Reporting Materials for Fin 100 PDF

**REPORTING MATERIALS FOR FIN 100** ### OBJECTIVES: 1. Explain the importance and role played by PDIC in the banking system ### TO DO LIST: 1. Join: the discussion on the topics about Philippine Deposit Insurance Corporation 2. Follow: Online Netiquette 3. Submit: the required output f...

**REPORTING MATERIALS FOR FIN 100** ### OBJECTIVES: 1. Explain the importance and role played by PDIC in the banking system ### TO DO LIST: 1. Join: the discussion on the topics about Philippine Deposit Insurance Corporation 2. Follow: Online Netiquette 3. Submit: the required output for this module on or before the given deadline. ### LECTURE: #### A Brief History - Just like in the United States of America, deposit insurance in the Philippines was borne out of the need to stabilize the banking system from a rash of withdrawals that led to bank runs. In the US, disruptions caused by bank failures recurred during the 1800s up to the 1930s. While numerous solutions were put forth, many of them were based on the deposit insurance principle. - Solutions to stabilize the US banking industry were originally implemented at the level of the State and initially solicited support from banks on a voluntary basis. - As the banking crisis in the US worsened in the 1930s the US Congress passed the Banking Act of 1933, which created the Federal Deposit Insurance Corporation (FDIC). By its very name, the FDIC provided deposit insurance on a national level, starting at USD 2,500 per depositor and made membership by banks mandatory. - Thirty years later, the Philippines went through a similar banking crisis. In order to stabilize the situation and restore confidence in banks, the Philippines government created its own version of deposit insurance system through Republic Act 3591, which created the Philippine Deposit Insurance Corporation (PDIC) on June 22, 1963 to protect depositors and help maintain financial stability. Unlike the Federal Deposit Insurance of the US, the Philippines initially adopted a voluntary membership by banks in the PDIC. - Mr. Basilio Estanislao, then Special Assistant to Central Bank Governor Andres Castillo and later Director of the PDIC itself, was tasked to prepare the manuscript for Republic Act 3591. Director Estanislao was quoted to have said that: "The philosophy behind deposit insurance is for the government to protect the small, unsophisticated depositors who comprise the majority, and not the big ones who are more discriminatory." - The foundation for this statement of Director Estanislao is [confidence], the major ingredient that makes any financial system flourish. Take confidence away and the financial system crumbles like a house of cards. This is also why President Franklin D. Roosevelt in his first "[fireside chat]" to the people of the United States of America on March 12, 1933 said that: "[After all, there is an element in the readjustment of our financial system more important than currency, more important gold, and that is the confidence of the people."] - The PDIC commenced operations in 1968 after the appointment of the Board of Directors and the release of the PDIC's initial permanent insurance fund i[n the amount of *Php5 million*]*.* A year later, Republic Act 5571 made banks' membership with the PDIC *[mandatory]*. Thereafter, a series of government actions led to the increase in the maximum deposit insurance coverage for depositors. Starting with just a maximum deposit insurance - The PDIC Charter was further amended in 2009 as a pre-emptive measure to build confidence in the banking system amid the brewing global crisis during that time. Aside from the doubling of maximum deposit insurance coverage from Php250,000 to Php500,000, the PDIC was granted the flexibility to adjust the maximum deposit insurance coverage when the financial stability of the banking system is threatened. - The latest amendments to the PDIC Charter also provided for institutional and financial strengthening measures to build up the Deposit Insurance Fund and to reinforce PDIC's role as a member of the country's financial safety net while continually providing depositor protection. PDIC's co-regulatory powers were also expanded in terms of determining insured deposits, examining deposit accounts in cases of finding of unsafe and unsound banking practices, and conducting special bank examinations. ### FREQUENTLY ASKED QUESTIONS - #### What is the Philippine Deposit Insurance Corporation (PDIC)? - PDIC is a government instrumentality created in 1963 by virtue of Republic Act 3591 to insure the deposits of all banks which are entitled to the benefits of insurance. The latest amendments to RA 3591 are contained in RA 10846 signed into law on May 23, 