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 minimum retirement pay formula that must be afforded to any qualified retiring employee shall be onehalf 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 retirement benefits 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 provided by 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 the employers 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 retirement benefits 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 tax exemption) under the retirement benefit plan of the same or another employer.

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 to enjoy said treatments, at the time of his retirement, the retiring employee shall have been employed 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 as reasonable: 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 an account 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 must be 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 a pension 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 of interest; (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;

(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 least fifty (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 stemmed up 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 tax exempt. The above opinion should be reconciled with the ruling of the Bureau of Internal Revenue (BIR Ruling 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 Tax Code. 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 the early/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 to the 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 under Section 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

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 hereby added: "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, or corporation 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 salary or compensation. "(g) "Regular officer" or "enlisted man" shall mean one whose commission or enlistment is in the 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 compulsory upon 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 shall be 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 in the 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 of insurance selected by him, and his employer shall likewise pay for him the same amount."

Sec. 3. Section five of Commonwealth Act Numbered One hundred and eighty-six is hereby amended to read as follows: "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 Employer I. 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 otherwise provided in this Act, the first rate shall apply to a civilian employee insured on or after the approval of this Act. The second rate shall apply to a civilian employee already insured prior to the approval of this Act unless he chooses term insurance in which case the first rate shall apply. The third rate shall apply to a regular officer or an enlisted man. II. insurance 5 more for exceed 6 P200 If than this If Retirement salary is or less. employee's monthly salary is P200, but his premium benefit shall not P37.50 per month. employee's monthly

"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

insurance

shall

be

entirely

borne

by

the

insured.

"(c) Premiums for optional retirement annuity. Each employee may at his option and under such 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 per centum 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 separation before 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 System beginning 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 if such 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 is convenient 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 amended to read as follows: "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 premiums described 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 of insurability: 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 new employer 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

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 be imposed 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 the System shall be advanced." Sec. 5. Section seven of Commonwealth Act Numbered One hundred and eighty-six is hereby amended 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 such rules 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, or corporations. "(c) All savings in appropriations for salaries and wages that may be realized by each employer during 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 amended to read as follows: 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 if the 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 month following 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, have been approved by the System. (c) Amount and kind of insurance. Compulsory membership insurance shall be term insurance 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

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 of satisfactory 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 the six per centum monthly premium will buy. Sec. 7. Section ten of Commonwealth Act Numbered One hundred and eighty-six is hereby amended to read as follows: "Section 10. Optional insurance. Upon application to the Board and on satisfactory evidence of 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 be paid 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 One hundred 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 the average 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, one and 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 twothirds 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 designated beneficiary, 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

"(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 on his 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 corresponding employer'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, the last 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 may prescribe. 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 be compensated 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 one whose 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 submitted to 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 Civil Service 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

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 officers whose 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 concerned to 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 the System, 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 under section 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 up to 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 or pension: 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 be computed 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 Philippines under 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 for and 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 during which 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

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 reappointment before 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 of premiums 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, so long 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. hereby Section twelve of Commonwealth Act Numbered One hundred and eighty-six is 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 successor is 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 successors shall 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 this Act 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 of expenditures, 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

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 to the 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, reasonable necessary 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, in general, 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 of the 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 the subject 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 the Board, 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 Commissioner of 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

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 be required 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 the members 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. hereby Section 16. hereby Section 17. hereby Section 18. hereby Section seventeen of Commonwealth Act Numbered One hundred and eighty-six is changed to section twenty. Section eighteen of Commonwealth Act Numbered One hundred and eighty-six is changed to section twenty-one. Section nineteen of Commonwealth Act Numbered One hundred and eighty-six is changed to section twenty-two. Section twenty of Commonwealth Act Numbered One hundred and eighty-six is 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. another Accounts to be maintained. The System shall keep separate and distinct from one the following funds:

"(a) Life insurance fund. This shall consist of all premiums for life insurance benefit and/or earnings 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 the required reserves to the end of guaranteeing the fulfillment of the life insurance contracts issued by 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

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 of the 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 amount left 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 under this Act, or the proceeds thereof, when paid to any member thereunder, nor any other benefit granted 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 made payable 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 otherwise appropriated, 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

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 shall cease 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 employer without 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 Act Numbered 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 for the 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 so notifies 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. If such 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, established or 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 System unless 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 the commission 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

disqualification from holding public office and from practicing any profession or calling licensed by the Government." Sec. 25. hereby Section twenty-six of Commonwealth Act Numbered One hundred and eighty-six is 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 rendered at 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 eightynine, 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 legal heirs 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 be refunded 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 the reorganization 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 section twelve of this Act. This provision shall also apply to any member of the judiciary who, prior to the 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 under Act 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 the approval 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 herein required, such payment may be deferred under such conditions as the System may prescribe. 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 EXECUTIVE ORDERS AUTHORIZING GOVERNMENT REORGANIZATION AFTER THE RATIFICATION OF THE 1987 CONSTITUTION APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES.

