es
pew

‘Republic of the Philippines
House of Representatives
Queson City, Metro Manila

Nineteenth Congress

First Regular Session
House Bill No.

Introduced by :
Hon. Gerville ‘Jinky Bitrics’ R. Luistro

EXPLANATORY NOTE

A grateful nation always recognizes the bravery of our military and
uniformed personnel (MUPs) in defending the sovereignty of the country and the
people. A way of expressing this gratitude is providing them a unified system of
retirement, separation and payment, also for the benefit of their beneficiaries in
appropriate conditions. However, in doing so, we must not compromise the same
nation they are defending by risking its fiscal situation.

At present, according to a study conducted by the Government Service
Insurance System (GSIS), the pension system has an unfunded reserve deficit of
P 9.6 trillion, and a total of P848.39 billion is needed annually to sustain it for the
next 20 years based on the existing scheme. And the problem will continue to
worsen as we recruit more MUPs.

The problem with the existing pension system for MUPs is the absence of
a seed fund to grow since MUPs are not required to pay mandatory
contributions for their pension unlike civilian government employees as it is
being subsidized by the government through annual appropriations in the
national budget. There is also the current practice of automatic indexation of
the pension to the prevailing salaries of active personnel. Eventually, these will
eat up the budget unless the liabilities are deferred and trust and provident
funds are set-up to ease the budgetary pressure.

More than ever, it is now imperative to put in place mechanisms that
would address the ills of the present pension system for MUPs and install one
that can be managed in a more efficient and sustainable manner.


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This bill seeks to institute the following remedial measures :

Limit the automatic indexation of pension and survivorship benefits to the
increases in the salaries of those in the active service of the same rank by
Putting a cap of 5% for the next 10 years from the effectivity of the law;

Impose mandatory contributions as follows: first three years; 5 percent
employee, 16 percent National Government (NG); next three years; 7
percent employee, 14 percent NG; years thereafter: 9 percent employee,
12 percent NG, in parity with other GSIS pensioners;

Identify other sources of funding for MUP pension, including proceeds
from the sale/lease of assets of the MUP, from National Government
assets, and other identified assets;

Establish a new entity, the Military and Uniformed Personnel Trust Fund
Committee, to be the administrator of the MUP fund while GSIS will act as
its fund manager; and,

‘Set the MUP pensionable age at 56 years, regardless of years of service.

The propose measure hopes to reduce the defense budget for pensioners
had been gnawing at defense spending for many years now, and have the

saved amount allocated for procurement of new weapons or modern platforms in
order for our servicemen to more effectively serve their function of defending the
Motherland, without sacrificing their own well-being in times of peace and in their
twilight years.

For the foregoing reasons, the immediate consideration and approval of

the bill is earnestly urged.



aEPRES,
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HOUSe

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“ag es
ML ippwe

Republic of the Philippines
Bouse of Representatives
Queson City, Metro Manila

Nineteenth Congress

First Regular Session

douse Bill’ No. 7511

Introduced by :
Hon. Gerville ‘Jinky Bitrics’ R. Luistro

AN ACT
CREATING A SUSTAINABLE FISCAL FRAMEWORK FOR THE PENSION
SYSTEM OF THE MILITARY AND UNIFORMED PERSONNEL, PROVIDING
MECHANISMS FOR THE DISPOSITION OF GOVERNMENT ASSETS FOR THE
PURPOSE, AND APPROPRIATING FUNDS THEREFOR

Be it enacted by the Senate and the House of Representatives of the Philippines
in Congress assembled :

TITLE
General Provisions

Section 1. Short Title - This Act shall be known as the “Military and
Uniformed Personnel Pension Act”.

Section 2. Declaration of Policy - The State duly recognizes the vital role of
the military and uniformed personnel in providing internal and external security,
promoting peace and order, and ensuring public safety.

The State also recognizes its obligation to secure the pension system for
the military and uniformed personnel given the distinctive personal risk in their
role in nation building and national security.

To protect the military and uniformed personnel against the extraordinary
hazards, risks, and dangers that they encounter in the performance of their
duties, the State shall ensure that there shall be an adequate, robust, and a
well-managed insurance system that shall adequately and sustainably support
their needs and that of their dependents.


