Pag-IBIG Fund Law of 2009

State policy and objectives

Section 2 declares the State policy to establish, develop, promote, and integrate a nationwide sound and viable tax-exempt mutual provident savings system for employed and other earning groups.
Section 2 mandates membership in Pag-IBIG with mandatory contributory support of employers in the spirit of social justice and national development, geared to housing needs.
Section 3 directs integration of all laws relating to the Home Development Mutual Fund to achieve: improving citizens’ quality of life through shelter, providing an integrated nationwide provident savings system, and providing housing through mobilization of funds for shelter finance.

Key definitions under the law

Section 4 defines “Board” as the duly constituted Board of Trustees of the Home Development Mutual Fund.
Section 4 defines “Compensation” as basic monthly salary plus mandated cost of living allowance.
Section 4 defines “Contributions” as amounts payable to the Fund by members and employers in accordance with the Act.
Section 4 defines “Employee” as any person in the service of an employer who receives compensation for services.
Section 4 defines “Employer” broadly to include any person (natural or juridical), domestic or foreign, carrying on business or activity in the Philippines (or outside the Philippines) that uses the services of another person under its order, including the government and its instrumentalities, and local government units.
Section 4 defines “Employment” to cover service performed by an employee within the Philippines, with an agreement option allowing foreign governments, international organizations, or their wholly-owned instrumentalities employing workers in the Philippines (or employing Filipinos abroad) to include their employees as Fund members, provided the agreement conforms to the Act.
Section 4 defines “Fund” as the Fund created under the Act, a government financial institution mobilizing provident funds primarily for shelter finance.
Section 4 defines “Investible Funds” as funds available after deducting: cost of operations and expenses, administrative and general expenses, reserves for benefit claims, a sinking fund for return of members’ equity upon maturity, and a reserve for loan repayments.
Section 4 defines “Member” as an employee coverable under the Act who pays mandated contributions.
Section 4 defines “Membership Term” as twenty (20) years commencing from the first day of the month to which initial contributions apply, with maturity after a total of two hundred forty (240) monthly contributions.
Section 4 defines “Net Fund Asset” as total assets less current liabilities.
Section 4 defines “Permanent Total Disability” as loss or impairment of physical and mental function resulting from injury or sickness that completely incapacitates a member to perform any work or engage in business/occupation as determined by the Fund.
Section 4 defines “GSIS” and “SSS” by reference to their respective establishing laws (Commonwealth Act No. 186 for GSIS, and Republic Act No. 1161 for SSS).

Coverage, members, and contributions

Section 5 creates the Home Development Mutual Fund of 2009, also referred to as the Fund, as a mutual provident savings system for private and government employees and other earning groups, supported by matching mandatory employer contributions and housing as the primary investment.
Section 5 establishes the Fund as a body corporate with principal office in Metro Manila, and provides that it replaces the Home Development Mutual Fund established under Presidential Decree No. 1752.
Section 6 makes Fund coverage mandatory for:
- all employees covered by the SSS and GSIS, and their employers, notwithstanding waivers previously issued;
- includes uniformed members of the Armed Forces of the Philippines, Bureau of Fire Protection, Bureau of Jail Management and Penology, and Philippine National Police;
- Filipinos employed by foreign-based employers; and
- spouses who devote full-time to household and family affairs, unless they also engage in another vocation or employment subject to mandatory coverage.
Section 6 allows full-time household spouses to be covered voluntarily by adopting contributions based on one-half (1/2) of the employed spouse’s monthly compensation income, subject to the Act’s terms.
Section 6 allows coverage extension to other working groups with or without employer contributions, as determined by the Board of Trustees.
Section 7 requires monthly funding through member provident savings and equal employer matching contributions.
Section 7 sets employee contribution rates based on monthly compensation:
- 1% if monthly compensation is not more than PHP 1,500.00; and
- 2% if monthly compensation is more than PHP 1,500.00.
Section 7 imposes on all employers a contribution of 2% of the monthly compensation of all covered employees.
Section 7 caps the maximum monthly compensation used to compute employee and employer contributions at PHP 5,000.00, but allows adjustment by the Board of Trustees through rules considering actuarial calculations and rates of benefits.
Section 7 prohibits employers from deducting, directly or indirectly, from covered employees’ compensation, or otherwise recovering from them, the employer’s contribution.
Section 8 provides that membership generally lasts twenty (20) years, with earlier termination for retirement, disability, insanity, death, departure from the country, or other Board-provided causes.
Section 8 allows those who become members after effectivity to withdraw the total accumulated value of contributions after the fifteenth (15th) year of continuous membership, on condition that they have no outstanding housing loans with the Fund; the option does not prejudice continuing membership.
Section 8 provides that resignation, layoff, or suspension from employment does not necessarily terminate membership, except that suspension of contributions can affect membership.
Section 9 authorizes the Board, by rules or resolutions, to waive or suspend coverage and/or monthly contribution payments for reasons including nature of employment, condition of business, ability to make contributions, and other reasonable considerations.

