes of this Act; (g) to prescribe the forms of life insurance

and annuity contracts to be issued and the benefits thereof including accident benefits; (h) to fix

the premium rates, conditions and terms thereof, taking into consideration the kind of insurance,age, health, and other factors affecting the insurability of the employee or member, and to

authorize the issuance thereof when so determined; (i) to construct, establish and/or operate

hospitals and sanatoriums when possible and expedient or necessary to the employees' welfare;(j) to enter into agreements or contracts with Government and private hospitals or health

institutions and with medical associations or duly licensed physicians, nurses, or other competent

persons who may be needed in connection with medical and obstetrical services for members of

the System and their dependents, paying them, and authorizing them to accept, reasonablenecessary compensation therefor, notwithstanding any provision of law to the contrary; (k)

except as otherwise provided in this Act, to extend, when possible and expedient, directly or

through other agencies, and under such rules, regulations, and conditions it may prescribe,

medical and obstetrical services to other members of the System and their dependents, and, ingeneral, promote the health of the members of the System and appropriate necessary sums

therefor from the surplus of the System; (l) having regard to any periodic audit and valuation of

the retirement insurance fund, to make such immediate readjustments or modifications in any ofthe rates or periods of benefits granted under this Act and prescribe rules and conditions therefor,

notwithstanding any provision of this Act to the contrary, as appear necessary in order to make

said fund sufficient or no more than reasonably sufficient to discharge its liabilities: Provided,That no person may allege vested rights for reason of these readjustments or modifications; (m)

to have the power of succession; (n) to sue and be sued; and (o) to exercise such other powers as

may be necessary to carry on the business for which the System has been created.

Section 13. Section fifteen of Commonwealth Act Numbered One hundred and eighty-six is

hereby changed to section eighteen and is amended to read as follows:

"Section 18. Personnel.The Board shall have the power to appoint a general manager, or a

general manager and actuary, who shall be a person of recognized experience and capacity in thesubject of life and social insurance, and who shall be the chief executive officer of the System,

one or more assistant general managers, one or more managers, a medical director, and an

actuary, and fix their compensation. The general manager shall, subject to the approval of theBoard, appoint additional personnel whenever and wherever they may be necessary to the

effective execution of the provisions of this Act and fix their compensation. He shall have the

power to prescribe their duties, grant leave, prescribe certain qualifications to the end that only

competent persons may be employed, and appoint committees: Provided, however, That said

additional personnel shall be selected from civil service eligibles certified by the Commissionerof Civil Service and shall be subject to civil service rules and regulations except as herein

otherwise provided.

"The Auditor General shall appoint a representative who shall be the auditor of the corporation,

and the necessary personnel to assist said representative in the performance of his duties. The

number and salaries of the auditor and said personnel shall be determined by the Auditor


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General, subject to appropriation by the Board of Directors; in case of disagreement, the matter

should be submitted to the President of the Philippines whose decision shall be final. Said

salaries and all other expenses of maintaining the auditor's office shall be paid by the System."

Section 14. Section sixteen of Commonwealth Act Numbered One hundred and eighty-six is

hereby changed to section nineteen and is amended to read as follows:

"Section 19. Records and reports. The Board shall cause to be kept records as may berequired for the purpose of making actuarial valuations of the System including such data

necessary in the computation of rates of disability, mortality, and withdrawal among the

members and any other information that may be useful for the adjustment of the benefits for themembers of the System. Separate and distinct records of operation of each fund of the System

and of disbursements for the same and all accounts of payments made out of each fund shall,

likewise, be made and kept by the System.

"Within four months after the end of each fiscal year, the Board shall submit to the President of

the Philippines who shall furnish a copy thereof to the Congress of the Philippines, a report of

operations of the preceding year under the provisions of this Act."

Section 15. Section seventeen of Commonwealth Act Numbered One hundred and eighty-six is

hereby changed to section twenty.

Section 16. Section eighteen of Commonwealth Act Numbered One hundred and eighty-six is

hereby changed to section twenty-one.

Section 17. Section nineteen of Commonwealth Act Numbered One hundred and eighty-six is

hereby changed to section twenty-two.

