71 OG No. 26, 3862 (June 30, 1975)

[ PRESIDENTIAL DECREE NO. 712, May 27, 1975 ]

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.

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.—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".

SEC. 2. Definitions.—-When used in this Decree the
following terms shall, unless the context otherwise indicates, have the
following respective meanings:

1. "Fixed Monthly Pensions" shall mean the level of flat monthly
   annuities provided under Section 11 of Commonwealth Act No. 186, as
   amended.
2. "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.
3. "Cost of Living Index" or "Index" shall mean the Consumer
   Price Index for the Philippines, as compiled by the Central Bank of the
   Philippines.
4. "Adjustment Date" shall mean the first clay of July in each
   calendar year.
5. "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.
6. "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.
7. "Conversion Factor" shall mean the variable for
   converting the Fixed Monthly Pensions into Indexed Monthly
   Pensions.
8. "Adjustment Factor" shall mean the variable for adjusting
   the Indexed Monthly Pensions on each Adjustment Date.
9. "Board" shall mean the Board of Trustees of the Government
   Service Insurance System.
10. "System" shall mean the Government Service Insurance System.
11. "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.
12. "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.
13. "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.
14. 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.

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:

1. Future Retirees—

1. 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.

2. 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:

1. 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.
2. 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.
3. 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.

2. Present retirees—

1. 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.

2. 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.

3. No adjustment will be made on the value of the Fixed Monthly
   Pensions which have been paid to Present Retirees prior to July 1,
   1975.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

Source: Supreme Court E-Library