"Section 3.    Social Security System. — (a) To carry out the purposes of this Act, the Social Security System with principal place of business in Manila or Quezon City, Philippines, is hereby created. The system shall be directed and controlled by a Social Security Commission composed of the Secretary of Labor and six appointive members, two of whom shall represent the labor group, two, the management group and two, the general public, to be appointed by the President with the consent of the Commission on Appointments. The Chairman of the Commission shall be designated by the President of the Philippines. The term of the appointive members shall be three years: Provided, That the terms of the first six appointive members shall be one, two and three years for every two members, respectively. All vacancies, except through the expiration of the term, shall be filled for the unexpired term only. The appointive members of the Commission shall receive twenty-five pesos per diem for each meeting actually attended by them: Provided, That no compensation shall be paid for more than one meeting a week.  

"(b)    The Commission shall have under its general supervision an Administrator who shall serve as the chief executive officer immediately responsible for carrying out the program of the Social Security System hereby created and the policies of the Commission. The Administrator shall be a person who has had previous experience in technical and administrative fields related to the purposes of this Act. He shall be appointed by the President of the Philippines with the consent of the Commission on Appointments, and shall receive a salary to be fixed by the Commission with the approval of the President, payable from the funds of the System.

"(c)    The Commission, upon the recommendation of the Administrator, shall appoint an actuary, medical director, and such other personnel as may be deemed necessary, shall fix their compensation; prescribe their duties and establish such methods and procedures as may insure the efficient, honest and economical administration of the provisions and purposes of this Act: Provided, however, That the personnel of the System shall be selected only from civil service eligibles certified by the Commissioner of Civil Service and shall be subject to civil service rules and regulations."

"(j)    To acquire, receive, or hold, by way of purchase, expropriation or otherwise, public or private property for the purpose of undertaking housing projects preferably for the benefit of low-salaried employee-members whose salaries do not exceed one thousand eight hundred pesos per annum and for the maintenance of hospitals and institutions for the sick, aged and infirm employee-members and immediate members of their families."  

"Section 5. (a)    Settlement of claims. — The filing, determination and settlement of claims shall be governed by the rules and regulations promulgated by the Commission."

"(d)    Employee. — Any person who performs services for an 'employer' in which either or both mental and physical efforts are used and who receives compensation for such services, where there is an employer-employee relationship.

"(e)    Dependent. — The legitimate spouse and legitimate or legitimated child of the covered employee who is under twenty-one years of age, and the parents of said employee who are wholly dependent upon him for regular support.

"(f)    Compensation. — All actual remuneration for employment, including the cash value of any remuneration paid in any medium other than cash except that part of the remuneration in excess of five hundred pesos received during the month.

"(g)    Monthly salary credit. — The compensation base for premiums and benefits as indicated in the schedule in Section eighteen of this Act.

"(j)    Employment. — Any service performed by an employee for his employer, except —

"(1)    Agricultural labor when performed by a share or leasehold tenant or worker who is not paid any regular daily wage or base pay and who does not work for an uninterrupted period of at least six months in a year;

"(9)    Service performed as a student nurse in the employ of a hospital or nurses' training school, and service performed as a medical intern in the employ of a hospital; and

"(k)    Beneficiaries. — Those designated as such by the covered employee from among the following:

"(1)    The legitimate spouse, the legitimate, legitimated, acknowledged natural children and natural children by legal fiction, and their legitimate descendants;

"(2)    In default of such spouse and children, the legitimate parents of the covered employee;

"(3)    In the absence of any of the foregoing, any other person designated by him."

"Section 9.    Compulsory coverage. — Coverage in the System shall be compulsory upon all employees between the ages of sixteen and sixty years, inclusive, and their employers: Provided, That any benefit already earned by employees under private benefit plans existing at the time of the approval of this Act shall not be discontinued, reduced or otherwise impaired: Provided, further, That private benefit plans which are existing and in force at the time of the compulsory coverage shall be integrated with the plan of the System in such a way where the employer's contribution to his private plan is more than that required of him in this Act he shall pay to the System only the contribution required of him and he shall continue his contributions to such private plan less his contribution to the System so that the employer's total contribution to his private benefit plan and to the Social Security System shall be the same as his contribution to his private plan before the compulsory coverage: Provided, further, That any changes, adjustments, modifications, eliminations or improvements in the benefits to be available under the remaining private plan, which may be necessary to adopt by reason of the reduced contribution thereto as a result of the integration, shall be subject to agreements between the employers and employees concerned: Provided, further, That the private benefit plan which the employer shall continue for his employees shall remain under the employer's management and control unless there is an existing agreement to the contrary: Provided, finally, That nothing in this Act shall be construed as a limitation on the right of employers and employees to agree and adopt benefits which are over and above those provided under this Act."