Provident character and housing access

Section 10 declares the Fund private in character, wholly owned by members, administered in trust, and applied exclusively for members’ benefit.
Section 10 requires full individual crediting of personal and employer contributions, individual accounting, transferability upon change of employment, and dividend earning as provided in implementing rules.
Section 10 states that credited amounts constitute each member’s provident fund to be paid to the member, the member’s estate, or beneficiaries upon termination of membership, or to draw peripheral benefits for the member.
Section 11 grants good-standing members eligibility to apply for housing loans, subject to Board-authorized terms and conditions and the members’ ability to pay.
Section 11 requires the Board to institute policies ensuring lower-income members obtain housing loans.

Governance and operational powers

Section 12 names the implementer as the Home Development Mutual Fund created under the Act.
Section 13 vests in the Fund its statutory and usual corporate powers, including:
- adopting and changing rules and regulations;
- adopting annual and supplemental budgets, and authorizing necessary capital and operating expenditures;
- submitting an annual report to the President not later than March 15 covering prior-year activities and the Fund’s condition;
- investing not less than seventy percent (70%) of investible funds to housing, consistent with the Act;
- acquiring, utilizing, or disposing of real or personal properties recognized by law;
- establishing accounting and computer systems;
- conducting continuing actuarial and statistical studies and valuations to determine financial viability and to readjust benefits and contribution/interest/allocation items to covered contingencies;
- exercising succession, suing and being sued, and using a corporate seal;
- entering contracts of every kind;
- borrowing funds from any source (private or government; foreign or domestic);
- investing, owning, or participating in equity, and forming/organizing subsidiary or subsidiaries for its purposes;
- approving appointments and maintaining a compensation and position classification system aligned with Board-approved qualification standards and comprehensive job analysis, wage compensation study, and actual duty audits;
- ensuring compensation comparability with private sector and requiring Board periodic review no more than once every four (4) years, without prejudice to yearly merit reviews or increases tied to productivity and profitability, and declaring exemption from laws/rules/regulations on salaries and compensations;
- maintaining a provident fund for its officials and employees and their earnings to pay benefits to officials/employees or heirs;
- designing and adopting an early retirement incentive plan (ERIP) for its personnel;
- establishing field offices;
- approving restructuring proposals for payment of due but unremitted contributions and unpaid loan amortizations under Board-set terms;
- determining and imposing interest and penalties upon unpaid contributions due from employers and employees;
- ensuring collection and recovery of indebtedness/liabilities/accountabilities including unpaid contributions from all obligors, demanding payment, and initiating appropriate actions or suits (criminal, civil, administrative, or otherwise) in proper venues;
- allowing the Fund to compromise or release interest, penalty, or civil liability in connection with collection and lending operations under Board-set terms and conditions;
- allowing deputization of legal staff as special sheriff in foreclosure and enforcement cases involving the Fund, with reporting to the proper court and treatment as if acting under the court’s sheriff authority;
- designing and implementing programs to mobilize savings and provide additional mutual benefits with appropriate returns;
- performing other acts necessary, useful, incidental, or auxiliary to the Act.
Section 14 creates the Board of Trustees as the body vested with corporate powers and functions, appointed by the President of the Philippines.
Section 14 specifies Board composition:
- ex officio Chairperson: Chairperson of the Housing and Urban Development and Coordinating Council;
- ex officio Vice Chairman: Secretary of the Department of Finance;
- ex officio members: Secretary of the Department of Labor and Employment (or duly designated undersecretary), Secretary of the Department of Budget and Management (or duly designated undersecretary), and Secretary of the Department of Trade and Industry (or duly designated undersecretary);
- one Board member: Chief Executive Officer of the Fund; and
- Five (5) appointive members: two (2) representatives of private employees, two (2) representatives of private employers, and one (1) representative of government employees.
Section 14 sets private sector appointive term lengths: four (4) private sector representatives each appointed for two (2) years, with one employer representative having an initial term of one (1) year for the first set; the government employees’ representative has a two (2) year term.
Section 14 grants Board members per diem for each meeting actually attended, in amounts fixed by the Board in accordance with existing laws, rules, and regulations.
Section 15 grants the Board specific powers, including condonation of penalties imposed on member/borrower loans for justifiable Board-prescribed reasons, and extending the same exclusive condonation power to penalties imposed on employers who justifiably fail to remit required contributions.
Section 15 authorizes the Board to approve organizational and administrative structures and staffing pattern and to establish/fix/review/revise/adjust compensation packages in line with Section 13(k).
Section 15 authorizes the Board to authorize expenditures for effective administration and operations and to adopt budgets, including annual and supplemental budgets.
Section 16 authorizes Board rulemaking and requires publication of rules “in accordance with law” or at least once in a newspaper of general circulation in the Philippines, covering administration, member crediting/disbursements, grounds for membership termination other than completion of term, fund earnings distribution, interim disbursements, benefits and contribution rates and interest, housing and loan assistance programs, and procedures for adjudication and settlement of claims and disputes, among other implementation matters.
Section 17 requires the Chief Executive Officer to execute and administer Board policies and resolutions, prepare agendas, direct and supervise operations, and appoint/remove/suspend/discipline personnel for cause in line with civil service requirements (with Board approval and confirmation requirements for appointments by level).
Section 18 requires all Fund monies not needed for current administrative and operational requirements to be invested with due and prudent regard for safety, growth, and liquidity needs.

