Amendment to Gov't Service Insurance Act

Core policy and system purpose

Republic Act No. 660 strengthens the Government Service Insurance System by amending definitions, membership rules, premium structures, and retirement and related benefits.
Republic Act No. 660 requires the System to administer and manage life insurance and retirement insurance benefits through a structured fund and governance system.

Definitions adopted and clarified

Republic Act No. 660 defines “Employer” as the National or a local government, an agency, board, or corporation controlled or owned by the Government.
Republic Act No. 660 defines “Employee” as any Filipino citizen in the service of the “Employer.”
Republic Act No. 660 defines “Member” as any person insured in the System.
Republic Act No. 660 defines “Membership policy” as a life insurance policy for an amount whose monthly premium is equivalent to two, five or six per centum of an employee’s monthly salary or compensation.
Republic Act No. 660 defines “Regular officer” or “enlisted man” as one whose commission or enlistment is in the regular force of the Armed Forces of the Philippines and not in the reserve force.

Coverage and membership rules

Republic Act No. 660 makes membership compulsory for all regularly and permanently appointed employees (including employees whose tenure is fixed or limited by law).
Republic Act No. 660 makes membership compulsory for teachers, except only substitutes.
Republic Act No. 660 makes membership compulsory for all regular officers and enlisted men of the Armed Forces of the Philippines.
Republic Act No. 660 makes compulsory membership for regularly and permanently appointed employees of a municipal government below first class only if and when that government has joined the System under terms and conditions the System prescribes.
Republic Act No. 660 makes membership optional for an elective official of the National Government or of a local government who is already a member of the System, conditioned on written notification to the System, compliance with System requirements, and being in government service when insurance takes effect.
Republic Act No. 660 provides that once admitted into the System, the elective official is entitled to life insurance benefits by paying either one per centum or three per centum of monthly salary depending on the kind of insurance selected, with the employer paying the same amount.

Insurance benefits and policy limits

Compulsory membership insurance is automatic on the first day of the seventh calendar month following appointment, or on the first day of the sixth calendar month if appointment is on the first day of the month, provided medical examination (if required) is approved by the System.
Optional membership insurance takes effect on the first day of the calendar month following the calendar month during which the first premium was paid to the System, provided the application and medical examination (if required) are approved by the System.
Compulsory membership insurance is term insurance of an amount equal to the employee’s current annual salary, but the rule does not apply to any civilian employee already insured in the System prior to the approval of this Act, nor to a regular officer or enlisted man.
A civilian employee already insured in the System may request conversion to a paid-up endowment insurance and reinsurance under term insurance upon submission of satisfactory evidence of insurability, unless the request is made within one year from the date of approval of the Act.
Optional membership insurance may be selected as either the term insurance described above or an endowment insurance whose amount is whatever the six per centum monthly premium will buy.
Life insurance policies issued under the Act are non-assignable except to the System, participate in surplus as provided by the Act’s surplus rules, and remain in force as long as policy conditions are complied with, whether the member is in or out of service.

Premiums, contributions, remittance mechanics

For life insurance benefits, each employee member and employer pay monthly premium rates under the Act’s schedule by percentage of monthly salary, with the detailed schedule provided through the amended premium framework.
Payment of life insurance premiums begins on the last day of the calendar month preceding the month when insurance takes effect.
The first rate applies to a civilian employee insured on or after approval of the Act.
The second rate applies to a civilian employee already insured prior to approval unless the employee chooses term insurance, in which case the first rate applies.
The third rate applies to a regular officer or an enlisted man.
For retirement insurance, payment begins on the last day of the third calendar month following the month the Act was approved or the employee entered the service, whichever is later.
Retirement insurance premiums are not required for Justices of the Supreme Court, elective officials, and regular officers and enlisted men.
Employer collection mechanics require each employer at the end of each month to deduct and withhold the employee’s premiums from monthly salary.
Employers must advance and remit monthly premiums beginning April 1 of each year and quarterly thereafter for the current quarter, including employer and employee shares and corresponding extra premiums and additional amounts required by later provisions.
If the employee is separated, premiums not due and payable must be refunded or credited to the employer.
A member no longer in service may pay premiums directly to the System as allowed by the Act’s collection structure.
Premium payment for optional insurance and/or retirement annuity may be made to an employer whose location is convenient to the member; that employer is authorized and required to accept, issue a receipt, and remit immediately to the System.