"Section 10.    Effective date of coverage. — Compulsory coverage of the employer shall take effect on the first day of his operation, and that of the employee on the date of his employment."

"Section 12.    Retirement benefits. — (a) Upon reaching the age of sixty years and after having paid at least one hundred twenty monthly contributions to the System, a covered employee shall have the option to retire and he shall then be entitled for as long as he lives but in no case for less than five years to a monthly basic pension amount to be computed as follows:

Twenty-five per cent of the first one hundred pesos average monthly salary credits or fraction thereof;

Fifteen per cent of the second one hundred pesos average monthly salary credits or fraction thereof;

Five per cent of each succeeding one hundred pesos average monthly salary credits or fraction thereof:

Provided, That if the total number of monthly contributions exceeds one hundred twenty at the time of retirement, the retiring employee, in addition to the monthly basic pension amount, shall be entitled to a monthly pension increment of one-twenty-fourth of one per centum of the average monthly salary credit for each monthly contribution in excess of one hundred twenty: Provided, further, That a member of the System covered prior to the effectivity of this amendatory Act or within two years thereafter and who was fifty years of age or over on the effective date of his coverage shall be entitled to the benefits hereunder if he has paid a number of monthly contributions equivalent to twelve times the difference between his age at coverage and sixty, but in no case less than twenty-four: Provided, finally, That the monthly pension shall in no case be less than twenty-five pesos for a retiring employee already covered at the time of the approval of this amendatory Act.

"(b)    A covered member who is sixty years of age and who does not qualify for pension benefits under paragraph (a) above, shall be entitled to a lump sum benefit equal to the total contributions paid by him and in his behalf, provided that he is separated from employment and is not continuing membership in the System on his own.

"(c)    During the re-employment of a retired employee his annuity shall be suspended and he shall be subject again to the provisions of Section eighteen hereof, and his employer to Section nineteen, provided such employee receives from his employment an average monthly compensation of more than one hundred twenty pesos."  

"Section 13.    Death and permanent disability benefits. — (a) Upon the covered employee's death or total and permanent disability, he or in case of his death, his beneficiaries shall be entitled to a basic lump sum amount equivalent to the total twelve highest monthly salary credits within the thirty-six calendar month period preceding his death or total and permanent disability excluding the month of death or total and permanent disability, or twelve times the total monthly salary credits divided by the total number of monthly contributions, whichever is greater, plus five-twelfths of one per centum of the basic lump sum amount for each monthly contribution in excess of one hundred twenty monthly contributions: Provided, That the following conditions are satisfied at the time of death or total and permanent disability:

"1.    He shall have paid eighteen monthly contributions within the thirty-six calendar month period preceding his death or total and permanent disability excluding the month of death; or

"2.    He shall have paid a number of monthly contributions equal to eighty per cent of the number of calendar months from the month of his death or total and permanent disability, inclusive:

Provided, further, That if none of the foregoing conditions are satisfied, his death or total and permanent disability benefit amount shall be proportionately reduced by the ratio which the total number of monthly contributions bear to the total number of calendar months from the month of his coverage to the month immediately preceding the death or total and permanent disability, inclusive: Provided, finally, That the death or total and permanent disability benefit amount shall not be less than the total contributions paid by him and his employer in his behalf to the System.

"(b)    If the disability is partial but permanent, the amount of benefit shall be such percentage of the benefit described in the preceding paragraph as the Commission may determine, with due regard to the degree of disability."

"Section 14.    Sickness Benefit. — (a) Under such rules and conditions as the Commission may prescribe, any covered employee under this Act who has paid at least twelve monthly contributions and who, on account of sickness or bodily injury is confined in a hospital, or elsewhere with the Commission's approval, shall, for each day of such confinement, be paid by his employer, or by the System if such person is unemployed or is a voluntary member, an allowance equivalent to thirty per centum of the total monthly salary credits within the twelve-month period immediately preceding his confinement divided by three hundred, plus ten per centum thereof for each dependent duly reported to the System prior to his current confinement if he has any, but in no case shall the total amount of such daily allowance be less than one peso and fifty centavos nor exceed seven pesos or seventy per centum of the total monthly salary credits within the twelve-month period immediately preceding his confinement divided by three hundred, whichever is the smaller amount, nor paid for a period longer than one hundred twenty days in one calendar year; nor shall any unused portion of the one hundred twenty days sick benefits granted under this section be carried forward and added to the total period allowable in the subsequent year: Provided, That such allowance shall begin only after the first seven days of confinement, except when such confinement is due to injury or to any acute disease; but in no case shall such allowance begin before all sick leaves of absence with pay, if any, to the credit of the employee shall have been exhausted: Provided, further, That payment of such allowances shall be promptly made by the employer every regular pay day, or on the fifteenth and last day of each month in the case of direct payment by the System, for as long as such allowances are due and payable.