Contributions remittance, records, and enforcement

Section 23 requires every employer, private or public, to set aside and remit required contributions through a remittance mechanism determined by the Board.
Section 23 makes every employer that must set aside and remit liable for the contributions, with nonpayment subject to 3% per month penalty on amounts payable from the date contributions fall due until paid.
Section 23 requires government instrumentalities and agencies, including government-owned and -controlled corporations, to provide contribution payments in their annual appropriations.
Section 23 imposes penal sanctions on government employers that fail to include contribution payments on time or delay remittance, and makes the heads of offices and agencies administratively liable for non-remittance.
Section 23 states that an employer’s failure or refusal to pay/remit contributions does not prejudice the covered employee’s right to benefits under the Act.
Section 23 provides that, when an employer refuses or neglects to pay, the Fund collects contributions using the same manner as taxes are collectible under the National Internal Revenue Code, as amended.
Section 23 sets a prescription rule for actions by the Fund against employers: necessary actions may be commenced within twenty (20) years from when delinquency is known or assessment is made by the Fund, or from when the benefit accrues, depending on circumstances.
Section 24 requires each employer to immediately report to the Fund: names, ages, civil status, occupations, salaries, and dependents of covered employees.
Section 24 requires employers to keep true and accurate work records for such period and containing such information as the Fund prescribes, including annual registers of new and separated employees sourced from the Fund.
Section 24 requires submission of the annual register in the month of January each year, and includes that employers must secure the register from the Fund and fill it upon the employee’s first day of employment or on the effective date of separation, with required data.
Section 24 provides that the work records are open to Fund inspection by the Fund or authorized representatives quarterly, or as often as the Fund requires.
Section 27 grants visitorial and enforcement authority: the Fund or authorized representatives may inspect premises, books of accounts, and records of any person or entity covered by the Act; require regular submission of reports; and act on violations.
Section 27 allows the Fund’s administration to be supervised/visited/verified by appropriate government agencies designated and authorized by the President.