Section 18. Section twenty of Commonwealth Act Numbered One hundred and eighty-six ishereby changed to section twenty-three.

Section 19. Section twenty-one of Commonwealth Act Numbered One hundred and eighty-six

is hereby changed to section twenty-four and is amended to read as follows:

"Sec. 24. Accounts to be maintained.The System shall keep separate and distinct from one

another the following funds:

"(a) Life insurance fund.This shall consist of all premiums for life insurance benefit and/orearnings and savings therefrom. It shall meet death claims as they may arise or such equities as

any member may be entitled to, under the conditions of his policy, and shall maintain therequired reserves to the end of guaranteeing the fulfillment of the life insurance contracts issuedby the System. Said reserves shall be computed yearly in accordance with approved valuation

standards and with an interest rate of not higher than four per centum per annum.

"(b) Retirement insurance fund. This shall consist of all contributions for retirement

insurance benefit and of earnings and savings therefrom. It shall meet annuity payments and

establish the required reserves to the end of guaranteeing the fulfillment of the contracts issued


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by the System. Said reserves shall be determined yearly on such annuity tables, with an interest

rate of not higher than three per centum per annum, as shall be adopted by the Board.

"(c) Contingency reserve fund.This shall consist of such portion of the surplus of each fund

mentioned above as may be set aside each year by the Board pursuant to section twenty-five

hereof: Provided, That it shall not exceed ten per centum of the required reserves of the System.

"(d) General fund.This shall consist of such amounts as may be set aside by the Board from

each fund, to meet the expenses incidental to the enforcement of the provisions of this Act.

"The Government of the Republic of the Philippines hereby guarantees the fulfillment of the

obligations of the Government Service Insurance System to the members thereof when and as

they shall become due."

Sec. 20. Section twenty-two of Commonwealth Act Numbered One hundred and eighty-six is

hereby changed to section twenty-five and is amended to read as follows:

"Sec. 25. Disposable surplus.Any disposable surplus that may result from the operations ofthe life insurance fund shall be apportioned among the members whose policies are in force for

at least one year, when and if the Board deems it expedient, in accordance with the schedule

prepared by the Actuary and approved by the Board. The disposable surplus shall be that amountleft after the mean reserves of the policies, contingency reserves, the expenses incidental to the

operation of said fund, the expenses incurred in promoting the health of the members, and other

liabilities of the fund have been determined and set aside or satisfied."

Sec. 21. Section twenty-three of Commonwealth Act Numbered One hundred and eighty-six is

hereby changed to section twenty-six and is amended to read as follows:

"Sec. 26. Exemptions from legal process and liens.No policy of life insurance issued underthis Act, or the proceeds thereof, when paid to any member thereunder, nor any other benefitgranted under this Act, shall be liable to attachment, garnishment, or other process, or to be

seized, taken, appropriated, or applied by any legal or equitable process or operation of law to

pay any debt or liability of such member, or his beneficiary, or any other person who may have a

right thereunder, either before or after payment; nor shall the proceeds thereof, when not madepayable to a named beneficiary, constitute a part of the estate of the member for payment of his

debt: Provided, however, that this section shall not apply when obligations or indebtedness to the

employer are concerned."

Sec. 22. Section twenty-four of Commonwealth Act Numbered One hundred and eighty-six is

hereby changed to section twenty-seven and is amended to read as follows:

"Sec. 27. Appropriations. There is hereby appropriated for the current fiscal year, and

annually thereafter, out of any fund in the Philippines Treasury or other depository not otherwiseappropriated, including special and corporate funds, such sums as may be necessary to pay the

contributions or premiums payable by each employer under this Act."