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 EXECUTIVE ORDERS AUTHORIZING GOVERNMENT REORGANIZATION AFTER THE RATIFICATION OF THE 1987 CONSTITUTION APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES. Section 1. Declaration of Policy. It is hereby declared the policy of the State to promote economy, efficiency and effectiveness in government operations, particularly in the delivery of essential public services.For this purpose, the State shall endeavor to streamline government functions and to maintain necessary positions through an appropriate retirement and voluntary separation scheme. Sec. 2. Coverage. This Act shall cover all appointive officials and employees of the National Government, including government-owned or controlled corporations with original charters, 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 of government service as of the date of separation. Uniformed personnel of the Armed Forces of the Philippines including those of the PC-INP are excluded from the coverage of this Act.
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Sec. 3. Early Retirement and Voluntary Separation Benefits. All appointive government officials and employees included in the coverage hereof who voluntarily elect in writing to be retired or separated from the service and whose retirement has been approved under the provisions of this Act shall be paid retirement or separation benefits equivalent to one and one-fourth (1 1/4) month basic salary for every year of their respective government services or the nearest equivalent fraction thereof favorable to

them on the basis of the highest salary which they respectively received in the course of their employment in the government: Provided, That in no case shall the benefit to be paid to any appointive official or employee be less than Ten thousand pesos (P10,000): Provided, further, That any appointive official or employee who has previously been found guilty in an administrative proceeding and whose rank or salary has been reduced shall be paid on the basis of his last salary.
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Sec. 4. Additional Benefits. In addition to the benefits herein authorized, covered appointive officials and employees who retire or voluntarily elect to be separated from the service under this Act shall be entitled to the return of GSIS personal contributions pertaining to retirement only and the payment of the corresponding share of the government with interest earned pursuant to existing rules and regulations of the Government Service Insurance System. They shall likewise be entitled to the commutation of unused vacation and sick leaves in accordance with existing rules and regulations: Provided, however, That should the government agency concerned lack the necessary funds for this, the same shall come from the appropriation to fund this Act: Provided, further, That those who retire after rendering government service for thirty-one (31) years or more and avail themselves of the incentive benefits provided under this Act shall be entitled to an additional ten percent (10%) of the amount corresponding to what they will receive from the thirtyfirst year onward.
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Sec. 5. Exclusiveness of Benefits. An appointive official or employee who retires or elects to be separated from the service under this Act shall not be eligible for optional retirement with gratuity under Republic Act Nos. 1616 and 4968 or with pension under Commonwealth Act. No. 186, as amended by Republic Act No. 660, or under Presidential Decree No. 1146, as amended, or vice-versa.
chan robles virtual law library

Sec. 6. Abolition of Positions. The positions vacated through the early retirement or separation of its incumbent shall be abolished unless the head of the office or agency, with the approval of the President in the case of the Executive Department, the Chief Justice in the case of the Judiciary, the

Senate President or the Speaker of the House of Representatives in the case of Congress, the Chairman in the case of the Constitutional Commissions, certifies within the period of sixty (60) days from the time of approval or acceptance of the application for retirement or separation that the exigencies of the service require its retention.
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Sec. 7. Discretion of Agency Heads in Acceptance of Application for Early Retirement and Voluntary Separation. No appointive official or employee shall be separated or retired under this Act unless his application for early retirement or voluntary separation shall have been accepted by the head of the government office or agency or by the chief executive officer of the government-owned or 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 other offices under a department; governor or mayor, as the case may be, in the case of local government units; the Chief of Justice in the case of the employees of the Judiciary; the Senate President or the Speaker of the House of Representatives, as the case may be, in the case of employees of the Legislature; the Chairman in the case of the Constitutional Commissions; and in the case of other offices not within the authority of those previously mentioned, their overall superior.
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The application for early retirement or voluntary separation shall be accepted unless the services of the applicant shall be deemed necessary. The application of those with pending administrative cases punishable by dismissal or removal shall be held in abeyance until the final disposition of such cases without prejudice to their receiving benefits under this law in case of acquittal.
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The applications of those with criminal cases of grave nature committed in relation to their office shall be held in abeyance.
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Sec. 8. Restriction on the Employment and Replacement of Retired or Separated Personnel. Appointive officials and employees who are retired or separated under this Act shall not be eligible for appointment to, or employment in any branch,

