House to accommodate DND chief’s proposals in MUP pension reform bill

By Beatriz Marie D. Cruz, Reporter

CONGRESSMEN will debate proposed changes to a bill seeking to reform the pension system for the Philippine military and police, including fully indexing pensions to the salary increases of active personnel and exempting all active members from making contributions, according to Albay Rep. Jose Maria Clemente S. Salceda.

This comes after Defense Secretary Gilberto C. Teodoro, Jr. objected to key provisions of the military and uniformed personnel (MUP) pension reform bill that was approved by a House ad hoc committee last week.

“As chairman of the ad hoc committee, I would like to assure the (Defense) secretary that his requests are acceptable,” Mr. Salceda, who also heads the House of Representatives Ways and Means Committee, said in a statement.

“We will adopt the Teodoro proposal of indexation for all retired and retireables and a transitioned contribution scheme… And I will heed the request for full indexation for those who are retired and due for retirement.”

Mr. Teodoro had opposed the bill’s provision that capped the indexation of pensions to 50% of the salary increase of active personnel, from the 100% automatic indexation.

Under the current pension system, pension payments to retired MUPs are automatically indexed to the current salaries of personnel in active service.

“Of course, the proposal will add some P1.2 trillion more to the actuarial reserve deficiency, from the current P2.2 trillion under the current substitute bill,” Mr. Salceda said.

He also appeared amenable to addressing Mr. Teodoro’s concerns over the proposed blanket mandatory contributions for military personnel, particularly those who have completed at least 20 years of service.

Under the bill, all MUP would be required to contribute to the pension fund. For active personnel, they would contribute 5% for the first three years, 7% for the following three years, and 9% thereafter. New entrants would have to contribute 9% immediately, with the government contributing 12%.

However, Mr. Salceda said he will ask the Department of National Defense (DND) to clarify its objections to the bill.

“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 (Mr. Teodoro’s) statement is that they don’t want anybody from the active service to pay any contribution or to give up any amount of indexation,” he said.

Mr. Salceda expects some pushback on Mr. Teodoro’s proposals from the economic managers but expressed hope these will be sorted out within the Executive.

“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.

Sought for comment, Finance Secretary Benjamin E. Diokno said he will wait for the final House version before giving a statement.

Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, said Mr. Teodoro’s proposed changes to the bill would not solve the pension system’s problem “entirely” but “at least it does not aggravate the problem.”

“Since people apparently are willing to provide for the retirement needs of soldiers, why doesn’t the state also take care of the health and other needs of everyone, not just a select group,” he said.

Defense and security analyst Chester B. Cabalza said a “mutual contribution” only for new entrants is “achievable.”

“As long as the 9% contribution will redound to the public service of the MUP entrants in their long and entire service for the country and will not be burdened to the additional 12% coming from the government, it becomes a win-win solution for the sustainability of the MUP pension system,” Mr. Cabalza, founding president of the Manila-based International Development and Security Cooperation, said via Messenger chat.

The MUP pension reform bill is part of the Legislative-Executive Development Advisory Council’s list of priority measures that are targeted for approval by end-2023.