ALBAY Rep. Joey Salceda yesterday accepted the proposal of Defense Secretary Gilbert Teodoro seeking the removal of a provision calling for mandatory contributions among active military personnel in the pension reform system bill but warned that it will cost the government another P1.2 trillion.
“As chair of the ad hoc committee (on military and uniformed personnel or MUP pension reform bill), I would like to assure the Secretary that his requests are acceptable. We will adopt the Teodoro proposal of indexation for all retired and ‘retirables’ and a transitioned contribution scheme,” said Salceda, who also chairs the House committee on ways and means.
He noted that because of Teodoro’s opposition to the provision, there will be a P1.2 trillion additional actuarial reserve deficiency, from the current 2.2 trillion under the current substitute bill.
Under the ad hoc panel’s proposal, which Salceda earlier claimed to be a “win-win” solution, military and uniformed personnel (MUP) will be subjected to a “phased-in” contribution scheme of five percent of salaries for the first three years, seven percent for the next three years, nine percent thereafter for active personnel and nine percent immediately for new entrants, including a larger government counterpart to complete the 21 percent contribution to the pension fund.
In return, active military and uniformed personnel (MUP) will get a salary increase every year for the next 10 years and a separation benefit if they leave.
Speaker Romualdez has ordered the creation of the ad hoc committee to thresh out disagreements over various proposals on the pension system reforms.
The provisions retain the promotion to one rank higher upon retirement and provide for a uniform 90 percent of longevity pay plus base pay for lump sum benefit upon separation below 20 years in service, a new benefit for the PNP.
There will also be a lump sum benefit based on the years of service; a guaranteed three percent annual increase in salaries for 10 years; indexation of pensions to 50 percent of adjustment in pay; creation of a window for indigent pensioners under the trust funds; submission of a regular IFRS-compliant (International Financial Reporting Standards) reports every three years for the pension system.
Last week, Teodoro said he does not agree with the bill’s provision calling for mandatory contributions among active military personnel, especially for those who have already completed 20 years of active service.”
The imposition of mandatory monthly contributions without a transition phase will definitely have an impact on soldiers, Teodoro said.
Since the committee already terminated proceedings, Salceda said the amendments will be introduced when the bill reaches the plenary for sponsorship and debates.
“My job is to get a bill that will work fiscally but is also acceptable to all stakeholders. So, of course, if Secretary Teodoro has major concerns, part of my job is to accommodate. Not without DOF (Department of Finance) concerns, of course, but that’s for them to settle in the Cabinet,” he said.
Salceda said the newly amended provision will provide that only new entrants will contribute the nine percent contribution with a government counterpart of 12 percent “and I will heed the request for full indexation for those who are retired and due for retirement.”
He said he is still clarifying with the DOF and the Department of National Defense (DND) “exactly what the request is because we are hearing clarifications that they just want to ensure that those who have given 20 years of service or more will not pay contributions or be subject to lower indexation.
“Our initial impression from the statement is that they don’t want anybody from the active service to pay any contribution or to give up any amount of indexation. I would also like to remind all stakeholders that the aim of fiscal sustainability is to ensure that the pension system is substantially preserved in a way that can still be guaranteed by the State. In other words, a reform that is not too expensive, but also not too disruptive,” he said.
Salceda also said that since there could be some “pushback” from the DOF and the economic managers on Teodoro’s proposal, “we hope that within the Executive, they will sort their position out.
“I need a figure that still allows me to protect the reform’s three guarantees: Guaranteed salary increase, guaranteed pension increase, and guaranteed funding source. So, moving forward, any additional proposals should bear the costs in mind,” he said.
