D. Retirement (See also RA 7641, 8558, 10757, and 10789; Labor Advisory on Retirement Pay, October 24, 1996)

E. Retirement (Labor Code, art. 302)

The result of a bilateral act of the parties, a voluntary agreement between the employer and the employee whereby the latter, after reaching a certain age agrees to sever his or her employment with the former. (Jaculbe v. Silliman University, G.R. No. 156934, 2007)

Retroactive Effect of Retirement Laws

• The claimant for retirement benefits was still in the employ of the employer at the time the statute took effect; and
• The claimant had complied with the requirements for eligibility for such retirement benefits under the statute (URC v. Caballeda, G.R. No. 156644, 2008)

Compulsory

All employees receiving compensation who have not reached the compulsory retirement age, irrespective of employment status.

Age of retirement

Optional retirement: In the absence of a retirement plan or other applicable agreement providing for retirement benefits of employees in an establishment, an employee may retire upon reaching the age of 60 or more if he has served for at least 5 years in said establishment.

Compulsory retirement: In the absence of a retirement plan or other applicable agreement providing for retirement benefits of EEs in an establishment, an EE shall be retired at the age of 65 years. (IRR R.A. No. 7641, Sec. 4)

May the optional and compulsory retirement ages be lowered?

• Written policy – such as in the CBA (Pantranco North Express v. NLRC & U. Suniga, G.R. No. 95940, 1996); or
• Assented to by the employees (Jaculbe v. Silliman University, G.R. No. 156934, 2007)

Nature of employees’ assent

The employees’ assent may be evidenced by silence. (Obusan v. PNB, G.R. No. 181178, 2010)

However, in another case, the Supreme Court ruled that acceptance by the employees of an early retirement age option must be explicit, voluntary, free, and uncompelled. (Cercado v. Uniprom, Inc., G.R. No. 188154, 2010)

Note: Obusan was decided by the Supreme Court in division on July 26, 2010, while Cercado was decided also in division on October 13, 2010.

Retirement Age for Underground and Surface Mine Workers

For underground and surface mine workers, the optional retirement age is 50, while the mandatory retirement age is now 60. (R.A. No. 10757, Sec. 2)

Amount of Retirement Pay

The minimum retirement pay shall be equivalent to one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.

For the purpose of computing retirement pay, “one-half month salary” shall include all of the following:

• Fifteen (15) days salary based on the latest salary rate;
• Cash equivalent of five (5) days of service incentive leave;
• One-twelfth (1/12) of the 13th-month pay, equivalent to 2.5 days’ salary.

Total: 22.5 days

Thus, “one-half month salary” is equivalent to 22.5 days. (Capitol Wireless, Inc. vs Sec. Confessor, G.R. No. 117174, 1996; Rogelio Reyes v. NLRC, G.R. No. 160233, 2007)

Other benefits may be included in the computation of the retirement pay upon agreement of the ER and the EE or if provided in the CBA.

Retirement pay under RA 7641 vis-à-vis retirement benefits under SSS and GSIS laws

RA 7641 mandates payment of retirement benefits. Private sector employees, regardless of their position, designation or status and irrespective of the method by which their wages are paid, are entitled to retirement benefits upon compulsory retirement at the age of sixty-five (65) or upon optional retirement at sixty (60) or more but not 65, provided they have served at least five (5) years and are not employees of retail, service or agricultural establishments or operations regularly employing not more than ten (10) employees. The minimum retirement pay due covered employees shall be equivalent to one-half month salary for every year of service, a fraction of at least six (6) months being considered as one whole year. The benefits under this law are other than those granted by the SSS or the GSIS.

Amount Paid

• 10% of the monthly pension or
• P250.00, whichever is higher, Retirement Benefits

Retirement Benefits [Sec. 12-B]

Retirement Benefits under a CBA or Applicable Contract

Any employee may retire or be retired by his/her employer upon reaching the age established in the CBA or other applicable agreement/contract and shall receive the retirement benefits granted therein; provided, however, that such retirement benefits shall not be less than the retirement pay required under R.A. No. 7641, and provided further that if such retirement benefits under the agreement are less, the employer shall pay the difference.

Where both the employer and the employee contribute to a retirement fund pursuant to the applicable agreement, the employer’s total contributions and the accrued interest thereof should not be less than the total retirement benefits to which the employee would have been entitled had there been no such retirement benefits’ fund. If such total portion from the employer is less, the employer shall pay the deficiency.

Age

• 60 years; already separated from employment or has ceased to be self-employed; or
• 65 years - entitled to monthly pension from retirement until death.

The monthly pension shall be suspended upon the reemployment or resumption of self-employment of a retired member who is less than sixty-five [65] years old.

Eligibility Requirements

The member who retires:

• Has rendered at least 15 years of service;
• Is at least 60 years of age at the time of retirement; and
• Is not receiving a monthly pension benefit from permanent total disability.

Retirement shall be compulsory for an employee at 65 years of age with at least 15 years of service.

If he has less than 15 years of service, he may be allowed to continue in the service in accordance with existing civil service rules and regulations.

Retirement Benefit of Part-Time Workers

Part-time workers are also entitled to retirement pay of at least one-half month salary for every year of service under RA 7641 after satisfying the following conditions precedent for optional retirement:

• There is no retirement plan between the employer and the employee; and
• The employee should have reached the age of 60 years, and should have rendered at least 5 years of service with the employer.

The components of retirement benefit of part-time workers may likewise be computed at least in proportion to the salary and related benefits due them. (DOLE Handbook on Workers’ Statutory Monetary Benefits, 2014 ed.)

Retirement Benefit

• The lump sum payment payable at the time of retirement + old-age pension benefit (basic monthly pension payable monthly for life, starting upon expiration of the five-year (5) guaranteed period covered by the lump sum); or
• Cash payment equivalent to 18 months of his basic monthly pension + monthly pension for life payable immediately with no five-year (5) guarantee.
• It shall be periodically adjusted as may be recommended by the GSIS.

Taxability

General Rule: Any provision of law to the contrary notwithstanding, the retirement benefits received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan maintained by the employer shall be exempt from all taxes and shall not be liable to attachment, garnishment, levy or seizure by or under any legal or equitable process whatsoever (Intercontinental Broadcasting Corp. (IBC) v. Amorilla, G.R. No. 162775, 2006)

Exception: Except to pay a debt of the official or employee concerned to the private benefit plan or that arising from liability imposed in a criminal action.

Additional conditions

• The benefit plan must be approved by the Bureau of Internal Revenue;
• The retiring official or employee has been in the service of the same employer for at least ten (10) years and is not less than fifty years of age at the time of his retirement;
• The retirement benefits shall be availed of by an official or employee only once; and,
• In case of separation of an official or employee from the service of the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee, any amount received by him or by his heirs from the employer as a consequence of such separation shall likewise be exempt as hereinabove provided.