Employer premium obligations and System enforcement

Each employer must include in its annual appropriation and remit the necessary amounts for its premium shares for retirement and life insurance, plus any extra premiums for hazards or risks of employees’ occupations.
If a compulsory membership policy matures, the employer’s life insurance premium ceases until the member acquires a new membership policy granted only upon satisfactory evidence of insurability.
On transfer of an employee from one employer to another, the former employer is relieved of further premiums and the new employer assumes premiums whether or not it has joined the System.
The Board has rule-making power for collection and remittance of premiums and other amounts payable, and for collection of indebtedness to the System.
If officials delay or fail to collect or remit premiums or indebtedness, the Board may impose a fine not exceeding the loss or damage the System may suffer on the responsible official(s), without prejudice to other punishment under existing Civil Service rules and regulations.
The Board may grant extra remuneration to officials in charge of collecting and remitting premiums or indebtedness when doing so advances the best interest of the System.

Additional premiums, donations, and surplus use

For prior services rendered before approval of the Act, the employer must pay necessary additional amounts or premiums under rules and regulations the System prescribes.
The Board is authorized to supplement individual premiums of members using moneys from donations, gifts, legacies, or bequests and to invest and deposit donated moneys to the System.
Savings in employer appropriations for salaries and wages realized during each fiscal year are transferred to the System, which uses them for the payment of benefits provided in the Act.

Retirement insurance: annuity amounts and forms

Upon retirement, a member is automatically entitled to a life annuity payable monthly for at least five years and thereafter as long as he lives.
The monthly annuity amount at age fifty-seven (57) is twenty pesos, plus:
- one and six-tenths per centum of the average monthly salary during the last five years of service for each year of service after approval of the Act; and
- one and two-tenths per centum of the same average monthly salary for each year of service prior to approval of the Act if that prior service is at least seven years.
The annuity amount is adjusted actuarially if retirement occurs at an age other than fifty-seven years.
The maximum monthly annuity at age fifty-seven cannot exceed two-thirds of the average monthly salary or five hundred pesos, whichever is the smaller amount.
Retirement benefit is not paid earlier than one year after approval of the Act.
In lieu of the automatic annuity, the member may elect one of these equivalent benefits:
- (1) monthly annuity during lifetime;
- (2) monthly annuity during joint lives of the employee and wife or other designated beneficiary, reduced upon death of either to one-half and paid to the survivor;
- (3) for those at least sixty-five (65) years of age, a lump sum payment of present value of annuity for first five years plus future annuity to be paid monthly; or
- (4) such other benefit as the System approves.
If death occurs before retirement eligibility, beneficiaries recorded in the retirement annuity application receive the member’s own premiums with interest of three per centum per annum, compounded monthly; if death occurs when eligible for retirement, the automatic or previously chosen annuity is paid.
Disability benefit applies upon permanent and total disability:
- If the member is discharged and services are no longer desirable and the member served less than five years, the member is paid own contributions with interest of three per centum per annum, compounded monthly.
- If the member served at least five years but less than fifteen years, the member receives own contributions plus employer premiums described under life/retirement premium provisions, without interest.
- If the member served at least fifteen years, the member is retired and becomes entitled to the benefit under the retirement annuity computation rule.
Upon dismissal for cause or voluntary separation, the member receives only own premiums and voluntary deposits, if any, plus interest of three per centum per annum, compounded monthly.