Towards these ends, the State shall guarantee the sustainability of the
pension and other benefits of the military and uniformed personnel by creating a
fiscal framework that fully supports their funding requirements.

Section 3. Definition of Terms - As used in this Act:

a) Military and Uniform Personnel refers to all employees of the government
who wear uniforms, with ranks, may be armed or unarmed, primarily
involved in national defense, enforcement of laws, and in the maintenance
of peace, order, and security and who belong to any of the following
services: Armed Forces of the Philippines, Philippine National Police,
Philippine Coast Guard, Bureau of Jail Management and Penology, Bureau
of Corrections, and the employees of the Hydrography Branch of the
National Mapping and Resource Information Authority who were
transferred from the Bureau of Coast and Geodetic Survey;

Pension refers to the sum of money representing the monthly retirement
pay or the monthly life annuity and uniformed personnel;

Survivorship Pension refers to the monthly benefit or the monthly life
annuity of the beneficiaries of a military and uniformed personnel who is
retired or separated under the provisions of existing laws.

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TITLE It
Fiscal Sustainabi of Pension Benefits

Section 4. Fiscal Risk Management - To ensure that fiscal risks related to
the military and uniformed personnel pension system are managed and
addressed, the Secretary of Finance, as Chairperson of the Military and
Uniformed Personnel Trust Fund Committee created under Section 9 of this Act,
shall:

a) Formulate policies, consistent with law, to ensure the fiscal sustainability of
the pension of military and uniformed personnel;

b) Asses possible risks to the fiscal sustainability of the pension of military
uniformed personnel and propose appropriate policy interventions;

c) Identify, manage, and control risks that the pension of military and
uniformed personnel may pose to the national government's fiscal position;

d) Inform Congress of such risks through the annual Fiscal Risk Statement
and purpose legislative reforms to address such risks; and,

€) Obtain information from any officer or office of local governments and
agencies and instrumentalities of the national government, as may be
necessary.

Section 5. Maturity Benefit from the Insurance Plan - A military and
uniformed personnel who is retired or separated under the provisions of existing
laws, or the qualified survivors in the case of death before retirement or
separation, shall receive the maturity benefit from the life insurance plan funded
by mandatory contributions paid by the military and uniformed personnel under
Section 14 of this Act. The Military and Uniformed Personnel Trust Fund


Committee as created under Section 9 of this Act, shall provide mechanisms to
allow the enjoyment of this benefits either lump sum or in annuitized payments.

Section 6. Disability Pension - In lieu of disability benefits provided under
existing laws, a military and uniformed personnel who is retired by reasons of
disability, which is the proximate result of wounds or injuries sustained or
sickness or disease acquired in the line of duty shall receive a monthly disability
pension corresponding to the disability incurred at the time of separation:

a) If and while the disability is rated twenty-five percent (25%) - Five
thousand pesos (P5,000.00);

b) If and while the disability is rated fifty percent (50%) - Ten thousand
pesos P10,000.00);

c) If and while the disability is rated seventy-five percent (75%) - Fifteen
thousand pesos (P15,000.00); and,

d) If and while the disability is rated one hundred percent (100%) - Twenty
thousand pesos (P20,000.00).

Section 7. Capped Automatic Indexation to Adjustments in Active
Personnel Pay - The adjustment in pension of retired or separated military and
uniformed personnel and survivorship pension of qualified survivors shall be
automatically indexed to adjustments in the salary of military and uniformed
Personnel in active service holding the same rank: Provided, That within ten (10)
years from the effectivity of this Act, the adjustment in the salary of active
military and uniformed personnel shall not exceed five percent (5%) at any
given year and the adjustment in the pension and survivorship pension shall not
exceed five percent (5%) during the same year.

The President of the Philippines is hereby authorized, upon the
recommendation of the Military and uniformed Personnel Trust Fund Committee
as created under Section 9 of this Act, and subject to consultation with the
President of the Senate and the Speaker of the House of Representatives, to
increase the pension and survivorship pension at a rate lower that the
adjustment in the salary of active military and uniformed personnel of the same
rank if the national government incurs an unmanageable public sector deficit.

