THE newly-elected chairman of the Ad Hoc Committee on the Military and Uniformed Personnel (MUP) Pension Reform revealed the key features of a solution lawmakers and government economists agreed upon last Wednesday.
Albay Rep. Jose Ma. Clemente “Joey” S. Salceda was elected chairman of the Ad Hoc Committee by the House plenary following a three-hour meeting between members of the economic team and key lawmakers. The closed-door meeting last Wednesday was convened by Speaker Ferdinand Martin G. Romualdez after President Ferdinand R. Marcos Jr. asked them to thresh out disagreements over the MUP pension reforms.
According to Salceda, Marcos and Romualdez—both of whom he thanked “for their trust”—“wanted a working solution as soon as possible.”
“And I think we have come up with one,” the lawmaker said adding that a consensus hammered out between the executive agencies and the House leadership needs refinement.
“We will listen to all stakeholders to refine the version, but we have received very positive feedback about the version we have at hand,” Salceda said last Thursday.
Key features
SALCEDA revealed that “the emerging version” has four key features.
One is a guaranteed annual salary increase for a MUP at a sustainable rate of 3 percent per year for the next ten years. A second feature is retaining indexation of pensions but limiting pension increases to 50 percent of the salary increase for active personnel.
The version also features the creation of an MUP Trust Fund and a governance committee with the economic managers and the MUP services represented. The fourth feature is the retention of almost all other features of the MUP pension system.
According to Salceda, the proposal would also include a contribution scheme wherein active MUPs will contribute a portion of base pay but the government will pay a larger counterpart.
The lawmaker said they are looking at patterning the scheme after that applied to salaries of civil servants. The latter features deductions at 9 percent for the employee and 12 percent for the government.
The lawmaker added, however, that the contribution scheme feature is still subject to deliberation, and that they could ease the deductions through a transition period.
Guarantees, duties
ACCORDING to Salceda, the MUP pension reform bill “will have what I call the ‘Three Guarantees:’ a sure annual salary increase; sure indexation of pensions; and, sure funding for the pension system,” Salceda said. “The resulting reform must have those three features in it.”
He added that the “Three Guarantees” must be rooted in “Three Duties:” the duty of the State to compensate the MUP; the duty of the MUP to save for part of their own pensions; and, the duty of people to pay part of the cost of those pensions.”
“It’s a social compact,” the lawmaker said.
Salceda said the reform also prevents mass retirement as it does not create separate retirement regimes for different categories.
“Everyone gains something; everyone shares something: that is the key principle of this reform,” he added.
Meanwhile, Salceda added that the Ad Hoc committee will try to finish its version “hopefully before the 2024 budget reaches the House floor.”
“We still have boxes of documents from the May to October 2021 House hearings on the reform, not to mention initial position papers submitted this year by stakeholders. So, we have enough to work with. We will finalize the consensus version, and that will be the starting point for discussions,” he said.
Pending issues
ACCORDING to Salceda, pending issues include what to do with MUP assets and the management of the Trust Fund.
“But these are questions of detail rather than questions of principle,” he said. “The principle is shared benefit and shared sacrifice. The proposal is already at that point. Win-win.”
He vowed to finalize the “win-win version of MUP reform right away.”
Salceda, nonetheless, emphasized that the biggest problem with the MUP pension system is that each time salaries grow, pension liabilities also grow.
“Indexation of pensions to active personnel salaries is the key feature of the pension system. So, any reform must focus on that, either to control salary growth or to control its effects on the pension,” he said. (See related story “Govt to spend P160B for MUP pension, other benefits in ’24”)
Fiscal collapse
FINANCE Secretary Benjamin E. Diokno earlier announced that Marcos has approved decreasing the contributions of the government to the pool of funds for the pension of MUPs, among other reforms to avoid a fiscal collapse.
For this year alone, Diokno said the government would spend more than P120 billion (roughly $2.21 billion at current exchange rates) to fund the pension of those serving under several state institutions.
The latter are: the Armed Forces of the Philippines; the Bureau of Jail Management and Penology; the Bureau of Fire Protection; the Philippine National Police; the Philippine Public Safety College; the Philippine Coast Guard; and, the Bureau of Corrections.
Under the current proposal, the fund will be managed by the Government Service Insurance System (GSIS). An oversight committee shall be formed composed of the Secretary of Finance, the Secretary of Budget and Management, the Executive Secretary and the President and General Manager of the GSIS as ex-officio member and representatives from the MUP services.