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PRESIDENTIAL DECREE NO. 712
PRESIDENTIAL DECREE NO. 712 -
AMENDING COMMONWEALTH ACT NO. 186, AS AMENDED, AND CONVERTING THE
PRESENT FIXED MONTHLY PENSIONS OF THE GOVERNMENT SERVICE INSURANCE
SYSTEM TO INDEXED MONTHLY PENSIONS AND FOR OTHER PURPOSES
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chanroblesvirtualawlibrary
WHEREAS,
the fixed monthly annuities or pensions being received by government
pensioners under Commonwealth Act No. 186, as amended, are hardly
adequate to meet the increasing costs of living;chanroblesvirtualawlibrary
WHEREAS, the continuing erosion of the value of such fixed monthly
annuities or pensions due to inflation or increase in the cost of
living has aggravated the predicament of the retirees;chanroblesvirtualawlibrary
WHEREAS, the government is cognizant of the plight of government
retirees and their families and is desirous of alleviating their
predicament;chanroblesvirtualawlibrary
WHEREAS, a periodic adjustment of the fixed monthly pensions linked
with the cost of living indices can protect the real value of the
monthly annuities or pensions received by retirees from the erosive
effects of inflation;chanroblesvirtualawlibrary
WHEREAS, the conversion of the fixed monthly annuities or pensions to
indexed monthly pensions should in no way impair, diminish or abrogate
the benefits presently enjoyed by retirees under Commonwealth Act No.
186, as amended, but should rather augment the present benefits;chanroblesvirtualawlibrary
WHEREAS, the periodic adjustments of monthly pensions must be done on a
sound basis and such adjustments should conform with the financial and
investment capability of the Government Service Insurance System
without need of periodic increases in national government
appropriations and contributions;chanroblesvirtualawlibrary
WHEREAS, the Government Service Insurance System must be endowed with
the necessary powers and exemptions to enable it to maximize the
administration of the various funds established by law.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers vested in me by the Constitution, do hereby
decree and order that:cralaw:red
Section 1. Conversion. — The present fixed monthly
pensions under Section 11 of Commonwealth Act No. 186, as amended,
shall be converted into, as hereinafter provided, and shall be known as
the "Indexed Monthly Pensions".
Section 2. Definitions. — When used in this Decree
the following terms shall, unless the context otherwise indicates, have
the following respective meanings:cralaw:red
a) "Fixed Monthly Pensions" shall mean the level of
flat monthly annuities provided under Section 11 of Commonwealth Act
No. 186, as amended.
b) "Indexed Monthly Pensions" shall mean the adjusted
and adjustable monthly annuities to be provided under this Decree based
on a cost of living index or other government indices.
c) "Cost of Living Index" or "Index" shall mean the
Consumer Price Index for the Philippines, as compiled by the Central
Bank of the Philippines.
d) "Adjustment Date" shall mean the first day of July
in each calendar year.
e) "Average Monthly Index" for any year shall mean
the result obtained by dividing by twelve the sum of the monthly
Indices in the twelve-month period ending on the last day of December
in such year.
f) "Index Ratio" for any Adjustment Date shall mean
the result obtained by dividing by sixty the sum of the monthly Indices
in the sixty-month period ending on the last day of December preceding
such Adjustment Date.
g) "Conversion Factor" shall mean the variable for
converting the fixed Monthly Pensions into Indexed Monthly Pensions.
h) "Adjustment Factor" shall mean the variable for
adjusting the Indexed Monthly Pensions on each Adjustment Date.
i) "Board" shall mean the Board of Trustees of the
Government Service Insurance System.
j) "System" shall mean the Government Service
Insurance System.
k) "Future Retirees" shall mean the present and
future members of the Retirement Insurance Fund of the System whose
actual retirement dates will be on or after July 1, 1975.
l) "Present Retirees" shall mean the members of the
Retirement Insurance Fund of the system who have retired or will be
retired prior to July 1, 1975.
m) "Deferred Period" shall mean the guaranteed period
for which a retiree receives a lump sum payment in lieu of his Fixed
Monthly Pensions and after which period future monthly pensions shall
be payable to the retiree for life.
n) Whenever used herein, the masculine pronoun shall
include the feminine gender, the singular number shall include the
plural, and the plural shall include the singular, unless the context
indicates otherwise.