Sec. 23. Section twenty-five of Commonwealth Act Numbered One hundred and eighty-six is


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hereby changed to section twenty-eight and is amended to read as follows:

"Sec. 28. Miscellaneous provisions. (a) Act Numbered Two thousand five hundred and

eighty-nine, as amended, and all other retirement or pension plans heretofore in force in any

chartered city or corporation owned or controlled by the Government are hereby declared

inoperative or abolished, and Act Numbered Four thousand one hundred and eighty-three shallcease to be applicable to employees of any local government that may be admitted to the System,

and hereafter no insurance or retirement plan for employees shall be created by any employerwithout the prior approval of the System: Provided, That the rights of those already retired shall

not be affected: Provided, further, That as of the date of approval of this Act the present value of

the benefit as may be computed by the actuary of the System or the gratuity payable to any

member who has established his right before the approval of this Act to retire under either ActNumbered Four thousand one hundred and eighty-nine or Act Numbered Four thousand one

hundred and eighty-three or under any retirement or pension plan mentioned above shall be

credited and paid by the employer concerned to the retirement insurance fund of the System in

installments to be determined by the System and approved by the President and shall be included

in the computation of the additional premiums or amounts required in section seven hereof forthe service annuity described in subsection (a) of section eleven hereof: And provided, finally,

That such a member shall be entitled to the retirement benefit described in this Act only if he sonotifies the System within six months from the approval of this Act, otherwise it shall be deemed

that he does not desire to be retired under this Act and accordingly the gratuity or benefit payable

to him under either aforementioned Act shall be exclusively reserved for him by the System. Ifsuch member elects the retirement benefit of this Act, but his position is abolished or he dies or

becomes disable before becoming eligible to said benefit, his legal heirs may be paid the

retirement benefit to which he has established his right prior to the approval of this Act and his

contributions under this Act shall be refunded as provided in section 11 (d) hereof.

"(b) Except as herein otherwise provided, the Government Service Insurance System including

all its forms or documents required of its members, shall be exempt from all types of taxes,

documentary stamps, duties and contributions, fiscal or municipal, direct or indirect, establishedor to be established; and more specially, it shall not be subject to the provisions of Act Numbered

Twenty-four hundred and twenty-seven, as amended, and Commonwealth Act Numbered Four

hundred and sixty-six, as amended, and no law hereafter enacted shall apply to said Systemunless it is provided therein that the same is applicable to the System by expressly stating the

name of said entity.

"(c) Any provision of law inconsistent with the provisions of this Act is hereby repealed."

Sec. 24. Section twenty-nine to read as follows is hereby added to Commonwealth Act

Numbered One hundred and eighty-six:

"Sec. 29. Penalty. Any person found to have participated, directly or indirectly, in thecommission of fraud, collusion, falsification, misrepresentation of facts, or any other kind of

anomaly in the issuance of any certificate or document for any purpose connected with this Act,

or in obtaining any benefit or payment under this Act, whether for him or some other person,shall be punished by a fine not exceeding one thousand pesos or imprisonment not exceeding one

year, or by both such fine and imprisonment at the discretion of the court, besides


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disqualification from holding public office and from practicing any profession or calling licensed

by the Government."

Sec. 25. Section twenty-six of Commonwealth Act Numbered One hundred and eighty-six is

hereby changed to section thirty.

Sec. 26. Notwithstanding the provisions of this Act to the contrary, any officer or employee

who died in the service within three years before said Act went into effect and who had renderedat least thirty-five years of service and who was entitled to or who could have established his

right to the retirement gratuity provided for in Act Numbered Twenty-five hundred and eighty-

nine, as amended, or to any other retirement benefits from any pension fund created by law shall

be considered retired under the provisions of this Act if his wife, or in her default, his other legalheirs shall so elect and notify the System to that effect. Upon making such election, the wife or

legal heirs of the deceased officer or employee shall be paid the monthly annuity for five

consecutive years or such other benefit as provided in said Act, in lieu of the retirement gratuity

or retirement benefits to which the deceased was entitled at the time of his death; and any portion

of such gratuity or retirement benefits already paid to his wife or other legal heirs shall berefunded to the System: Provided, That contributions corresponding to his last five years of

service shall be deducted monthly from his life annuity.

Notwithstanding any provisions of this Act to the contrary, any officer or employee whose

position was abolished or who was separated from the service as a consequence of thereorganization provided for in the Republic Act Numbered Four hundred and twenty-two may be

retired under the provisions of this Act if qualified: Provided, That any gratuity or retirement

benefit already received by him shall be refunded to the System: Provided, further, That,

contributions corresponding to his last five years of service shall be paid as provided in sectiontwelve of this Act. This provision shall also apply to any member of the judiciary who, prior tothe approval of this Act, was separated from the service after reaching seventy years of age and

rendering at least thirty years of service and who is not entitled to retirement benefit under any

law.

