Key MUP pension reform clause out

THE House of Representatives on Tuesday approved on second reading a bill that seeks to reform the pension system for Philippine military and uniformed personnel (MUP), but removed a key provision requiring active personnel to make mandatory contributions.

During the Tuesday plenary session, lawmakers approved through voice vote House Bill No. 8969 or the proposed Military and Uniformed Personnel Pension System Act.

Albay Rep. Joey Sarte Salceda, who chaired the ad hoc committee on the MUP pension system, said the latest version is “fiscally, politically, and morally acceptable.”

“For active and retired personnel, the structure of the pension system was preserved in full,” he said.

Mr. Salceda said lawmakers had accommodated the request of  Defense Secretary Gilbert C. Teodoro, who had earlier objected to the mandatory contributions for all active personnel and the removal of the full indexation of pensions to the salary increase of active personnel.

“(Mr. Teodoro) is now more or less satisfied,” he added.

Lawmakers approved an amendment to the bill which would require only new entrants to contribute to the pension fund.

Under the bill, new entrants would contribute 9% of their salary, while the National Government counterpart is set at 12%.

During the plenary, lawmakers also agreed to restore the full indexation of MUP pensions. This amendment was proposed by House National Defense and Security Committee Chairman and Iloilo Rep. Raul C. Tupas.

Mr. Teodoro had earlier objected to the provision in the committee report that capped the indexation of the MUP pension at 50% of the salary increase of active personnel.

The bill would also authorize the President to adjust pensions during “adverse” fiscal or economic conditions.

However, Finance Secretary Benjamin E. Diokno had previously insisted that there is a need to overhaul the MUP pension system, noting that there is a risk of “fiscal collapse.”

“It will not qualify as a reform if indexation will continue and the active members will not contribute. We have to reduce the fiscal impact of the MUP’s pension program and the contribution of active members will greatly help in managing that,” Mr. Diokno said last month.

At present, all MUP do not contribute to their pension fund, which is fully funded by the National Government.

Under the measure, all MUPs would be guaranteed a 3% annual adjustment of their base pay over 10 years. Mr. Salceda said this is “already a sacrifice willingly made by the MUP given the historical salary rate increase of 12%.”

The bill also creates the MUP trust funds, composed of the Armed Forces of the Philippines (AFP) Trust Fund and the Uniformed Personnel Services Trust Fund.

Lawmakers also agreed to include the residual assets of the AFP-Retirement and Separation Benefits System (RSBS) as one of the funding sources for the AFP Trust Fund.

Mr. Salceda said the AFP will infuse at least P44 billion in assets to the fund.

“I trust that the AFP will be true to its word in contributing assets to the AFP Pension Trust Fund. I especially look forward to having the assets of the RSBS infused right away,” he said.

Compulsory retirement for MUP would be set at 57, or upon accumulation of 30 years of active service, whichever comes later. For key military officers, they can retire upon completion of tour of duty or upon relief by the President.

All MUP killed or wounded-in-action resulting to total permanent disability would be deemed compulsorily retired.

“The reform reduces the unfunded liabilities of the MUP pension system from estimates of as high as P14 trillion to just P3.4 trillion,” Mr. Salceda said.

Hansley A. Juliano, a political science professor from the Ateneo de Manila University, raised concerns over the possible misuse of MUP trust funds.

“The trust fund is the bigger source of contention since many instances of fund creation by the government has been at risk of improper usage,” Mr. Juliano said via Messenger chat.

The MUP pension program covers members of the AFP, Philippine National Police , the Bureau of Jail Management and Penology, Bureau of Fire Protection, Philippine Public Safety College, the Philippine Coast Guard, and Bureau of Corrections.

The bill is under the Legislative-Executive Development Advisory Council’s list of 20 priority measures sought for approval by December. — Beatriz Marie D. Cruz

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