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.

• Number: Presidential Decree No. 712
• Sections: 19

Preamble

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;

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;

WHEREAS, the government is cognizant of the plight of

government retirees and their families and is desirous of alleviating

their predicament;

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;

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;

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;

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:

Section 1 Conversion.

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.

SEC. 2. Definitions.—-When used in this Decree the

following terms shall, unless the context otherwise indicates, have the

following respective meanings:

"Fixed Monthly Pensions" shall mean the level of flat monthly

annuities provided under Section 11 of Commonwealth Act No. 186, as

amended.

"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.

"Cost of Living Index" or "Index" shall mean the Consumer

Price Index for the Philippines, as compiled by the Central Bank of the

Philippines.

"Adjustment Date" shall mean the first clay of July in each

calendar year.

"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.

"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.

"Conversion Factor" shall mean the variable for

converting the Fixed Monthly Pensions into Indexed Monthly

Pensions.

"Adjustment Factor" shall mean the variable for adjusting

the Indexed Monthly Pensions on each Adjustment Date.

"Board" shall mean the Board of Trustees of the Government

Service Insurance System.

"System" shall mean the Government Service Insurance System.

"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.

"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.

"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.

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.

SEC. 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:

Future Retirees—

For Future Retirees who do not elect the

lump sum payment—

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 the next Adjustment

Date.

For Future Retirees availing of the lump sum

payment

(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:

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.

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.

Subsequent adjustments shall be effected 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.

Present retirees—

For Present Retirees receiving Fixed Monthly

Pensions—All monthly pensions currently payable to Present

Retirees shall be adjusted as follows:

(aa) The conversion of Indexed Monthly Pensions shall be

effected as of July 1, 1975 based on the following Conversion Factors:

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 effected once

yearly in 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.

Present Retirees within the Deferred Period—

(aa) No adjustment will be made on the lump sum value of the

Fixed Monthly Pensions 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.

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 Provisos.

SEC. 4. Provisos.—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 operate 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.

SEC. 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 unfunded 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 of

Present Retirees to Indexed 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 and

its political subdivisions, including 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.

SEC. 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.

SEC. 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.

SEC. 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 positions

and to appoint the appropriate persons thereto.

Section 9 Indexed Monthly Pensions and Other Benefits Exempt from Legal Process.

SEC. 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.

SEC. 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.

SEC. 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.

SEC. 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 Investment of Funds.

SEC. 13. Investment 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.

Section 14 , Government Assistance to the System.

SEC. 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.

SEC. 15. Outside Assistance to the System.—Whenever

necessary or desirable for likewise carrying out the purposes of this

Decree, the System may engage and retain, upon such terms and conditions

as may be; mutually agreed upon, the services of competent consulting

and advisory firms.

Section 16 Technical Notes.

SEC. 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.

SEC. 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.

SEC. 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.

(Sgd.)

FERDINAND E. MARCOS

President

Republic of the Philippines

By the President:

(Sgd.)

ALEJANDRO MELCHOR

Executive Secretary