Notwithstanding any provisions of this Act to the contrary, any officer or employee, who has not

established his right to retire under Act Numbered Twenty-five hundred and eighty-nine or underAct Numbered Forty-one hundred and eighty-three, both as amended, but who has rendered not

less than twenty-five years of service and has attained the age of fifty-seven years may elect to

retire under either of said Acts if he shall establish such right within one year from the date of theapproval of this Act, or under this Act if otherwise qualified.

Sec. 27. This Act shall take effect upon its approval: Provided, That if the financial condition

of an employer does not permit payment of its contributions for retirement insurance hereinrequired, such payment may be deferred under such conditions as the System may prescribe.

Republic Act No. 6683AN ACT PROVIDING BENEFITS FOR EARLY RETIREMENT AND VOLUNTARY SEPARATIONFROM THE GOVERNMENT SERVICE, AS WELL AS INVOLUNTARY SEPARATION OF CIVIL

SERVICE OFFICERS AND EMPLOYEES PURSUANT TO VARIOUS EXECUTIVE ORDERSAUTHORIZING GOVERNMENT REORGANIZATION AFTER THE RATIFICATION OF THE

1987 CONSTITUTION APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES.


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REPUBLIC ACT NO. 6683

AN ACT PROVIDING BENEFITS FOR EARLY RETIREMENT AND

VOLUNTARY SEPARATION FROM THE GOVERNMENT SERVICE,AS WELL AS INVOLUNTARY SEPARATION OF CIVIL SERVICE

OFFICERS AND EMPLOYEES PURSUANT TO VARIOUS EXECUTIVEORDERS AUTHORIZING GOVERNMENT REORGANIZATION AFTER

THE RATIFICATION OF THE 1987 CONSTITUTIONAPPROPRIATING FUNDS THEREFOR, AND FOR OTHER

PURPOSES.

Section 1. Declaration of Policy. It is hereby declared the

policy of the State to promote economy, efficiency andeffectiveness in government operations, particularly in thedelivery of essential public services.For this purpose, the Stateshall endeavor to streamline government functions and tomaintain necessary positions through an appropriate retirementand voluntary separation scheme.

Sec. 2. Coverage. This Act shall cover all appointive officialsand employees of the National Government, includinggovernment-owned or controlled corporations with originalcharters, as well as the personnel of all local government units.The benefits authorized under this Act shall apply to all regular,temporary, casual and emergency employees, regardless of age,who have rendered at least a total of two (2) consecutive years ofgovernment service as of the date of separation. Uniformedpersonnel of the Armed Forces of the Philippines including thoseof the PC-INP are excluded from the coverage of this Act. oble rt ibr y

Sec. 3. Early Retirement and Voluntary Separation Benefits.

All appointive government officials and employees included in thecoverage hereof who voluntarily elect in writing to be retired orseparated from the service and whose retirement has beenapproved under the provisions of this Act shall be paid retirementor separation benefits equivalent to one and one-fourth (1 1/4)month basic salary for every year of their respective governmentservices or the nearest equivalent fraction thereof favorable to


18/26

them on the basis of the highest salary which they respectivelyreceived in the course of their employment in the government:Provided, That in no case shall the benefit to be paid to anyappointive official or employee be less than Ten thousand pesos(P10,000): Provided, further, That any appointive official oremployee who has previously been found guilty in anadministrative proceeding and whose rank or salary has beenreduced shall be paid on the basis of his last salary. cralaw

Sec. 4. Additional Benefits. In addition to the benefits hereinauthorized, covered appointive officials and employees who retireor voluntarily elect to be separated from the service under thisAct shall be entitled to the return of GSIS personal contributionspertaining to retirement only and the payment of the

corresponding share of the government with interest earnedpursuant to existing rules and regulations of the GovernmentService Insurance System. They shall likewise be entitled to thecommutation of unused vacation and sick leaves in accordancewith existing rules and regulations: Provided, however, Thatshould the government agency concerned lack the necessaryfunds for this, the same shall come from the appropriation tofund this Act: Provided, further, That those who retire afterrendering government service for thirty-one (31) years or moreand avail themselves of the incentive benefits provided under this