TITLE III
Military and Uniformed Personnel Trust Fund

Section 8. Military and Uniformed Personnel Trust Fund - The Military and
Uniformed Personnel Trust Fund, hereinafter referred to as the MUP Trust Fund,
is hereby created for the budgetary support of the military and uniformed
services, including the payment of pension and survivorship pension under
existing laws and the disability pension and other benefits under this Act.

Section 9. Military and Uniformed Personnel Trust Fund Committee - To
carry out the declared policy of this Act, the Military and Uniformed Personnel
Trust Fund Committee, hereinafter referred to as the Committee, is hereby
created. The Committee shall be organized within ninety (90) days from the
effectivity of this Act. The Committee is composed of the following members:


a) Secretary of Finance, as Chairperson;

b) Secretary of Budget Management;

c) Secretary of National Defense;

d) Secretary of the Interior and Local Government;

e) Secretary of Justice;

f) Executive Secretary of the Office of the President; and,

g) President and General Manager of the Government Service Insurance
System.

The Bureau of the Treasury shall serve as the Secretariat of the

Committee and maintain the records and accounts of all investments, receipts,
disbursements, and other transactions relating to the management,
administration, and utilization of the MUP Trust Fund: Provided, That these
records and accounts are maintained in accordance with the existing accounting
and auditing laws, rules, and regulations and audited by the Commission on
Audit.

Section 10. Powers and Functions of the Committee - The Committee
shall exercise the following powers and functions:

@) Act as Trustee of the MUP Trust Fund and such other assets as may be
assigned to the pension system of the military and uniformed personnel
and direct how the assets of the MUP Trust Fund are managed;

b) Manage the MUP Trust Fund, through the fund manager designated under
Section 11 herein, and ensure that the fund is actuarially and financially
optimal and sustainable;

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Authorized the necessary expenses to manage and administer the MUP
Trust Fund;

d) Authorize and direct the creation of a life insurance system for military
and uniformed personnel which shall cover death and disability benefits in
addition to those provided under this Act, to account for the significant
risks involved in military and uniformed services and indemnify personnel
who suffer such risks, and set reasonable mandatory insurance premiums
therefor:

Provided, That the insurance system shall be administered by the
Government Service Insurance System and supervised by the Insurance
Commission: Provided, further, That the subject system shall be manage
separately from the pension system: Provided, finally, That, subject to the
authorization of the Committee, the insurance system may undertake
investments in debt and equity securities and in the money market, real
estate investments, and other viable investments;

e) Authorize and direct the creation of a provident fund or a mutual fund;

f) Implement and execute functions related to the disposition of assets
identified under this Act;


g) Create, manage, and utilize separate trust fund accounts for the
budgetary support of the military and uniformed services, retirement and
survivorship benefits of military and uniformed personnel, provident or
mutual fund and insurance provisions;

h) Cause undertaking of a survey or consultation to asses the preference of
military and uniformed personnel on the features of the pension system,
including willingness to pay for contributions and interest in various
benefit and investments schemes;

i) Commission an actuarial evaluation of the fiscal sustainability of the
pension scheme, including the specific recommendations on the rates for
contributions and investment options for the MUP Trust Fund, as
applicable; and,

Perform other necessary functions for the effective management of the
MUP Trust Fund.

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Provided, That within one (1) year from the effectivity of this Act, the
fund manager shall conduct the studies stated in Subsections (h) and (i) herein;
Provided, further, That the findings and recommendations obtained from the
studies shall be submitted to the Committee which shall promulgate
implementing rules and regulations with respect to the mandatory contribution
scheme, and other features of the pension scheme as applicable: Provided,
furthermore, That an amount not exceeding Thirty million pesos
(P30,000,000.00) is hereby appropriated for the conduct of the studies:
Provided, finally, That the fund manager may engage the private sector, as
needed, to ensure quality and timeliness in the implementation of the survey,
consultation, and actuarial evaluation.

Section 11. MUP Trust Fund Manager - The Government Service Insurance
System is designated as the fund manager and benefits administrator of the
MUP Trust Fund, and shall:

a) Implement an investment management and benefits administration
strategy as directed by the Committee;

b) Monitor market and economic trends and tract securities to make
informed investment decisions;

c) Recommend its portfolio strategy to the Committee;

) Tract financial results of companies in the portfolio and various metrics,
including price-to-earnings ratio, inflation-adjusted return, sales,
earnings, and dividends; and,

) Perform other acts necessary to fulfill its mandate under this Act, or such
acts that may be delegated by the Committee.