2016. RA 10846 empowered PDIC with stronger authorities to protect the depositing public and promote financial stability. The new law also includes important provisions to ensure that the PDIC remains financially and institutionally strong to fulfill its mandate under its Charter. - The PDIC now has the authority to help depositors have quicker access to their insured deposits should their bank close; resolve problem banks while still open; hasten the liquidation process for closed banks; and mete out stiffer sanctions and penalties against those who engage in unsafe and unsound banking practices. The PDIC is an attached agency of the Department of Finance. - #### What is PDIC's overall mandate? - PDIC exists to provide deposit insurance coverage for the depositing public to help promote public confidence and stability in the economy. It ensures prompt payment of insured deposits, exercises complementary supervision of banks, adopts responsive resolution methods, and applies efficient management of receivership and liquidation functions. - #### What are the functions of PDIC? - Deposit Insurer - Co-regulator of Banks - Receiver and Liquidator of Closed Bank - #### What is PDIC's maximum deposit insurance coverage? - Effective June 1, 2009, the maximum deposit insurance coverage is P500,000 per depositor. All deposit accounts by a depositor in a closed bank maintained in the same right and capacity shall be added together. - Under R.A. No. 9576, the PDIC may proposed to adjust the MDIC, subject to the approval of the President of the Philippines, in case of a condition that threatens the monetary and financial stability of the banking system that may have systematic consequences. - #### What is an insured deposit? - The term 'insured deposit' means the amount due to any bona fide depositor for legitimate deposits in an insured bank net of any obligation of the depositor to the insured bank as of date of closure, but not to exceed P500,000.00. - A joint account shall be insured separately from any individually-owned deposit account. - R.A. No. 9576 stipulates that PDIC will not pay deposit insurance for the following accounts or transactions: - Investment products such as bonds, securities and trust accounts; - Deposit accounts which are unfunded, fictitious or fraudulent; - Deposit products constituting or emanating from unsafe and unsound banking practices; - Deposits that are determined to be proceeds of an unlawful activity as defined under the Anti-Money Laundering Law. - #### Are all banks members of PDIC? - [Membership of banks to PDIC is mandatory; hence, all operating banks are members of PDIC.] - #### What types of deposits are insured by PDIC? - Except for the exclusions stipulated in RA 9576, deposits of all commercial banks, savings and mortgage banks, rural banks, private development banks, cooperative banks, savings and loan associations, as well as branches and agencies in the Philippines of foreign banks and all other corporations authorized to perform banking functions in the Philippines, are insured with PDIC. As for Philippine banks with branches outside the country, RA 9576 stipulates that subject to the approval of the Board of Directors, any insured bank with branch outside the Philippines may elect to include for insurance its deposit obligations payable at such branch. - Foreign currency deposits are also insured by PDIC pursuant to RA 6426 ("An act instituting a foreign currency deposit system in the Philippines, and for other purposes") and Central Bank (CB) Circular No. 1389. Depositors may receive payment in the same currency in which the insured deposit is denominated. - Exclusions from deposit insurance coverage as stipulated in R.A. No. 9576: - Investment products such as bonds, securities and trust accounts; - Deposit accounts which are unfunded, fictitious or fraudulent; - Deposit products constituting or emanating from unsafe and unsound banking practices; - Deposits that are determined to be proceeds of an unlawful activity as defined under the Anti-Money Laundering Law. - #### Are deposits maintained in branches and subsidiaries of foreign banks operating in the Philippines insured by the PDIC? - Yes, the PDIC Charter provides that the deposits in branches and subsidiaries of foreign banks licensed by the Bangko Sentral ng Pilipinas (BSP) to perform banking functions in the Philippines are insured by the PDIC. - #### Are deposits maintained in the Philippine banks with branches outside the Philippines insured by the PDIC? - The PDIC Charter provides that a Philippine bank may elect to insure with the PDIC its deposits in branches outside the Philippines. As of 31 December 2012, no Philippine bank has elected to insure deposits in their foreign