Act shall be entitled to an additional ten percent (10%) of theamount corresponding to what they will receive from the thirty-first year onward.cralaw

Sec. 5. Exclusiveness of Benefits. An appointive official oremployee who retires or elects to be separated from the serviceunder this Act shall not be eligible for optional retirement withgratuity under Republic Act Nos. 1616 and 4968 or with pensionunder Commonwealth Act. No. 186, as amended by Republic ActNo. 660, or under Presidential Decree No. 1146, as amended, or

vice-versa. oble rt ibr y

Sec. 6. Abolition of Positions. The positions vacated throughthe early retirement or separation of its incumbent shall beabolished unless the head of the office or agency, with theapproval of the President in the case of the ExecutiveDepartment, the Chief Justice in the case of the Judiciary, the


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Senate President or the Speaker of the House of Representativesin the case of Congress, the Chairman in the case of theConstitutional Commissions, certifies within the period of sixty(60) days from the time of approval or acceptance of theapplication for retirement or separation that the exigencies of theservice require its retention.cralaw

Sec. 7. Discretion of Agency Heads in Acceptance of Applicationfor Early Retirement and Voluntary Separation. No appointiveofficial or employee shall be separated or retired under this Actunless his application for early retirement or voluntary separationshall have been accepted by the head of the government office oragency or by the chief executive officer of the government-ownedor controlled corporation concerned as the case may be.

For purposes of this Act, "head of government office or agency"refers to the Secretary in the case of bureaus, divisions and otheroffices under a department; governor or mayor, as the case maybe, in the case of local government units; the Chief of Justice inthe case of the employees of the Judiciary; the Senate Presidentor the Speaker of the House of Representatives, as the case maybe, in the case of employees of the Legislature; the Chairman inthe case of the Constitutional Commissions; and in the case ofother offices not within the authority of those previously

mentioned, their overall superior.o b l e r t w i b r y

The application for early retirement or voluntary separation shallbe accepted unless the services of the applicant shall be deemednecessary. The application of those with pending administrativecases punishable by dismissal or removal shall be held inabeyance until the final disposition of such cases withoutprejudice to their receiving benefits under this law in case ofacquittal. cralaw

The applications of those with criminal cases of grave naturecommitted in relation to their office shall be held in abeyance. cralaw

Sec. 8. Restriction on the Employment and Replacement ofRetired or Separated Personnel. Appointive officials andemployees who are retired or separated under this Act shall notbe eligible for appointment to, or employment in any branch,


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division, instrumentality or agency of the government, includinggovernment-owned or controlled corporations with originalcharters whether on a permanent, temporary, casual oremergency status within a period of five (5) years after separationunless they refund the benefits they received: Provided, however,That those reemployed in the government shall be treated as newentrants insofar as GSIS coverage is concerned. cralaw

Positions vacated but retained shall be filled by personnel chosenfrom among the most deserving employees in the agencyconcerned or from any other agency. cralaw

Sec. 9. Period of Applicability and Effectivity of the IncentiveBenefits. Applications for early retirement and voluntary

separation benefits hereunder shall be entertained only if filedwithin a period of two (2) months from the issuance of the rulesand regulations for the implementation of this Act pursuant toSection 13 hereof. The oldest employees who are the most seniorin the service will be given priority in the payment of benefits. cralaw

Sec. 10. Funding. For national government employees, thesum of Three billion pesos, or so much thereof as may benecessary, is hereby authorized to be appropriated out of anyfunds in the National Treasury not otherwise appropriated for

payment of early retirement and separation incentive benefitsauthorized in this Act.cralaw

For employees of government-owned or controlled corporations,the benefits herein granted shall be paid from the internal fundsof the respective corporations. In no case shall the benefits paidto employees of government-owned or controlled corporations beless than the benefits granted by their existing corporateprograms, if any. oble vrt ibr y

For employees of local government units, the benefits shall bepaid from available funds of each local government unit. cralaw