Section 3. Adjustment. — Any pension now being
received and hereafter to be received under the provisions of Section
11 of Commonwealth Act No. 186, as amended, shall be adjusted by the
system upon recommendation of the General Manager of the system and
approved by the President of the Philippines in accordance with such
guidelines as may from time to time and as circumstances may warrant.
Until amended or modified as provided above the following guidelines
shall apply:cralaw:red
(a) Future Retirees —chanroblesvirtualawlibrary
1) For Future Retirees who do not elect the lump sum
payment —chanroblesvirtualawlibrary
The Fixed Monthly Pensions of a Future Retiree who does not elect the
lump sum payment shall be converted into Indexed Monthly Pensions on
his actual retirement date, based on the Conversion Factor applicable
to the year of conversion and his year of retirement. The amount of his
converted Indexed Monthly pensions shall be the product obtained by
multiplying his Fixed Monthly Pensions by the applicable Conversion
Factor, which amount shall remain constant until the Adjustment Date
next following the date of conversion. Subsequent adjustments of his
Fixed Monthly Pensions shall be effected on each succeeding Adjustment
Date. The amount of the adjusted Indexed Monthly Pensions shall be the
product obtained by multiplying his Indexed Monthly Pensions for the
period next preceding each Adjustment Date by the Adjustment Factor for
such Adjustment Date. The amount of such Indexed Monthly Pensions shall
remain constant until next Adjustment Date. chanroblesvirtualawlibrary
2) For Future Retirees availing of the lump sum
payment —chanroblesvirtualawlibrary
(aa) The lump sum payment will be computed on the
basis of the Fixed Monthly Pensions.
(bb) Should a Future Retiree survive the Deferred
Period:cralaw:red
(i) He shall be entitled to an additional lump sum
payment equal to the difference between the total of the Indexed
Monthly Pensions payable during the Deferred period and the lump sum
amount actually received.
(ii) At the end of the Deferred Period, his Fixed
Monthly Pensions will be converted to Indexed Monthly Pensions. The
manner of conversion to Indexed Monthly Pensions shall be in accordance
with the provisions of paragraph (a) (1) hereof.
(iii) Subsequent adjustments shall be affected once
yearly on each succeeding Adjustment Date. Such adjustments shall be in
accordance with the manner of Adjustment of the Monthly Pensions as
provided for in paragraph (a) (1) hereof.
(cc) No additional payment shall be made should the
retiree die within the Deferred period.
(b) Present Retirees —chanroblesvirtualawlibrary
1) For present Retirees receiving Fixed Monthly
Pensions —chanroblesvirtualawlibrary
All monthly pensions currently payable to Present Retirees shall be
adjusted as follows:cralaw:red
(aa) The conversion of Indexed Monthly Pensions shall
be effected as of July 1, 1975 based on the following Conversion
Factors:cralaw:red
Year of Retirement Conversion
Factor
1959 and Prior 1.75
1960 1.72
1961 1.66
1962 1.63
1963 1.55
1964 1.46
1965 1.43
1966 1.39
1967 1.34
1968 1.32
1969 1.31
1970 1.21
1971 1.08
1972 1.04
1973 1.00
1974 1.00
The amount of the converted Indexed Monthly Pension for each Present
Retiree shall be the product obtained by multiplying his Fixed Monthly
Pension by the Conversion Factor corresponding to his year of
retirement. The amount of such Indexed Monthly Pensions shall remain
constant until the next Adjustment Date.
(bb) Subsequent adjustments, if any, shall be
affected once yearly on each succeeding Adjustment Date. Such
adjustments shall be in accordance with the manner of adjustment of the
Indexed Monthly Pensions payable to Future Retirees as provided for in
paragraph (a) (1) hereof.
