THE proposed Military and Uniformed Personnel (MUP) Pension System Act approved at the Lower House last Tuesday would require new entrants to pay for their pension, a provision that radically changes an old system.
House Bill (HB) 8969—approved, on third and final reading last Tuesday—mandates new entrants to government military and uniformed service to contribute 9 percent of their monthly compensation as personal shares. The national government shall provide 12 percent as its share, HB 8969 mandates.
HB 8969 also mandates that the monthly retirement pay of new entrants shall be 50 percent of the base pay and longevity pay of the permanent grade last held by the personnel in case of 20 years of active service, increasing by 2.5 percent for every year of active service rendered beyond 20 years to a maximum of 90 percent for 36 years of active service and over.
The bill, a priority of of President Ferdinand R. Marcos Jr., was endorsed last September 26 for Senate approval.
Ad Hoc Committee on the MUP Pension System Chairman and Albay Rep. Ma. Jose Clemente “Joey” S. Salceda said the bill essentially reduces the unfunded liabilities of the MUP pension system from estimates of as high as P14 trillion to P3.4 trillion.
THE measure also mandates the automatic indexation of the pension of retired MUP and the survivorship pension of qualified survivors at a rate not exceeding 100 percent of the increase in the base pay of the MUP in active service and holding the same rank during the same year.
The provision clarifies, however, that the indexation can only be implemented if the government guarantees an annual adjustment in the base pay of active MUP of three percent in the first decade of the enactment of the law.
Prior to HB 8969, MUPs are not required to pay for their pension unlike civilian government employees. Their pension is being subsidized by the government through the annual appropriations in the national budget, Senator Francis Joseph G. Escudero explained in a statement last year.
THE bill mandates the creation of the AFP Trust Fund and the Uniformed Personnel Services Trust Fund. A MUP Trust Fund Committee is also created under the proposal.
This body may increase the retirement benefits by not more than 1.5 percent of the retirement benefit within a given year. The bill, however, provides a caveat: this can only be done if the financial sustainability of such an increase is supported by an actuarial study.
HB 8969 also mandates the compulsory retirement of military personnel, in accordance with Section 6 of Republic Act (RA) 11709 (as amended by Section 2 of RA 11939). The caveats of this provision are one of the following conditions: upon reaching 57 years of age, or upon accumulation of 30 years of satisfactory active service, whichever comes later; or for key officers, upon completion of a tour of duty; or, upon relief by the President.
Upon retirement, the measure said a military or uniformed personnel shall choose the modes of payment of retirement: (A) lump sum, which received in advance and in one lump sum, retirement benefits equivalent to 36 months; and three years thereafter, received monthly retirement benefits as they accrue; or (B) direct pension, which received monthly retirement benefits as they accrue.
AFP Trust Fund
HB 8969 mandates that a source of the AFP Trust Fund should come from the proceeds of the residual assets of the AFP retirement separation benefits system.
Other sources include the sale of military reservations, as may be authorized by Congress, pursuant to the provisions of existing laws and regulations governing sales of government properties. Another source could be the lease or joint development of military reservations, as may be authorized by the President, pursuant to the provisions of existing laws and regulations governing lease or joint development of government properties.
The fund could also come from shares of the AFP from the sale of military camps provided for under RA 7227, as amended, and at least 50 percent of the proceeds, net of direct expenses authorized to be deducted from such proceeds from the lease and/or joint venture agreements and such other dispositions pertaining to the same camps in accordance with applicable and/or existing orders, rules, regulations, and issuances.
Still, other sources are: income derived from public-private partnerships entered into by the Department of National Defense or the AFP, as may be authorized by the President; and, sale of non-strategic real estate assets of the DND or the AFP as determined by the National Defense Secretary.
Within 30 days from the effectivity of HB 8969, of enacted into law, the concerned military and uniformed services shall submit a complete list of their real assets in the manner prescribed by the Department of Finance 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.
ACCORDING to Salceda, the annual appropriations allocated to the current MUP pension system have significantly increased over the years.
From a pension fund appropriation of P64.2 billion in 2014, the budget has increased to P128.6 billion in 2023, a growth equivalent to 101 percent, the lawmaker said.
Salceda said the pension system is indexed to the salary of active personnel, contrary to the common practice of using the highest salary as the basis for retirement or the Government Service and Insurance System practice of using the average monthly salary received by a government employee during the last three years immediately preceding retirement.
The lawmaker added that the estimates of actuarial reserve deficiency for the MUP pension should also decline from the original P9.6 trillion.
The proposal seeks to establish a viable funding source for the pension requirements of the MUPs, which stand at P158.4 billion for fiscal year 2023 and are estimated to increase to P257 billion for fiscal year 2024.
HB 8969 gained ayes from 272 members of the House of Representatives and nays from four lawmakers; one abstained.
The bill covers “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 (AFP), Philippine National Police, Philippine Coast Guard, Bureau of Fire Protection, Bureau of Jail Management and Penology, Bureau of Corrections, and commissioned officers of the hydrography branch of the National Mapping and Resource Information Authority who were transferred from the Bureau of Coast and Geodetic Survey.”