Investments, costs, audit, and solvency

Section 21 limits Fund administration and development costs: the Board may set amounts/limits not exceeding 2% of Net Fund Assets of the previous year, excluding operating cost directly related to lending operations.
Section 22 makes the Chairman of the Commission on Audit the ex officio auditor of the Fund and empowers appointment of representatives and subordinate personnel for audit duties, responsible to and removable only by the Commission on Audit Chairman.
Section 22 preserves the Board’s power to contract for another independent audit mode in addition to Commission on Audit audit service under Presidential Decree No. 1445 (Government Auditing Code of the Philippines).
Section 20 requires that benefits prescribed in the Act not be diminished and provides a government guarantee by accepting general responsibility for the Fund’s solvency.

Tax exemption and protection from legal process

Section 19 declares the Fund and all its assets and properties, all contributions collected and accruals thereto, and income/investment earnings therefrom, as well as supplies, equipment, papers, or documents, exempt from any tax, assessment, fee, charge, or customs/import duty.
Section 19 exempts all benefit payments made by the Pag-IBIG Fund from taxes, fees, or charges and provides that benefit payments are not subject to attachments, garnishments, levy, or seizure by any legal or equitable process before or after receipt by the entitled persons, except to pay any debt of the member to the Fund.
Section 19 prohibits application of any tax measure unless it expressly revokes the declared State policy in Section 2 granting tax exemption to the Fund.
Section 19 provides that any tax assessment against the Fund is null and void.

Criminal and administrative penalties

Section 25 punishes refusal or failure without lawful cause, or with fraudulent intent, to comply with the Act and implementing rules, particularly on registration of employees, collection and remittance of employee-savings and employer counterparts, and correct amounts due, within timelines set by implementing rules or specific calls/extensions by Fund management.
Section 25 imposes a penalty of a fine of not less than, but not more than twice the amount involved, and/or imprisonment of not more than six (6) years, in the court’s discretion, plus civil liabilities and/or obligations of the offender or delinquent.
Section 25 provides that if the offender is a corporation, the penalty is imposed on members of the governing board and the president or general manager.
Section 25 provides that corporate penalties do not prevent prosecution of related offenses under the Revised Penal Code and other laws, and do not prevent revocation and denial of operating rights and privileges in the Philippines, and deportation when the offender is a foreigner.
Section 25 imposes specific penalties on government instrumentalities/agencies/corporations: for failure to include contribution amounts in annual budgets or failure/refusal/delay of remittance by more than thirty (30) days from when due and demandable, and/or failure to deduct employees’ monthly contributions.
Section 25 sets the government-official penalties: on conviction by final judgment, imprisonment of not more than six (6) years and a fine of not less than, but not more than twice the amount involved.

Continuity of existing members and governance rules

Section 26 transfers and continues membership under the Fund established under Presidential Decree No. 1752, including accrued amounts and benefits and covering records/documents, integrating them into the new Fund under subsequent policies and rules.
Section 28 requires Board adoption and promulgation of implementing rules within ninety (90) days after approval of the Act, with publication in at least one (1) national newspaper of general circulation.

Separability and repeal

Section 29 provides a separability clause: invalidity or unconstitutionality of any provision or application does not affect remaining provisions, which continue in force.
Section 30 repeals Presidential Decree No. 1530, as amended by Executive Order Nos. 527 (series of 1979) and 538 (series of 1979); Presidential Decree No. 1752, as amended by Executive Order Nos. 35 (series of 1986) and 90 (series of 1986); and Republic Act No. 8501.
Section 30 amends Section 6 of Republic Act No. 7742 accordingly.
Section 30 modifies or amends other laws, decrees, executive orders, rules, and regulations, or parts thereof, inconsistent with or contrary to the Act or its purposes.