Section 12. Structure, Staffing Pattern, and Operating Budget - The
organizational structure and staffing pattern for the management of the MUP
Trust Fund within the Government Service Insurance System and for the
creation of the MUP Trust Fund Secretariat within the Bureau of the Treasury
shall be approved by the Committee within ninety (90) days from the enactment
of this Act: Provided, That appointees to various positions shall comply with the
qualification standards approved by the Civil Service Commission: Provided,


further, That the Government Service Insurance System shall be entitled to a
management fee, to be charged against the MUP Trust Fund and its derivative
incomes, including budgetary requirement commensurate to the expertise and
services rendered for the salaries and benefits of officials and employees
assigned to the Committee.

Section 13. Joint Responsibility - For the purpose of ensuring that only
qualified military and uniformed personnel retirees and beneficiaries shall receive
the retirement pension or separation benefits, the respective services or mother
units shall assist and share, jointly or separately, the duty and obligation with
the Committee in monitoring proof of life or life events that will affect the
qualification of pensioners and beneficiaries to receive the pension or benefit.
The initial computation of pension and benefits accruing to each retiree or
beneficiary shall be jointly undertaken and agreed upon by the concerned
mother unit and the Committee.

Section 14. Funding Source - The MUP Trust Fund shall be funded through
the following:

@) Capitalization - The amount of One hundred thirty billion pesos
(P130,000,000,000.00) shall be appropriated to the MUP Trust Fund to
cover the pension requirement of the Fiscal Year for which the fund was
appropriated. Such sums as may be necessary for the sustainability of the
fund as determined by the Committee shall be automatically appropriated
and be automatically released to the MUP Trust Fund.

b) Mandatory Contributions - It shall mandatory for military and uniformed
Personnel to contribute a percentage of their monthly compensation as
their personal share to the MUP Trust Fund. There shall also be a National
Government share which shall be automatically appropriated and used
exclusively to fund pension benefits of the military and uniformed
Personnel. The mandatory contributions shall be allocated as follows:

i, For the first three (3) years after the effectivity of this Act, military
and uniformed personnel shall contribute five percent (5%) of their
Monthly compensation as personal share, while the National
Government shall provide an equivalent of sixteen percent (16%)
as its share;

i. Thereafter, for the next three (3) years, military and uniformed
Personnel shall contribute seven percent (7%), while the National
Government shall provide fourteen percent (14%); and,

For every year after, military and uniformed personnel shall
contribute nine percent (9%) and the National Government shall
provide twelve percent (12%).

Provided, That contribution rates may be adjusted by the fund manager,
subject to actuarial validation: Provided, further, That forty-five percent (45%)
of mandatory contributions of the military and uniformed personnel shall be used
for the establishment of a life insurance plan as authorized under this Act, with
death, accident, and disability benefits in addition to those mandated under this
Act; forty-five percent (45%) shall be used to establish the Provident Fund; and


ten percent (10%) shall be used for the payment of disability pension granted
under this Act: Provided, furthermore, That such allocations may be periodically
adjusted by the Committee based on actual need and actuarial soundness:
Provided, finally, That the life insurance plan shall include a cash benefit that
shall be due and collectible at the plan’s maturity date, which shall be the date
of separation from service.

¢) Additional Sources of Funding ~ The MUP Trust Fund may be augmented
from the unprogrammed appropriations and proceeds derived from the
lease, joint development, auction of development rights, or disposition of
government properties identified for the purpose, investment income from
the MUP Trust Fund identified and overseen by the fund manager subject
to actuarial validation, and savings of the National Government.

Section 15. Government Guarantee - The government of the Republic of
the Philippines hereby guarantees the fulfillment of the obligations of the MUP
Trust Fund to its members when they fall due.

Section 16. Disposition of Military and Uniformed Services Assets -
Within thirty (30) days from the effectivity of this Act, the concerned military
and uniformed services shall submit a complete list of their real assets in the
manner prescribed by the Committee to identify additional sources of funding for
budgetary support of their services, and augment the financing of the
separation, retirement, and pension benefits of their military and uniformed
personnel under existing laws and this Act.