branches with PDIC. - To verify if your deposits in a branch of a Philippine bank outside the Philippines are covered by deposit insurance in the host foreign country, please inquire with the account officer of your branch. - #### What specific risks to a bank does PDIC cover? - PDIC covers only the risk of a bank closure ordered by the Monetary Board. Thus, bank losses due to theft, fire, closure by reason of strike or existence of public disorder, revolution or civil war, are not covered by PDIC. - #### Shall the depositor pay any insurance premium to PDIC? - No. Insurance premium is paid by the banks, not by the depositors. The bank is assessed 1/5 of 1% per annum of the assessment base of the bank. - #### How is insurance coverage determined? - In determining the insured amount, the outstanding balance of each account is adjusted, such that interests are updated, withholding taxes are deducted, accounts maintained by a depositor in the same right and capacity are added together; and whenever applicable, unpaid loans and other obligations of the depositor are deducted; and in no case shall insured deposit exceed P500,000. - R.A. No. 9576 stipulates that PDIC will not pay deposit insurance for the following accounts or transactions: - Investment products such as bonds, securities and trust accounts; - Deposit accounts which are unfunded, fictitious or fraudulent; - Deposit products constituting or emanating from unsafe and unsound banking practices; - Deposits that are determined to be proceeds of an unlawful activity as defined under the Anti-Money Laundering Law. - #### Can PDIC insurance coverage be increased by having several accounts in the same name in an insured bank? - No. Deposit insurance coverage is not determined on a per-account basis. The type of account (whether checking, savings, time or other form of deposit) has no bearing on the amount of insurance coverage. - #### If I have deposits in several different insured banks, will my deposits be added together for insurance purposes? - No. Deposits in different banking institutions are insured separately. However, if a bank has one or more branches, the main office and all branch offices are - #### Is there a need for a depositor to file his claim for insured deposit with PDIC? - Yes. Depositors will be advised through the national and/or local media and posters at the premises of the closed insured bank and other public places within the locality on the schedule of distribution of claim forms by PDIC, receiving of claim forms by PDIC, and the prescriptive date of filing claims by the depositors. - #### When should the depositor of a closed insured bank file his claim with PDIC? - The depositor of the closed insured bank has 24 months from date of bank takeover to file his deposit insurance claim. - #### What happens when the depositor of a closed bank fails to file his claim within the 24-month period? - All rights of the depositor with respect to the insured deposit shall no longer be honored. But he may still make a claim against the assets of the closed bank. - #### How long does it take PDIC to settle a claim for insured deposit? - PDIC aims to pay valid claims as soon as possible. Prior to payout, claims are examined thoroughly. This is to protect the Deposit Insurance Fund (DIF) which is the source of insurance payments. Sometimes, depositors mistakenly assume that the payouts are sourced from their deposits. This is not the case. The payouts are from PDIC's own funds. - The claim for insured deposit should be settled within six (6) months from the date of filing provided all requirements are met but the claim must be filed within twenty- four (24) months after bank takeover. The six-month period shall not apply if the documents of the claimant are incomplete or if the validity of the claim requires the resolution of issues of facts and law by another office, body or agency, independently or in coordination with PDIC. - #### What processes are involved before PDIC starts servicing claims? - Deposit records are subjected to an examination prior to the start of servicing/settlement of claims. Claims are evaluated and processed according to PDIC's standard procedures. - #### How long does the pre-settlement examination take? - The length of time needed for the pre-settlement examination of deposit liabilities of a closed insured bank largely depends on the completeness and accuracy of records turned over by the Bank of PDIC and the number of deposit accounts to be examined. - #### If the deposit account in a closed bank is more than P500,000.00, what happens to the excess of the maximum amount of insured deposit? - The claim for the uninsured portion of the deposit is a claim against the assets of the closed bank. - The claim may be filed with the Liquidator of the closed bank within sixty (60) days from publication of notice of closure. However, payment of said claim will depend ### OBJECTIVES: 1. Classify insurance companies based on their functions 2. Discuss the functions and products/services of insurance companies ### LECTURE: - A [life insurance policy] is *[a contract with an insurance company. In exchange for premiums (payments), the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries in the event of the insured\'s death.]