2) Present Retirees within the Deferred Period -
(aa) No adjustment will be made on the lump sum value
of the fixed Monthly pension which have been paid to Present Retirees
in advance prior to July 1, 1975.
(bb) At the end of the Deferred Period, should a
present Retiree be then alive, his fixed Monthly pensions will be
converted to Indexed Monthly Pensions in accordance with the manner of
conversion provided for in paragraph (a) (1) hereof.
(cc) Subsequent adjustments, if any, will be in
accordance with the manner of adjustment of the Indexed Monthly
Pensions as provided for in paragraph (a) (1) hereof.
3) No adjustment will be made on the value of the
fixed monthly Pensions which have been paid to Present Retirees prior
to July 1, 1975.
Section 4. Provisions. — The Indexed Monthly
Pensions determined in accordance with Section 3 hereof shall in no
case be less than the present Fixed Monthly pensions under Section 11
of Commonwealth Act No. 186, as amended. Nor shall the Indexed Monthly
Pensions under this Decree operated to abolish or impair the other
retirement options (such as lump sum payments), benefits (such as
survivors and disability benefits), and conditions provided under
Sections 11 and 12 of the same Act.
Section 5. Funding. — There is hereby appropriated
out of any fund in the National Treasury not otherwise appropriated,
including special and corporate funds, such sums as may be necessary to
meet unfounded prior and current liabilities of the Retirement
Insurance Fund as of July 1, 1975, including such additional sums as
may be required for the initial conversion of the Fixed Monthly
Pensions. Or in lieu of the foregoing appropriation, in whole or in
part, any present patrimonial property, real or otherwise, of the
national government owned and/or controlled corporations, not otherwise
disposed of, and any such property hereinafter acquired, may be
transferred or conveyed in fee simple to the System; provided that any
such transfer or conveyance shall be first approved by the President of
the Philippines. Future liabilities of the System after July 1, 1975
shall be funded as provided for under existing provisions of
Commonwealth Act No. 186, as amended, or by transfer or conveyance of
patrimonial property as provided herein for prior and current
liabilities of the System.
Section 6. Implementing Rules and Regulations. — The
System is hereby empowered to promulgate such rules and regulations and
perform all other acts as may be necessary to establish and implement
such Indexed Monthly Pensions.
Section 7. Facility of Payment. — The System is
hereby empowered to adopt such rules and regulations to expedite the
payment of benefits, proceeds, and claims pursuant to any and all laws
administered by the System and any such payment made in good faith and
prior to the filing of an adverse claim, to a beneficiary or claimant
subsequently found not to be eligible, shall free the System from
liability and save it harmless from any and all persons legally
entitled to such payment, without prejudice to the proper action in a
court of law by the lawful beneficiary or claimant against the
ineligible beneficiary or claimant.
Section 8. Reorganization. — To carry out the
objectives of this Decree and all other laws implemented by the System,
the Board upon recommendation of the General Manager, shall have full
power and authority to reorganize the System by creating, merging,
consolidating, or abolishing operating units and positions, by hiring,
appointing, promoting, and separating personnel, and by any and all
acts tending to promote the efficient and economical management and
administration of the System. The board is hereby empowered to convert
the position and title of General Manager into that of President of the
System, to create the position of Executive Vice President, one or more
senior vice presidents, one or more vice presidents, one or more
assistant vice presidents, and such other positions as the interest of
the service may require, to fix the qualifications for such position,
and to appoint the appropriate persons thereto.
Section 9. Indexed Monthly Pensions and Other
Benefits Exempt from Legal Process. — Any provision of law to the
contrary notwithstanding, the Indexed Monthly Pensions payable to a
retiree under this Decree and all other benefit payments by the System
shall not be subject to attachment, garnishment, levy or seizure under
any legal or equitable process whatsoever except to pay a debt of the
government retirees concerned to the System, or that arising from
liability resulting from a criminal action.
