Legal basis and declared purpose
- The order relies on Presidential Decree (PD) No. 361 (s. 1973), which established the Armed Forces of the Philippines-Retirement and Separation Benefits System (AFP-RSBS) and mandated a self-reliant funding scheme with continuous support for the AFP retirement system.
- The order cites the Feliciano Commission Report (2003) finding AFP-RSBS to be fundamentally flawed and not discharging its mandate.
- The order cites Executive Order (EO) No. 590 (s. 2006) and EO No. 590-A (s. 2007), which required deactivation, winding down, and liquidation of AFP-RSBS but were not fully implemented.
- The order invokes Section 5(a) of Republic Act No. 10149 (GOCC Governance Act of 2011), empowering the GCG (Governance Commission for GOCCs) to determine whether a GOCC should be reorganized, merged, streamlined, abolished, or privatized.
- The order states that the GCG finds abolition of AFP-RSBS is in the best interest of the State to improve national productivity and reduce ineffective and inefficient spending of public funds.
- The order provides that, pursuant to Section 5(a)(3) of Republic Act No. 10149, the GCG recommends abolition, and upon Presidential approval, the GCG shall implement such abolition unless another agency is designated.
Abolition of AFP-RSBS
- Section 1 abolishes the AFP-RSBS.
- Section 3 directs the AFP-RSBS Board to continue acting for winding down and liquidation purposes after abolition, subject to governance oversight.
Privatization of wholly-owned subsidiaries
- Section 2 approves the privatization of AFP-RSBS subsidiaries through liquidation of AFP-RSBS assets, including its shares in wholly-owned subsidiaries.
- The privatization covers Monterossa Development Corp. (MDC) and Southern Utility Management and Services, Inc. (SUMSI).
- Section 3(e) further provides that the Board of Trustees shall act in a liquidation capacity and recommend dispositive actions for subsidiaries and affiliates to the GCG.
Winding down and liquidation powers and duties
- Section 3 directs the AFP-RSBS Board to act as a Board of Liquidators under oversight by the Governance Commission.
- Upon effectivity, Section 3(a) requires the AFP-RSBS Board to:
- cease collecting members’ contributions; and
- cease the accrual of interest thereon.
- Section 3(b) requires the AFP-RSBS Board to:
- maintain only the number of personnel necessary to wind down corporate affairs; and
- cease hiring new personnel unless first approved by the Governance Commission.
- Section 3(c) requires the AFP-RSBS Board to collect all indebtedness due to AFP-RSBS.
- Section 3(d) requires the continued corporate operating budget to cover:
- (1) continuation of leasing services solely for preservation of assets;
- (2) collection of indebtedness;
- (3) release of penalties to loans and inter-company receivables due to AFP-RSBS, provided it is not manifestly prejudicial to the government and complies with existing auditing rules and regulations;
- (4) refund of AFP-RSBS members’ contributions as they fall due; and
- (5) servicing of existing Membership Loan Programs.
- Section 3(e) assigns the Board of Trustees (acting as Board of Liquidators) the duty to recommend to the GCG the dispositive actions for subsidiaries and affiliates.
- Section 3(f) authorizes the Board to enter contracts for:
- (1) selling all real estate assets (including subdivision lots, house and lots, memorial lots, raw lands, and all acquired assets) according to existing internal policies of AFP-RSBS;
- (2) selling golf and country club shares and all other personal properties;
- (3) managing, preserving, and maintaining buildings, facilities, and equipment in line with winding down activities;
- (4) completing deliverables to subdivisions and turning over completed subdivisions to LGUs and homeowners association; and
- (5) maintaining and preserving existing projects and properties, including security services and insurance.
- Section 3(g) directs the Board to pursue activities necessary to perfect ownership of real estate assets, including Land Use Conversion, Comprehensive Agrarian Reform Program (CARP) Exemption, Reconveyance, Segregation, and transfer of TCTs.
- Section 3(h) requires continued, abrogated, and/or re-negotiation of existing Joint Venture (JV) Agreements/Contracts, subject to the revised National Economic and Development Authority (NEDA) JV Guidelines.
- Section 3(i) grants the Board full power to sue and file complaints to protect the corporation’s rights and interests and to engage lawyers, accountants, and other professionals, in accordance with existing laws, to protect its interest, wind down its corporate affairs, and preserve, manage, and dispose remaining assets.
- Section 3 states that the foregoing is without prejudice to supplemental guidelines from the Governance Commission implementing the order.
Separation benefits for affected personnel
- Section 4 allows affected AFP-RSBS officials and personnel to avail separation benefits in addition to retirement or separation benefits allowed under existing laws.
- The separation benefit is computed using Basic Monthly Pay (BMP) and is based on years in service:
- First 20 years: 1.00 x Basic Monthly Pay (BMP) x No. of years
- 20 years and 1 day to 30 years: 1.25 x BMP x No. of years
- 30 years and 1 day and above: 1.50 x BMP x No. of years
- Section 4 requires that separation pay be sourced from AFP-RSBS corporate funds.
Technical Working Group and implementing rules
- Section 5 creates a Technical Working Group to assist the GCG in implementing the order.
- The Technical Working Group is composed of representatives from:
- Department of National Defense (DND);
- Department of Finance (DOF);
- Department of Budget and Management (DBM);
- Privatization Management Office (PMO);
- AFP-Retirement and Separation Benefits System (AFP-RSBS); and
- Armed Forces of the Philippines (AFP).
- Section 6 requires the Governance Commission to issue implementing rules and regulations as necessary to supplement the order.
Separability, repeal, and immediate compliance
- Section 7 provides separability: if any provision is declared invalid or unconstitutional, the remaining provisions continue to be valid and subsisting.
- Section 8 repeals or modifies all inconsistent orders, rules, regulations, issuances, or parts thereof.
- Section 9 provides that the order takes effect immediately.