* ### NON-LIFE INSURANCE - *[It is basically an insurance policy to protect an individual against losses and damages other than those covered by Life insurance.]* #### Coverage: - The coverage period for most non-life insurance policies and plans is usually one year, whereby premiums are normally paid on a one time basis. The risks that are covered by non-life insurance is property loss (stolen car or burnt house), liability arising from damage caused by an individual to a third party, accidental death - or injury ### FUNCTIONS OF INSURANCE ### #### *[Primary Functions:]* - **Insurance provides certainly:** - #### Insurance provides protection: - #### Risk-Sharing: #### *[Secondary Functions:]* 1. **Prevention of Loss -** The insurance joins hands with those institutions which are engaged in preventing the losses of the society. 2. **Improves Efficiency -** The insurance eliminates worries and miseries of losses at death and destruction of property. 3. **It helps Economic Progress -** By protecting the society from huge losses of damage, destruction and death, provides an opportunity to develop to those larger industries which have more risks in their setting up. ### ### ### ### ### ### ### BANCASSURANCE ### - The [partnership or relationship between a bank and an insurance company whereby the insurance company uses the bank sales channel in order to sell insurance products.] - Also known as [ *cross-selling*], is defined as the presentation and sale to bank customers by an insurance company of its insurance products within the premises of the head office of such banks duly licensed by the Bangko Sentral ng Pilipinas (BSP or Philippine Central Bank) #### Amended Insurance Code of the Philippines Institutionalizes Bancassurance On 15 August 2013, the President of the Philippines signed into law Republic Act No. 10607 or the revised Insurance Code of the Philippines (***[RA 10607]***). *[RA 10607, which amends the 38-year- old Insurance Code under Presidential Decree No. 612, seeks to strengthen the Philippine insurance industry and re-align Philippine law with global developments in the insurance sector.]* ### IMPACT ON THE INSURANCE SECTOR - All financial institutions supervised by the Insurance Commission (**IC**), including insurers/insurance companies, agents, and brokers (collectively, the **Supervised Entities**), are subject to the new provisions of RA 10607, including those relating to bancassurance. - At present, the BSP for its part is revising its cross-selling regulations applicable to banks. Proposed amendments to current BSP regulations are expected to grant authority to commercial and thrift banks to engage in cross-selling, in addition to universal banks and expanded commercial banks which were presently allowed under BSP rules. ### NEW BANCASSURANCE PROVISIONS - To engage in a bancassurance arrangement, a bank is not required anymore to have equity ownership of the insurance company. - All bancassurance products, whether life or non-life, are required to be issued or delivered in the form previously approved by the Insurance Commission. - Personnel tasked to present and sell insurance products within the bank premises must be duly licensed by the Insurance Commission. Such personnel will also be subject to the rules and regulations of RA 10607 to be promulgated by the Insurance Commission and the BSP. ### COMPLIANCE: - Review carefully and more in-depth the bacnassurance provisions of RA 10607 and further IC regulations/issuances to be issued on the matter; - Consider the new bancassurance provisions, review and reconsider their current policies and practices applicable to cross-selling, in order to comply with the recent law; - Possibly liaise with relevant IC personnel (in particular, the Regulation, Enforcement and Prosecution Division) to ensure that their policies/practices meet internal rules, policies, and practices of the IC; and - Monitor the progress and eventual issuance of the rules and regulations to be promulgated by the Insurance Commission and the BSP, specifically with respect to bancassurance, to ensure timely and effective compliance. ### NEW RULES OF BANCASSURANCE - Under the said Rules, the selling of insurance