Section 10. Exemption of the System. —
Notwithstanding any provision of existing law, decree, executive or
administrative order, rule or regulation to the contrary, the System
shall be exempt from the payment of any and all forms of taxes, tariffs
and duties, fees, imposts and assessments, and other charges.
Section 11. Exemption of the Retiree. —
Notwithstanding any provision of existing law, decree, executive or
administrative order, rule or regulation to the contrary, all benefits
paid under this Decree and other laws administered by the System shall
not be subject to income tax and all other forms of taxes.
Section 12. Valuation of Assets. — Assets of the
System shall be originally recognized at their acquisition costs. A
valuation thereof shall be made whenever necessary and the
corresponding adjustments shall be made to reflect the assets at their
appraised or fair market values. The valuation shall be made by an
independent firm of appraisers to be selected by the System.
Section 13. Investments of Funds. — All the funds
managed and/or administered by the System shall not be subject to the
provisions of Section 22 of Commonwealth Act No. 186, as amended,
and/or the Insurance Code, and all the funds managed and administered
by the System may be invested in such loans, advances, investments,
securities, properties, real or otherwise, as the Board may determine,
upon recommendation of the General manager. chanroblesvirtualawlibrary
Section 14. Government Assistance to the System. —
The System may, in the discharge of its duties and functions, call upon
all or any government branch, department, bureau, or office, including
the military services, for assistance, both material and personnel, as
may be necessary to any undertaking, operation, and activity for
carrying out the purposes of this Decree.
Section 15. Outside Assistance to the System. —
Whenever necessary of desirable for likewise carrying out the purposes
of this Decree, the System may engage and retain, upon terms and
conditions as may be mutually agreed upon, the services of competent
consulting advisory firms.
Section 16. Technical Notes. — The technical notes
underlying the conversion of Fixed Monthly Pensions to Indexed Monthly
Pensions hereunder are hereby ordered annexed to and made a part of
this Decree. Any and all changes in said technical notes as may be
required for future conversion and adjustment of monthly pensions as
may be determined by the System upon recommendation of the General
Manager shall first be approved by the President of the Philippines.
Section 17. Prior Laws. — Commonwealth Act No. 186,
as amended, otherwise known as the GSIS Charter, is hereby amended
accordingly. All acts, parts of Acts, Decrees, executive orders,
ordinances, and all other rules and regulations which are inconsistent
with the provisions of this Decree are hereby repealed, amended or
modified accordingly.
Section 18. Effective Date. — This Decree shall take
effect on April 1, 1975.
Done in the City of Manila,
this 27th day of May, in the year of Our Lord, nineteen hundred and
seventy-five.
ANNEX
TECHNICAL NOTES UNDERLYING THE CONVERSION OF THE PRESENT FIXED MONTHLY
PENSIONS OF THE GOVERNMENT SERVICE INSURANCE SYSTEM TO INDEXED MONTHLY
PENSIONS
I. Definitions:
a) "Fixed Monthly Pensions" shall mean the level of
flat monthly annuities provided under Section 11 of Commonwealth Act
No. 186, as amended.
b) "Indexed Monthly Pensions" shall mean the adjusted
and adjustable monthly annuities to be provided under this Decree,
based on cost of living index or other government indices.
c) "Cost of Living Index" or "Index" shall mean the
Consumer Price Index for the Philippines, as compiled by the Central
Bank of the Philippines.
d) "Adjustment Date" shall mean the first day of July
in each calendar year.
e) "Average Monthly Index" for any year shall mean
the result obtained by dividing by twelve the sum of the monthly
Indices in the twelve-month period ending on the last day of December
in such year.
f) "Index Ratio" for any Adjustment Date shall mean
the result obtained by dividing by sixty the sum of the monthly Indices
in the sixty-month period ending on the last day of December preceding
such adjustment Date. chanroblesvirtualawlibrary
g) "Conversion Factor" shall mean the variable for
converting the Fixed Monthly Pensions to Indexed Monthly Pensions on
each Adjustment Date.