Government-owned or controlled corporations and localgovernment units which may not be able to adequately fund theincentive benefits under this Act may avail themselves of theThree billion peso fund appropriation for this purpose but only to


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the extent of twenty-five percent (25%) of the requirements onthe condition that their plantilla and staffing pattern shall, for aperiod of one (1) year from the effectivity of this Act, be subjectto approval of the Department of Budget and Management:Provided, That in the case of government-owned or controlledcorporations, said twenty-five percent (25%) may be deducted bythe Department of Budget and Management from whateverbudgetary allocation and assistance they may get from theNational Government in the future. o b l e vr t i b r y

The above provisions notwithstanding, all savings accruing fromthe abolition of positions pursuant hereto shall be earmarked andused exclusively for the payment of the benefits under this Act. cralaw

Sec. 11. Retroactive Charges.

Officials and employees whowere previously separated from the government service not forcause but as a result of the reorganization pursuant to variousexecutive orders authorizing government reorganization issuedafter the ratification of the 1987 Constitution shall be deemedcovered and entitled to avail of the incentive benefits under thisAct.cralaw

Sec. 12. Penalties. Any government official who compels anemployee under any guise whatsoever to retire or be separated

from government service by virtue of this Act or otherwiseviolates provisions hereof shall, upon conviction, be punished bya fine not exceeding One thousand pesos (P1,000), or byimprisonment not exceeding six (6) months or both such fine andimprisonment in the discretion of the court.cralaw

Sec. 13. Implementing Rules and Regulations. Theimplementing rules and regulations shall be issued within fifteen(15) days from the date of effectivity of this Act by theDepartment of Budget and Management, in consultation with the

Civil Service Commission: Provided, That any provision of law tothe contrary notwithstanding, the only documents or supportingpapers to be submitted by appointive officials and employees whowish to avail themselves of the benefits under this Act are thefollowing: o b l e vr t i b r y


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(a) A duly approved application under oath for early retirement orvoluntary separation in accordance with this Act, including astatement of the number of years of service in the governmentand the rate of the highest salary received. ch n robles virtu l l w(b) Money and property clearance from the agency concernedwhere proper pursuant to Section 7 hereof; and

(c) A simplified statement of assets and liabilities, net worth, andfinancial and business interests in the case of regular employees:Provided, further, that the processing and actual payment ofbenefits to the appointive officials and employees concerned shallbe completed within fifteen (15) days from the date of submissionof all the foregoing documents.

Sec. 14. Compliance and Reporting.

Six (6) months from theeffectivity of this Act, the Department of Budget andManagement and the Civil Service Commission shall, on the basisof the reports of the various heads of government offices andagencies, render a report to Congress on the number ofgovernment employees affected, the type or nature of positionsinvolved, the total amount spent and an evaluation thereof. chanroblesvirtual law library

Sec. 15. Repealing Clause. All laws, rules and regulations or

parts thereof, inconsistent with the provisions of this Act arehereby repealed or modified accordingly. oble vrt ibr y

Sec. 16. Separability Clause. If any part, section or provisionof this Act shall be held invalid or unconstitutional, no other partsection or provision thereof shall be affected thereby. oble rt ibr y

Sec. 17. Effectivity. This Act shall take effect upon publicationin two (2) newspapers of general circulation.

Republic of the Philippines

SUPREME COURTManila

EN BANC

G.R. No. 43479 September 28, 1935


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ADAM C. DERKUM,petitioner,

vs.

PENSION AND INVESTMENT BOARD, composed of J. Ralston Hayden, Luther B.

Bewley, Salvador Lagdameo, Jose Gil, Samuel F. Gaches, Harvey A. Bordner and Manuel

Camus,respondent.

Harvey and O'Brien for petitioner.

Office of the Solicitor-General Hilado for respondent.

HULL, J.:

This is an original action for mandamusbrought in this court for the purpose of compelling the

respondent to pay petitioner in increased amount under the provisions of Act No. 3050 as

amended, commonly known as the Teachers' Pension Law.

For many years petitioner served the Government of the Philippine Islands in various capabilities

under the Bureau of Education. On October 3, 1927, he was, upon his own request, retired fromthe service with an annuity of P2,000 per annum. The pertinent provisions of the Teachers'Pension law at the time are set forth in not (1).

