MUP pension plan is not all money

If Finance Secretary Ralph Recto can have his way on the pension program for the country’s military and uniformed personnel (MUP), he would adopt the Senate’s proposal to require mandatory contributions only from new entrants to the service.

At present, the MUPs’ retirement benefits are fully funded by the government, i.e., they do not contribute any premium to the pension they will receive when they avail of optional retirement or are compulsorily retired after 30 years of service or for other service-related reasons.

In contrast, employees of other government offices contribute a premium, through automatic monthly salary deduction, to the Government Service Insurance System so that when their employment days are over, they will receive a pension proportionate to their contributions.

The difference in treatment arose from the government’s failure in 2016 to replace the retirement system that used to handle the MUPs’ pension program when it ceased operation due to serious financial problems.

That left the government with the responsibility of funding the entire cost of the MUP’s pension system without any contributions from its beneficiaries.

Former Finance Secretary Benjamin Diokno believed that arrangement is not sustainable because it would adversely affect the availability of funds for the government’s various development programs. To address that problem, he proposed that all MUPs in the active service be required to contribute a premium to their pension program.

Recto does not agree with his predecessor on this issue. He said the government has a “social contract” with the MUPs in active service on the pension they’ve been promised and should therefore honor it.

From a textbook point of view, requiring the MUPs to contribute to their retirement or separation benefits is reasonable. The rule of thumb in that post-employment arrangement is for the employer and the employees to proportionally contribute to the fund from which those benefits shall be drawn.

In the private sector, it is common practice for the employer to fully shoulder the costs of that fund, i.e., the employee is not obliged to make any contributions, subject to the condition that once the retirement or separation pay is paid in full, no further payments (or pension) shall be due from the employer.

It is not the fault of the MUPs who joined the service after 2016 that they did not make premium contributions to the retirement system of their service group. They were not required to do so. If they were, their premium would have been automatically deducted from their paycheck.

Thus, there is no moral, much less legal, basis for the present corps of MUPs to be ordered to retroactively share in the burden of funding their pension benefits.

It’s not their fault that their pensions had to be sourced exclusively from the national coffers. They should not be made to suffer from the government’s failure or negligence to draw up a contributory retirement program for them after 2016. The past finance managers slept on their job.

Requiring them at this stage to share in the cost of their pension benefits would be akin to changing the rules in the middle of the game without their consent or, worse, against their will.

Note that the norm in retirement programs that are fully funded by the employer, or is noncontributory, with regard to changes in its provisions, in particular, in the computation or manner of payment of benefits, is for the affected employees to be given prior notice of and to seek their consent to that action.

The idea is, those employees have already earned a vested right on the benefits that have been promised to them by the employer, or is an integral part of their employment contract, so they have a right to get involved on any major changes in the retirement program. Due process is required before any person can be deprived of his or her property.

At this time when our country has to contend with several threats to its national security, it would be counterproductive for the MUPs in active service to get the impression that their services are not appreciated by the government. INQ