"(b)    Eighty per centum of the daily benefits paid by an employer as provided in the preceding paragraph shall be reimbursed by the System to said employer upon receipt of satisfactory proof of such payment and of the legality thereof."

"Section 15.    Non-transferability of benefit. — The System shall pay the benefits provided for in this Act to such persons as may be entitled thereto in accordance with the provisions of this Act. Such benefits are not transferable, and no power of attorney or other document executed by those entitled thereto in favor of any agent, attorney, or any other individual for the collection thereof in their behalf shall be recognized except when they are physically and legally unable to collect personally such benefits: Provided, however, That in the case of death benefits, if no beneficiary has been designated or the designation thereof is void, said benefits shall be paid to the legal heirs in accordance with the laws of succession."

"Section 18.    Employee's contribution. — Beginning as of the last day of the calendar month when an employee's compulsory coverage takes effect and every month thereafter during his employment, the employer shall deduct and withhold from such employee's monthly salary, wage, compensation or earnings the employee's contribution in an amount corresponding to his salary, wage, compensation or earnings during the month in accordance with the following schedule:

    Monthly salary wage    Monthly    Employer's    Employee's    Total
    or earnings     salary    contribution    contribution    contribution
        credits

    I.    Below —  P10.00    P10    P.50    P.10    P.60

    II.    P10    — to P49.99    30     1.50     0.30     1.80

    III.    P50    —       99.99    75     3.00     1.50     4.50

    IV.    100    —      149.99    125     4.40     3.10     7.50

    V.    150    —      199.99    175     6.20     4.30     10.50

    VI.    200    —      249.99    225    7.90     5.60     13.50

    VII.     250    —      349.99    300     10.50     7.50     18.00

    VIII.     350    —      499.99    425     14.90     10.60     25.50

    IX.     500    —       Over    500     17.50     12.50    30.00

"Section 19.    Employer's contribution. — Beginning as of the last day of the month when an employee's compulsory coverage takes effect and every month thereafter during his employment, his employer shall pay, with respect to such covered employee, the employer's contribution in accordance with the schedule indicated in Section eighteen of this Act. Notwithstanding any contract to the contrary, an employer shall not deduct, directly or indirectly, from the compensation of his employees covered by the System or otherwise recover from them the employer's contribution with respect to such employees."

"Section 22.    Remittance of premiums. — (a) The contributions imposed in the preceding sections shall be remitted to the System within the first seven days of each calendar month following the month for which they are applicable or within such time as the Commission may prescribe. Every employer required to deduct and to remit such contributions shall be liable for their payment, and if any contribution is not paid to the System, as herein prescribed he shall pay besides the contribution a penalty thereon of three per centum per month from the date the contribution falls due until paid. If deemed expedient and advisable by the Commission, the collection and remittance of contributions shall be made quarterly or semi-annually in advance, the contributions payable by the employees to be advanced by their respective employers: Provided, That upon separation of an employee, any premium so paid in advance but not due shall be credited or refunded to his employer."

"Section 25.    Deposit and disbursement. — All moneys paid to or collected by the System every year under this Act and all accruals thereto shall be deposited, administered and disbursed in the same manner and under the same conditions and requirements as provided by law for other public special funds: Provided, That of the total yearly collection of such moneys and their accruals, not more than seven per centum shall be disbursed for the payment of salaries and wages and purchases of office equipment and materials and operational expenses of the System for any year."  

"(d)    In direct housing loans to employee-members of the System, giving priority to the low-income groups, up to a maximum of sixty per centum of the appraised value of the properties to be mortgaged by the borrowers under such rules and regulations as the Commission may adopt, and in building projects referred to in Section four (j) of this Act: Provided, That the total of such investment shall not exceed forty per centum of the total funds available for investment.

"(e)    In investments which will provide credit facilities for small short-term loans to employee-members."

"(e)    Whoever fails or refuses to comply with the provisions of this Act or with the rules and regulations promulgated by the Commission, shall be punished by a fine of not less than five hundred pesos nor more than five thousand pesos, or imprisonment for not less than six months nor more than one year, or both, at the discretion of the court.

"(g)    Any employee of the System who receives or keeps funds or property belonging, payable or deliverable to the System and who shall appropriate the same, or shall take or misappropriate or shall consent, or through abandonment or negligence, shall permit any other person to take such property or funds, wholly or partially, or shall otherwise be guilty of misappropriation of such funds or property, shall suffer the penalties provided in Article Two hundred seventeen of the Revised Penal Code."