division, instrumentality or agency of the government, including government-owned or controlled corporations with original charters whether on a permanent, temporary, casual or emergency status within a period of five (5) years after separation unless they refund the benefits they received: Provided, however, That those reemployed in the government shall be treated as new entrants insofar as GSIS coverage is concerned.
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Positions vacated but retained shall be filled by personnel chosen from among the most deserving employees in the agency concerned or from any other agency.
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Sec. 9. Period of Applicability and Effectivity of the Incentive Benefits. Applications for early retirement and voluntary separation benefits hereunder shall be entertained only if filed within a period of two (2) months from the issuance of the rules and regulations for the implementation of this Act pursuant to Section 13 hereof. The oldest employees who are the most senior in the service will be given priority in the payment of benefits.
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Sec. 10. Funding. For national government employees, the sum of Three billion pesos, or so much thereof as may be necessary, is hereby authorized to be appropriated out of any funds in the National Treasury not otherwise appropriated for payment of early retirement and separation incentive benefits authorized in this Act.
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For employees of government-owned or controlled corporations, the benefits herein granted shall be paid from the internal funds of the respective corporations. In no case shall the benefits paid to employees of government-owned or controlled corporations be less than the benefits granted by their existing corporate programs, if any.
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For employees of local government units, the benefits shall be paid from available funds of each local government unit.
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Government-owned or controlled corporations and local government units which may not be able to adequately fund the incentive benefits under this Act may avail themselves of the Three billion peso fund appropriation for this purpose but only to

the extent of twenty-five percent (25%) of the requirements on the condition that their plantilla and staffing pattern shall, for a period of one (1) year from the effectivity of this Act, be subject to approval of the Department of Budget and Management: Provided, That in the case of government-owned or controlled corporations, said twenty-five percent (25%) may be deducted by the Department of Budget and Management from whatever budgetary allocation and assistance they may get from the National Government in the future.
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The above provisions notwithstanding, all savings accruing from the abolition of positions pursuant hereto shall be earmarked and used exclusively for the payment of the benefits under this Act.
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Sec. 11. Retroactive Charges. Officials and employees who were previously separated from the government service not for cause but as a result of the reorganization pursuant to various executive orders authorizing government reorganization issued after the ratification of the 1987 Constitution shall be deemed covered and entitled to avail of the incentive benefits under this Act.
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Sec. 12. Penalties. Any government official who compels an employee under any guise whatsoever to retire or be separated from government service by virtue of this Act or otherwise violates provisions hereof shall, upon conviction, be punished by a fine not exceeding One thousand pesos (P1,000), or by imprisonment not exceeding six (6) months or both such fine and imprisonment in the discretion of the court.
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Sec. 13. Implementing Rules and Regulations. The implementing rules and regulations shall be issued within fifteen (15) days from the date of effectivity of this Act by the Department of Budget and Management, in consultation with the Civil Service Commission: Provided, That any provision of law to the contrary notwithstanding, the only documents or supporting papers to be submitted by appointive officials and employees who wish to avail themselves of the benefits under this Act are the following:
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(a) A duly approved application under oath for early retirement or voluntary separation in accordance with this Act, including a statement of the number of years of service in the government and the rate of the highest salary received. chan robles virtual law (b) Money and property clearance from the agency concerned where proper pursuant to Section 7 hereof; and (c) A simplified statement of assets and liabilities, net worth, and financial and business interests in the case of regular employees: Provided, further, that the processing and actual payment of benefits to the appointive officials and employees concerned shall be completed within fifteen (15) days from the date of submission of all the foregoing documents. Sec. 14. Compliance and Reporting. Six (6) months from the effectivity of this Act, the Department of Budget and Management and the Civil Service Commission shall, on the basis of the reports of the various heads of government offices and agencies, render a report to Congress on the number of government employees affected, the type or nature of positions involved, the total amount spent and an evaluation thereof.
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Sec. 15. Repealing Clause. All laws, rules and regulations or parts thereof, inconsistent with the provisions of this Act are hereby repealed or modified accordingly.
chan robles virtual l aw library

Sec. 16. Separability Clause. If any part, section or provision of this Act shall be held invalid or unconstitutional, no other part section or provision thereof shall be affected thereby.
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Sec. 17. Effectivity. This Act shall take effect upon publication in two (2) newspapers of general circulation.
Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 43479 September 28, 1935

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 mandamus brought 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 from the 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 only change 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 the passage 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 to increase 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 to those 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 be controlling in this jurisdiction. Petitioner cites a number of California decisions where the annuity 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 in other states.

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 pay be 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 of a 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 such amendment has no retroactive will not be affected by it but will continue to be govern by the original 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, where the 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. Where a 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 become crystallized 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 more generous 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

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 the Act 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 mandamus is denied without special pronouncement 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
1

SECTION 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 purely clerical, 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 for retirement on an annuity as provided in section two hereof: Provided, That the lectures and 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 include persons who are not citizens of the Philippine Islands or of the United States of America.

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-nine years of service; eight-tenths of the average salary for thirty-two or more years of service. xxx xxx xxx

SEC 10. Beginning on the first day of the third month next following the approval of 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 or compensations from which the deductions are made and from all allotments from which the deductions are made and from all allotments out of of lump sum appropriations 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.
2

SECTION 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 established upon 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 as computed 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 of the average salary for thirty-two or more years of service." SEC 2. This Act shall take effect upon its approval.