Retirement conditions, eligibility, and service computation

A member may retire upon completion of thirty (30) years of total service and attainment of fifty-seven (57) years of age, with the last three years of service before retirement continuous.
Members must have made contributions for at least five years, which may be deducted from the life annuity upon request approved by the Board under terms and conditions the Board prescribes.
Members at least fifty-seven years old may retire with a service period shorter than thirty years, with each year decrease in service compensated by one-half year increase in age over fifty-seven.
Retirement may occur at an age younger than fifty-seven if each year decrease below fifty-seven is compensated by one year increase in service over thirty.
For laborers or persons whose work is mostly manual, the ages in the retirement eligibility rule may be decreased by not more than five years at the System’s discretion.
No member is entitled to retirement benefit if age is below fifty-two (52) years or total service is less than fifteen (15) years.
The employer may request retirement of an employee described under retirement conditions who is disqualified and unable to perform satisfactorily, but the employer must notify the employee in writing first.
The employer’s retirement request is submitted to the Civil Service Board of Appeals only after written notice, and the employee must be given a hearing; retirement is allowed only if the Board finds after examination that the employee is disqualified.
The Civil Service Board of Appeals decision on whether retirement should proceed is final and conclusive.
Retirement is automatic and compulsory at age sixty-five (65) if the member has completed fifteen (15) years of service; if not, continuation is allowed until fifteen years are completed unless eligible for disability retirement.
The automatic compulsory retirement rule does not apply to members of the judiciary and constitutional officers whose tenure of office is guaranteed.
After specific approval of the President of the Philippines, an employee may be allowed to continue serving after age sixty-five upon special qualifications and need of service.
Employers must notify each such employee of the date of automatic separation at least sixty (60) days in advance.
An employee separated from service who is receiving an annuity is not eligible again for appointment to an appointive position or employment under any employer unless the appointing authority determines special qualifications and medical examination approval by the System; during any new employment, the annuity payment is suspended.
After termination of the new appointment, suspended annuity payment resumes.
Reinstatement rules for members not receiving annuity prior to separation require full credit for prior service for annuity computation, subject to refund conditions: no credit is given unless the System is refunded with interest of three per centum per annum, compounded monthly, for amounts received and any pension/retirement plan benefits unless exempted by law from refund.
If separated before and reinstated after approval of the Act, only three-fourths (3/4) of prior services are credited after complying with refund/refund-with-interest conditions.
Service computation rules count total service from original employment and include service under one or more employers, overseas service under authority of the Republic of the Philippines, honorable service in the Armed Forces of the Philippines prior to approval of the Act, and honorable service in the Philippines under the authority of the United States Government prior to July fourth nineteen hundred and forty-six.
Service used to calculate military/nasal retirement pay due to military service or disability incurred therein is excluded from the retirement annuity computation.
Periods of service after approval during which premiums are not required are excluded unless the corresponding premiums are later paid with interest.
Period coverage includes February twenty-eight nineteen hundred and forty-five and from January first nineteen hundred and forty-two up to a period not exceeding one year at a time during which the officer or employee was out of service, for those in service on December eight, nineteen hundred and forty-one, except those separated prior to Japanese occupation, in computing total service, annuity computation, and premium payment requirements.

Funds, actuarial reserves, and government guarantee

The System is a non-stock corporation with principal place of business in Manila, Philippines.
The System is managed by a Board of Trustees of five (5) members appointed by the President with consent of the Commission on Appointments.
Trustees elect among themselves a chairman and vice-chairman.
Trustee terms are three (3) years, with initial staggered terms: one for one year, two for two years, and two for three years; successors serve a term of three years from expiration; vacancies (other than by term expiration) are filled only for the unexpired term.
Each trustee is entitled to twenty-five pesos per day of actual attendance in session.
The System maintains separate and distinct funds: life insurance fund, retirement insurance fund, contingency reserve fund, and general fund.
The life insurance fund includes life insurance premiums and earnings/savings, pays death claims and member equities under policy conditions, and maintains required reserves computed yearly under valuation standards with an interest rate of not higher than four per centum per annum.
The retirement insurance fund includes retirement contributions and earnings/savings, pays annuity payments, and establishes reserves under annuity tables with an interest rate of not higher than three per centum per annum adopted by the Board.
The contingency reserve fund is the portion of surplus set aside each year by the Board and cannot exceed ten per centum of the required reserves.
The general fund holds amounts set aside by the Board from each fund to meet expenses incidental to enforcing the Act.
The Government guarantees the fulfillment of the System’s obligations to members when due.

Board powers, organization, and operations

The Board has general corporate powers and exclusive powers to adopt by-laws, rules, and regulations; adopt and budget expenditures; set up accounting and personnel; invest funds directly or indirectly.
The Board has authority to discount pensions guaranteed under the Act at a discount rate it prescribes.
The Board may establish branches of the System, lease or acquire real property and facilities, prescribe forms of life insurance and annuity contracts and accident benefits, and fix premium rates, conditions, and terms based on age, health, and other insurability factors.
The Board may construct, establish, and/or operate hospitals and sanatoriums and may enter into agreements with government and private hospitals/health institutions and with medical associations or duly licensed physicians and nurses, paying them reasonable necessary compensation notwithstanding contrary laws.
The Board may extend medical and obstetrical services to other System members and dependents and promote members’ health using surplus, subject to rules the Board prescribes.
The Board may readjust retirement insurance rates or benefit periods after periodic audits and valuation of the retirement insurance fund to make the fund sufficient or reasonably sufficient to discharge liabilities, and no person may allege vested rights because of these readjustments.
The Board has power of succession, to sue and be sued, and to exercise other powers necessary to carry on the System’s business.
The Board appoints a general manager (and optionally an actuary) as chief executive officer, assistant general managers, managers, a medical director, and an actuary, and fixes their compensation.
Additional personnel must be selected from civil service eligibles certified by the Commissioner of Civil Service and are subject to civil service rules and regulations, except as otherwise provided.
The Auditor General appoints an auditor representative and necessary personnel; their number and salaries are determined by the Auditor General subject to Board of Directors appropriation, with disputes submitted to the President of the Philippines whose decision is final.
The Board keeps records for actuarial valuation and separates and distinctly keeps records for each fund and its disbursements and accounts.
Within four months after the end of each fiscal year, the Board submits an operations report of the preceding year to the President, who furnishes a copy to Congress.

