SC rebuffs COA, orders release of P747M early retirement benefits to DBP personnel

SC rebuffs COA, orders release of P747M early retirement benefits to DBP personnel

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The Supreme Court (SC) has reversed the Commission on Audit’s (COA) disallowance of the payment of P747.17-million benefits to Development Bank of the Philippines (DBP) employees who availed themselves of early retirement.

In a recent 32-page decision, the SC also approved a compromise agreement in which DBP agreed to release the benefits to 144 retirees to settle their petition for mandamus against the state bank.

The SC granted the DBP’s petition to overturn the COA’s January 30, 2013 ruling, which had affirmed the May 17, 2007 notice of disallowance (ND) against the state bank’s Early Retirement Incentive Program (ERIP) IV-2010.

The COA found the ERIP irregular on the ground that it was a “supplementary retirement plan” prohibited by Republic Act (RA) Number 4968 (or the Teves Retirement Law) and it lacked the approval of the Secretary of Finance.

A supplementary retirement plan augments the government’s legally standardized retirement benefits with additional incentives. In practice, it rewards a longtime employee for his loyalty.

The SC, however, agreed with the DBP that the ERIP was not a supplementary retirement plan.

The ERIP incentives were not meant as a reward. Instead, the objective was to encourage older employees to give way to newer hires to infuse new talent into the bank, create new opportunities for career advancement, and allow the bank to save on personnel expenses.

The SC noted that the ERIP was not limited to employees who were qualified to retire or had already retired, unlike a supplementary retirement plan.

Contrary to the COA’s claim, the SC said the ERIP incentives were not an increase in benefits, as these were actually equivalent to separation pay.

“The grant of benefits under [the ERIP] along with the grant of benefits under other retirement laws should not be considered as a form of double compensation,” read the decision penned by Associate Justice Alfredo Benjamin Caguioa.

Even if the ERIP was indeed a supplementary retirement plan, the SC said the DBP Charter authorized the state bank’s board to provide such an incentive scheme.

The SC said the DBP Charter should prevail over the Teves Retirement Law “not only because it is a later law but also because it is a special law.”

But, the DBP Charter would only require the Secretary of Finance’s prior approval if the ERIP was really a supplementary retirement plan, the SC said.

In any case, the SC noted that Secretary Margarito Teves in a January 24, 2009 letter already found the grant of the ERIP incentives to be “factually and legally proper and in order.”

“Thus, the ineluctable conclusion is that COA erred in disallowing the benefits under ERIP IV-2003,” the SC concluded. #

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