On December 6, 1929, the Governor-General approved Act No. 3629 (see note 2). The onlychange made by this Act was in raising the limitation from P4,000 to P6,000.

In due time petitioner asked respondent to hold that this Act applied to him and to give him the

benefit thereof. This request was denied by respondent, and relief was also denied by the

Governor-General. Whereupon this action was brought.

Petitioner contends that the new Act applies to his case, although he had been retired prior to thepassage of the amendatory Act. In view of of the plenary powers of the Philippine Legislature

under our Organic Act, there can be no question that the law-making body had the right toincrease the annuities now being received by retired officers. The question is, therefore, whether

the Legislature by its action intended to grant the new benefits of those already separated from

the service. If the Legislature had that question in mind and intended to grant the benefits tothose situated as petitioner, a clause to that effect would have put the question beyond debate.

Not having done so, we can only look to the language of the Act itself and learn the legislative

intent through the standards canons of construction.

It is contended on the part of petitioner that our retirement laws were taken from California and

that, therefore, the decisions of the California courts on their retirement statutes should becontrolling in this jurisdiction. Petitioner cites a number of California decisions where theannuity of policemen and firemen have been increase after their retirement. An examination of

the California statutes, however, discloses that our statute is expressed in quite different terms,

and its is probable that our Legislature not only looked at the legislation that had been passed inother states.


24/26

It the California cases cited, policemen or firemen received an annuity based on the grade they

held at the time of retirement, and the California courts have held that when the compensation of

that grade is increased, the corresponding increase should be given to those on the retired list.(Rumetsch vs.Davie, 189 cal., 715; 209 Pac., 1008; Klench vs.Board of Pension Fund Com'rs.,

79 Cal. App., 171; 249 Pac., 46.)

A similar case was decided in the opposite way by the Supreme Court of Illinois. (O'Neil vs.

Harding, 315 III., 516; 145 N.E., 593.)

It is also be noted that in some particulars in California those retired retained a connection with

the service, while here the petitioner is completely severe from the Philippine service, and three

remains only by obligation of the Philippine Government to pay him whatever annual sum paybe due under the law.

The contention of the petitioner that is annuity is not a mere gratuity is correct. (People ex rel.Kronel vs.Abbott, 274 III., 380; 113 N.E., 696, and cases there cited.) When the conditions of

law are fulfilled, the employee becomes titled to the annuity as a matter of right. But the rights ofa person retired are determined by the law as it stood at the date of retirement (O'Neil vs.

Harding,supra), and therefore he has no vested right to the benefits of subsequent laws.

Where a section of an Act is amended as was done in this case, the general rule is that suchamendment has no retroactive will not be affected by it but will continue to be govern by theoriginal statute.

When the statute is amended by declaring that it shall read in a given way, the

amendment has no retroactive force. It has been said that the rule which, as to positive

enactments, requires express evidence of legislative intent in order to give them

retroactive effect, does not apply to appealing statutes but the better view is that, wherethe result will be to impair contracts or vested rights, a construction is to be avoided

which will give a retrospective operation to a repealing statute. . . . (25 R.C.L., 795.)

Unless required in express terms or by clear implication, an amendatory act will not be

given a retroactive construction. Proceedings instituted, orders made, and judgments

rendered before the passage of the amendment to be govern to the original statute. Wherea statute, or a portion thereof, is amended by declaring that, as amended, it shall in full,

the provisions of the original statute that are repealed are to be considered as having been

the law from the time they were first enacted, and the new provisions are to be

understood as enacted at the time the amended act takes effect. (59 C.J., 1181.)

The theory that the petitioner's right is founded upon contract does not inure to the benefit of

petitioner. The Philippine Government is carrying out its obligation to petitioner, which becomecrystallized and determinable upon the date of his retirement. A contract is not ordinarily

affected by an amendment of the law under which the contract arose. (Government of the

Philippine Islands vs.Frank, 13 Phil., 236.) That the Legislature saw fit subsequently to be moregenerous to those who were to be retired in the future, was a matter of policy solely for its

determination. Has the legislature instead of increasing the annuity, reduced it, petitioner would


25/26

have had a right to resist its application to his case, having been retired prior to the change.