(h) "Adjustment Factor" shall mean the variable for
adjusting the Indexed Monthly Pensions on each Adjustment Date.
II. Average Monthly Consumer Price Indices (CPI) for
years 1957 to 1974:
Year Average Monthly
t* CPIt
1957 72.6
1958 74.4
1959 72.8
1960 76.4
1961 80.1
1962 82.4
1963 89.1
1964 96.8
1965 100.0
1966 104.8
1967 110.6
1968 113.0
1969 114.5
1970 131.5
1971 160.2
1972 173.4
1973 194.5
1974 171.9
Source: Central bank of the Philippines
* For years prior to 1957, the Average Monthly CPI for 1957 will be
used.
III. Index Ratio (IR):
IR 5 Y = average of the monthly
CPI's from
January, Y-5, to December, Y-1
inclusive.
Therefore, IR5 1975 = average of
the monthly CPI's from
January, 1970, to December, 1974,
inclusive
IV. Conversion Factors (CF) to convert Fixed Monthly
Pensions to Indexed Monthly Pensions:cralaw:red
CF Y = 1 + g x IR 5 Y 1
t
CPI t
where IR 5
1 0
Y
CPI t
CF Y t = Conversion Factor for year
of
conversion Y and year of retirement t,
rounded to the nearest per cent.
Balancing Factor, which is the
percentage adjustment
incorporated in the formula to
arrive at the value of the
Conversion Factor. chanroblesvirtualawlibrary
Y The values CF t for Y = 1975, with g = 50% and CFt 1975 not
greater than 1.75, are given below:
Year 1975
t* CFt
1959 1.75
1960 1.72
1961 1.66
1962 1.63
1963 1.55
1964 1.46
1965 1.43
1966 1.39
1967 1.34
1968 1.32
1969 1.31
1970 1.21
1971 1.08
1972 1.00
1973 1.00
1974
* For years prior 1959, CFt 1975 will be equal to 1.75.
V. Converted Indexed Monthly Pensions:
IMP Y = FMP t x CF Y
t
where IMP Y = Indexed Monthly
Pensions
converted during Year Y
FMP t = Fixed Monthly
Pensions of
members retiring during Year t.
VI. Adjustment Factor (AF) to adjust Indexed Monthly
Pensions:
IR 5 Y
AF y = k x ————
IR 5 Y 1
where AF Y = Adjustment Factor for year Y.
and K = Degree of Adjustment.
Therefore, AF 1976 = kx IR 5 1976
—————
IR 5 1975
For full adjustment, k = 100%,
IR 5 1976
and AF 1976 = —————
IR 5 1975
VII. Adjusted Indexed Monthly Pensions:
IMP Y = IMP Y - 1 x AF Y
where IMP Y = Indexed Monthly Pensions adjusted in year Y.
Therefore, IMP 1976 = IMP 1975
x AF 1976
ILLUSTRATIVE EXAMPLES OF INDEXED MONTHLY PENSIONS OF PRESENT RETIREES
AS OF CONVERSION DATE JULY 1, 1975
Fixed Indexed
Year of Monthly
Conversion Monthly
Retirement
Pensions Factor Pensions
1954 P150 1.75
P262.50
1959 P150 1.75
P262.50
1964 P200 1.46
P292.00
1969 P250 1.31
P328.00
1974 P350 1.00
P350.00
Explanatory Note:
The Indexed Monthly Pensions of a Present Retiree will be equal to the
product of his Fixed Monthly Pensions and the Conversion Factor
applicable to his year of retirement. Thus, a retiree who retired in
1954 and who is receiving Fixed Monthly Pensions of P150 will be
entitled to Indexed Monthly Pensions of P262.50, which is obtained as
follows:cralaw:red
Indexed Monthly Pensions = Fixed
Monthly Pensions X
Conversion Factor
= P150 x 1.75
= P262.50
His Indexed Monthly pensions will remain constant at P262.50 until the
next adjustment on July 1, 1976.
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