products, including variable life insurance products, within the premises of a bank is only allowed after the Insurance Commission (IC) has approved the bancassurance agreement entered into by and between the insurance company and the bank - In order to differentiate insurance products from bank products, the regulation requires that the portion of the bank premises where bancassurance activities are conducted must be distinct and clearly marked off against areas where bank products are sold. - The regulator also said: "The IC will not require bank employees to obtain a licence as an insurance agent as such task is merely incidental to their duties as bank employees." ### INSURANCE COMMISSION ### MISSION ### VISION ### ORGANIZATIONAL STRUCTURE - To promote growth and financial stability of insurance companies - To professionalize insurance services and develop insurance consciousness among the general populace - To establish a sound national insurance market, and - To safeguard the rights and interest of the insuring people. #### Types of Insurers in Philippines 1. **Government** #### Private - #### Proprietary Insurers - #### Cooperative Insures #### Definition and Kinds of Insurance #### #### Life Insurance - A policy of life insurance is not a mere contract of indemnity, but is a contract to pay the beneficiary a certain sun of money in the event of death, provided certain conditions are performed by the insured. #### Non-Life Insurance - **Three (3) main classification** - Property Insurance - Marine Insurance - Casualty Insurance #### Property Insurance - Provide protection against more risks to property such as the special perils of earthquake, flood, typhoon, riot and strike, falling aircraft, and impact of vehicles are written usually in conjunction which fire coverage. #### Marine Insurance - This includes cargo, hull freight, and liability of the ship owner to the crew, passengers, or property of the third parties. Inland marine, covering shipment of goods by trucks, railways, or ferry, is included in this classification. #### Motor Insurance - Any kind of insurance pertaining to the ownership, maintenance, or use of motor vehicle may be referred to, in general, as Automobile Insurance. It also refers to insurance on auto home, ### OTHER INSURANCES #### Personal Accident Insurance - A particular type of insurance which provides benefits/indemnity in case of losses to the person or physical well-being of an insured, individual arising out of accident. #### Direct Losses - Accidental loss of life or death which results out of injuries sustained by the individual and accidental loss sight or eyes. #### Indirect Loss - The individual may be disabled for some time, either totally or partially. He could be confined in the hospital or bed-ridden at the house in which case he is unable to engage in his usual means of livelihood. #### Health Insurance - A type of insurance coverage that pays for medical and surgical expenses that are incurred by the insured. Health insurance can either reimbursed the insured for expenses incurred from illness or injury or pay the care provider directly. Often included in employer benefit packages as a means of enticing quality employees. ### FOR THIS WEEK'S LESSON, STUDENTS ARE REQUIRED TO: #### Answer the following questions: 1. Identify the top 10 Insurance Company in the Philippines 2. How do each insurance company determine their insurance premium? 3. Identify 1 function of Insurance and explain how it is being applied to every company. #### Exercise \# 5 1. Identify the different types of Insurer in the Philippines. 2. What are the different kinds of insurance in the Philippines? Give examples ### OBJECTIVES: 1. Differentiate types of investment companies 2. Discuss the functions and products/services of investment companies ### LECTURE: #### What is Investment? #### Needs of Investment - Earn return on your idle resources - Generate a specified sum of money for specific goal in life - Make a provision for an uncertain future ### INFLATION ### RETURN #### Inflation v/s Return -- -- -- -- -- -- - Invest early - Invest regularly - Invest for long term and not short term #### Important Steps to Investing 1. Obtain written documents explaining the investment 2. Read and understand such documents 3. Verify the legitimacy of the investment 4. Find out the costs and benefits associated with the investment 5. Assess the risk-return profile of the investment 6. Know the liquidity and safety aspects of the investment 7. Ascertain if it is appropriate for your specific goals 8. Compare these details with other investment opportunities available 9. Examine if it fits in with other investments you are considering or you have already made 10. Deal only through an