Surplus apportionment and surplus rules

Disposable surplus from the life insurance fund is apportioned among members whose policies are in force for at least one year when and if the Board deems it expedient, using a schedule prepared by the Actuary and approved by the Board.
Disposable surplus is computed as the amount left after mean reserves, contingency reserves, life fund expenses incidental to operation, expenses for promoting members’ health, and other liabilities are determined and set aside or satisfied.

Exemptions, taxes, and legal process

Life insurance policies under the Act and their proceeds when paid to any member, and other benefits granted under the Act, are exempt from attachment, garnishment, or other process and cannot be seized, taken, appropriated, or applied by legal or equitable process to pay debts or liabilities of the member, beneficiary, or other person with rights under the Act.
The proceeds do not form part of the member’s estate for paying debts when not payable to a named beneficiary.
The exemption does not apply when the obligations or indebtedness to the employer are concerned.
The System and all its forms or documents required of members are exempt from taxes, documentary stamps, duties, and contributions, fiscal or municipal, direct or indirect, established or to be established.
The System is not subject to Act No. 24027, as amended, and Commonwealth Act No. 466, as amended, and no later law applies to the System unless it expressly states the System by name.

Insurance and retirement plan abolition; priority and elections

Act No. 2589, as amended, and other retirement or pension plans previously in force in any chartered city or corporation owned or controlled by the Government are declared inoperative or abolished.
Act No. 4103 ceases to be applicable to employees of any local government that is admitted to the System.
No insurance or retirement plan for employees may be created by any employer without prior approval of the System.
Rights of those already retired are not affected.
As of approval of the Act, present value of benefits computed by the System actuary or the gratuity payable to a member who established a right under the abolished laws is credited to the System’s retirement insurance fund in installments determined by the System and approved by the President, and included in computing additional premiums required for the service annuity.
A member entitled under prior laws becomes entitled to retirement benefits under the Act only if the member notifies the System within six months from approval; otherwise, the member is deemed not to desire retirement under the Act and the prior gratuity/benefit is exclusively reserved for the member by the System.
If the member elects the retirement benefits of the Act but the position is abolished or the member dies or becomes disabled before becoming eligible, legal heirs may be paid the retirement benefit previously established under prior laws and contributions under the Act are refunded under the Act’s refund rule.
The Act governs and restructures credited rights to retirement benefits and transitions participants into the System’s retirement insurance framework.

Penalties for fraud and wrongful procurement

Any person who participates directly or indirectly in fraud, collusion, falsification, misrepresentation of facts, or any other anomaly in issuing any certificate or document for purposes connected with the Act, or in obtaining any benefit or payment under the Act, is punished by a fine not exceeding one thousand pesos or imprisonment not exceeding one year, or both at the court’s discretion.
The offender is also disqualified from holding public office and from practicing any profession or calling licensed by the Government.

Transitional and special retirement elections

A deceased officer or employee who died in the service within three years before the Act went into effect, rendered at least thirty-five years of service, and was entitled to or could have established entitlement to retirement gratuity or other retirement benefits under Act No. 2589, as amended, is considered retired under the Act if the wife elects, or if she defaults, the other legal heirs elect and notify the System.
Upon election, the wife or legal heirs are paid the monthly annuity for five consecutive years or such other benefit provided under the Act, in lieu of the retirement gratuity or retirement benefits the deceased was entitled to at death.
Any portion of the gratuity or retirement benefits already paid to the wife or other legal heirs must be refunded to the System.
Contributions corresponding to the deceased’s last five years of service are deducted monthly from the life annuity.
Officers or employees whose positions were abolished or who were separated due to the reorganization under Republic Act No. 422 may be retired under the Act if qualified, and any gratuity or retirement benefit already received must be refunded to the System; contributions corresponding to the last five years of service are paid as provided in the retirement conditions section on contributions.
This transitional rule also applies to a member of the judiciary separated after reaching seventy years of age with at least thirty years of service who is not entitled to retirement benefit under any law.
An officer or employee who had not established the right to retire under Act No. 2589 or Act No. 4103, both as amended, but who has rendered not less than twenty-five years of service and attained age fifty-seven, may elect to retire under either of those Acts if the right is established within one year from Act approval, or may elect to retire under this Act if otherwise qualified.

Separability, repeals, and conflict rule

Republic Act No. 660 declares that provisions of law inconsistent with the Act are repealed.