Thereafter, the Committee shall conduct a complete accounting and
inventory of the assets of military and uniformed services that may be used to
support MUP Trust Fund, including the amount, value, description and nature of
such funds, properties, assets, records, choses in action, and other rights,
claims, or causes of action pertaining thereto, and submit a report to the Office
of the President, Congress, and the Commission on Audit.

Within thirty (30) days from the receipt of the inventory by the
Committee, the Commission on Audit shall audit the accounting and inventory of
the assets of concerned military and uniformed services to determine the
completeness of the inventory and establish the reasonableness of the asset
valuation.

Within one (1) year from the submission of the accounting and inventory
of the assets of concerned military and uniformed services, the Commission on
Audit shall submit to the Committee the audit report, including the complete list
of the assets of concerned military and uniform services and their valuation, and
the methodologies employed for the evaluation.

The Committee shall, within fifteen (15) days from the receipt of audit
report, publish the audit report in at least two (2) newspaper of general
circulation. Nothing herein shall be construed as preventing the designated
disposition entity from procuring a third-party appraisal of any of the assets of
concerned military and uniformed services prior to or while preparing the
privatization or disposition plans of the assets.


The Committee shall coordinate with the Office of the President, Philippine
Reclamation Agency, and other disposition entities to be identified by the
Committee in the execution and delivery of this mandate.

The Committee shall prioritize the disposition modes that may generate
income from these assets without undertaking the sale thereof except when the
Committee determines that selling a specific asset is the most optimal financial
option: Provided, That the Committee may sell only portions thereof to meet the
financial requirements.

To optimize revenues from the assets of the concerned military and
uniformed personnel services, the Committee may seek the services of the
Privatization Group of the Department of Finance which shall recommend to the
Committee the most financially advantageous manner of disposition of the
assets.

Unless otherwise directed by the President of the Philippines as the
Commander-in Chief and upon the recommendation of the Secretary of Finance,
the proceeds from the disposition of assets of the concerned military and
uniformed services shall be earmarked for the budgetary support of the military

and uniformed services for capital outlay and maintenance and other operating
expenditures. The Committee shall allocate the proceeds from the disposition of
assets based on the funding requirements of the specific purposes. The proceeds
from the disposition of assets of the military and uniformed services shall inure
to the benefit of, or as budget support to, the service to which the asset belongs
if used towards budgetary support for capital outlays, pension fund, and
maintenance and other operating expenses.

Within one (1) year from the effectivity of this Act, the military and
uniformed services may add to the list such real assets required for identification
and submission under this Section and which belonged to the military and
uniformed services prior to the effectivity of this Act. Any real asset that is
required by this Act to be included in the submitted list and which are not
included in actual submissions by the military and uniformed services may be
disposed by the MUP Trust Fund Committee in the manner it deems appropriate.

Section 17. Tax Treatment of the MUP Trust Fund. - Notwithstanding any
law to the contrary, the MUP Trust Fund, its assets, revenues, including all
accruals thereto, and benefits paid, are exempt from all taxes, fees, charges, or
duties of all kinds. These exemptions shall continue unless expressly and
specifically revoked.

Subject to Section 20 of this Act, the MUP Trust Fund, the properties of
the military and uniformed services identified by the Committee to be disposed
and sums or monies for the payment of the benefits under this Act are exempt
from attachment, garnishment, execution, levy or other processes issued by the
courts, quasi-judicial agencies or administrative bodies and from all financial
obligations of the members, including pecuniary accountability arising from or
caused or occasioned by the members’ position or work except when the
monetary liability, contractual or otherwise, is in favor of the MUP Trust Fund.


All other applicable tax exemptions granted to the Government Service
Insurance System, shall also apply to the MUP Trust Fund.

TITLE IV
Transitory Provisions

Section 18. Transfer of Power and Functions - For purposes of
administration of military and uniform personnel pension and retirement
benefits, the powers and functions of units or instrumentalities of agencies that
employ military and uniformed personnel and administer their pension system or
parts thereof are hereby transferred to the MUP Trust Fund Committee.