Petitioner having this right, the respondent is bound to deny an increase unless the Legislature

expressly so directed.

Section 2 of Act No. 3050 as amended on December 6, 1929, by Act No. 3629, must be read in

connection with section 1 of said Act. Section 1 provides that the persons therein named ". . .shall be eligible for retirement on an annuity as provided in section 2 hereof . . .". On December

6, 1929, the petitioner was not a person "eligible for retirement". His retirement was then an

already consummated fact. Persons in his status therefore are not embraced in the terms of theAct as amended. These terms being expressed in the future tense, it would require a forced

construction of the language actually used by the Legislature to make law as it stood after

December 6, 1929, applicable to teachers who had previously been retired.

We are conscious of the inequality which results between those retire before and those who may

have retired after December 6, 1929, in respect of the amount of the annuity which they receive.

But the remedy rests with the Legislature if it was not the intention of the Legislature of such a

difference should be made.

In view of the premises, the petition for writ of mandamusis denied without specialpronouncement as to cost.

So ordered.

Avancea, C.J., Malcolm, Villa-Real, Abad Santos, Vickers, Imperial, Goddard, and Recto, JJ.,concur.

Butte, J.,took no part for the reason that he was the Chairman of the Teachers' Pension and

Investment Board on June 30, 1932.

Footnotes

1SECTION 1. beginning on the first day of April next following the date of the approval

of this Act, all teachers, principles, supervisors, inspectors, superintendents, and other

persons employed in supervising and directing the school work of teachers in the public

school service of the Philippine Islands, whose position are not classified as purelyclerical, without regard as to status in the classifies civil service of the Philippines

Islands, who have on that day, or who shall have any date thereafter, rendered at least

twenty years of service as computed in section seven of this Act, shall be eligible forretirement on an annuity as provided in section two hereof:Provided, That the lecturesand other special instructors who render provisional service shall not be legible for

pension nor shall such services be counted as teaching services in computing the length

of service of a teacher:Provided, further,That the provisions of this Act shall not includepersons who are not citizens of the Philippine Islands or of the United States of America.


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SEC. 2. For the purpose of determining the amount of annuity which a retired

employee shall receive the following classifications and rates shall be established

upon the basis of the annuity consisting of a fractional part of the average pay,salary or compensation in no case exceeding four thousand pesos per annum. The

annual inniuty as computed under this Act shall be four-tenths of the average

salary for twenty years of service; six-tents of the average salary for twenty-nineyears of service; eight-tenths of the average salary for thirty-two or more years ofservice.

xxx xxx xxx

SEC 10. Beginning on the first day of the third month next following the approvalof this Act and monthly thereafter there shall be deducted and withheld from each

monthly basic salary, pay or compensation of each employees to whom this Act

applies a sum equal to three per centum of such employee's monthly basic salary,

pay or compensation. The Insular Treasurer shall cause the said deductions to be

withheld form all specific appropriations for the particular salaries orcompensations from which the deductions are made and from all allotments from

which the deductions are made and from all allotments out of of lump sumappropriations for payments of such salaries or compensations for each fiscal

year, and said sums shall be transferred on the books of the Insular Treasurer to

the credit of the "Teachers Pension and Disability Fund" created in this Act.

2SECTION 1. Section two of Act Numbered Three thousand and fifty is hereby amended

so as to read as follows:

"SEC. 2. For the purpose of determining the amount of annuity which a retired

employee shall receive, the following classifications and rates shall be establishedupon the basis of the annuity consisting of a fractional part of the average pay,salary, or compensation, for the three years of service rendered prior to the

granting of the pension with maximum average pay, salary, or compensation, in

no case exceeding six thousand pesos per annum. The annual annuity ascomputed under this Act shall be four-tenths of the average salary for twenty

years of service; five-tenths of the average salary for twenty-six years of service;

seven-tenths of the average salary for twenty-nine years of service; eight-tenths ofthe average salary for thirty-two or more years of service."

SEC 2. This Act shall take effect upon its approval.

Documents

Applicable Laws on Retirement in the Philippines