Section 19. Period of Transfer - There shall be a transition period of five (5)
months from the effectivity of this Act to implement the transfer of powers and
functions, rights, assets, and liabilities mentioned in this Title: Provided, That
the same transition period shall be provided to allow the units or
instrumentalities of agencies administering the military and uniformed personnel
pension system to restructure: Provided, further, That all civilian personnel in
the units or instrumentalities administering the military and uniformed personnel
pension system affected by the transfer of powers and functions provided in this
Title shall continue in office without need of reappointment: Provided, finally,
That civilian employees in the units or instrumentalities of agencies
administrating the military and uniformed personnel pension system who opt to
retire or resign as a result hereof, if qualified, shall be allowed and be entitled to
retirement and separation benefits under existing laws to officials and employees
affected by an approved reorganization program.

TITLE V
Final Provisions

Section 20. Non-encumbrance of Benefits - The benefits authorized under
this Act, except as provided herein, are not subject to attachment, garnishment,
levy, execution or any tax whatsoever, and may not be assigned, ceded, or
conveyed to any third person: Provided, That if a retired or separated military
and uniformed personnel who is entitled to any benefit under this Act has
unsettled money or property accountabilities incurred while in the active service,
an amount not exceeding fifty percent (50%) of the pension gratuity or other
payment due to the military and uniformed personnel or their survivors under
this Act may be withheld and be applied to settle such accountabilities.

Section 21. Financial Literacy and Career Transition Training - The
Bangko Sentral ng Pilipinas, in coordination with the military and uniformed
services, shall provide mandatory, periodic financial literacy training for active
personnel. The military and uniformed services shall formulate skills workshops
for active personnel who plan to transition to other careers outside of the
uniformed service.


Section 22. Penal Clause - Any person who participates directly or indirectly
in the commission of fraud, falsification, misrepresentation of facts, collusion or
any similar anomaly in the issuance of any certificate or document for any
Purpose connected with this Act shall upon conviction be punished by a fine not
less than the amount defrauded but not more that threefold of such amount or
imprisonment of not less than six (6) months and one (1) day to six (6) years
and perpetual disqualification from holding public office and from practicing any
profession licensed by the government.

Section 23. Implementing Rules and Regulations - Within sixty (60) days
from the effectivity of this Act, the Secretary of Finance shall, in consultation
with the Secretaries of National Defense, Interior and Local Government, Justice,
Transportation, Environment and Natural Resources, Budget and Management,
and the Head of the Government Service and Insurance System, promulgate the
necessary rules and regulations for the effective implementation of this Act.

Supplemental rules and regulations governing the management and
administration of the pension system of the military and uniformed personnel
may be issued within one (1) year from the effectivity of this Act.

Section 24. Repealing Clause - The pertinent provisions of these laws are
hereby repealed:

a) Presidential Decree No. 361, entitled “Providing for an Armed Forces
Retirement and Separation Benefits System” as amended by Presidential
Decree No. 1656 and Presidential Decree No. 1909;

Sections 23, 24, 26, and 31 of Presidential Decree No. 1638, entitled
“Establishing a New System of Retirement and Separation for Military
Personnel of the Armed Forces of the Philippines and for Other Purposes,”
as amended by Presidential Decree No. 1650;

Section 11 of Republic Act No. 340, as amended “An Act to Establish a
Uniform Retirement System for the Armed Forces of the Philippines, to
Provide for Separation Therefrom, and for Other Purposes,” as amended;

d) Sections 16, 17, 18, 19, 20, and 22 of Republic Act No. 5976, otherwise
known as the "Coast Survey Officers Retirement and Separation Act of
1969”,

b)

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€) Section 77 of Republic Act No. 6975, otherwise known as the "Department
of Interior and Local Government Act of 1990”, as amended; and,

f) Sections 4 and 5 of Republic Act No. 9040, otherwise known as the “AFP
Tax Exemption for Pay and Allowances Act of 2001.”

All laws, decrees, executive orders, rules and regulations, and other
issuances or parts thereof which are inconsistent with this Act are hereby
repealed, amended or modified accordingly.


Section 25. Separability Clause -If any provision of this Act is declared
unconstitutional or invalid, the other provisions not otherwise affected shall
remain in full force and effect.

Section 26. Effectivity - This Act shall take effect fifteen (15) days after its
Publication in the Official Gazette or in any newspaper of general circulation.

Approved.