authorized intermediary 11. Seek all clarifications about the intermediary and the investment 12. Explore the options available to you if something were to go wrong, and then, if satisfied, make the investment #### Interest #### Factors determine Interest Rate - Demand for money - Level of government borrowings - Supply of money - Inflation rate - RBI & Government policies which determine some of the variable mentioned above #### Options for Investment #### #### Physical assets - *[Real Estate, Gold/Jewelry, Commodities]* #### Financial Assets - *[Fixed Deposit, Small Saving Instruments, Mutual Fund, Pension Fund and Securities Market Instruments]* #### Short-Term Financial Option Investment - *[Saving Bank Account]* - *[Fixed Deposits]* - *[Money Market or Liquid Funds]* #### Saving Bank Account #### Fixed Deposits with Banks 1. Referred to as term deposits 2. Minimum investment period for bank FDs is 30 days 3. FDs with bank are for investor with low risk appetite 4. FDs is lower than money market fund #### Money Market/Liquid Funds - Specialized form of mutual funds that invest in extremely short -- term. Primarily protecting your capital and then, aim to maximize returns. Money market funds usually yield better than saving accounts, but lower than bank fixed deposits. #### Long-Term Financial Investment - Post Office Saving Scheme - Company Fixed Deposits - Public Provident Fund - Bonds & Debentures - Mutual Funds #### Post Office Savings - A low risk saving instrument. Provides an interest rate of 8% per annum paid monthly. Minimum amount can be invested is 1000/- Maturity period of 6 years. #### Company Fixed Deposits - These are short-term to medium-term borrowings at fixed rate of interest. Payable monthly, quarterly, semi-annually or annually. Rate of interest varies between 6-9% per annum. Interest received after deduction of taxes. #### Public Provident Fund - A long term savings instrument with a maturity of 15 years. Interest payable at 8% per annum compounded annually. PPF account can be opened through a nationalized bank. #### Bonds - Fixed Income instrument issued for a period of more than one year. Purpose of raising capital. A promise to repay the principal along with a fixed rate of interest on specified date. #### Mutual Fund 1. Operated by an investment company which raises money from the public and invests in a group of assets. 2. Substitute for those who are unable to invest directly in equities or debt because of resource, time or knowledge constraints. 3. Usually long term investment vehicle. ### SHARE - Total equity capital of a company is divided into equal units of small denominations. The holder of such shares are members of the company and have voting rights. - For example, in a company the total equity capital of 2,000,000,000 is divided into 20,000,000 units of 10 each. Each such unit of 10 is called a Share. ### DERIVATIVE - A product whose value is derived from the value of one or more basic variables, called underlying. - Underlying assets can be equity, index, foreign exchange (forex), commodity or any other assets. - Emerged as hedging devices against fluctuations in commodity prices and commodity-linked derivatives remained the sole form of such products for almost three hundred years. ### OBJECTIVES: 1. Discuss the functions and products/services of investment house 2. Discuss the functions and products/services of securities dealers and brokers ### LECTURE: - A stock broker is an intermediary who arranges to buy and sell securities on the behalf of clients (the buyer and the seller). - According to SEBI (Stock Brokers and Sub- Brokers) Regulations, 1992, a stockbroker is member of a stock exchange and requires to hold a certificate of registration from SEBI in order to buy, sell or deal in securities. ### TYPES OF BROKERS #### Full Service Broker - [ **Advisory**] - #### [Discretionary Management] #### Discount Brokers #### Nature of Work - Securities sales representatives - Securities traders - Securities brokers - Securities analysts - Broker firms #### Regulation for brokers 1. Is eligible to be admitted as a member of a stock exchange 2. Has the necessary infrastructure like adequate office space, equipment and manpower to effectively discharge his activities 3. Has past experience in the business of buying, selling or securities 4. Could pay the amount of fees for registration in the prescribed manner #### The persons eligible to become broker are: 1. Individuals; 2. Partnership firms registered under the Indian Partnership Act, 1932; 3. Institutions, including subsidiaries of banks engaged in financial Services; 4. Body corporate including companies as defined in the Companies Act. 1956. -- -- -- -- -- -- -- -- -- -- -- -- - **[Main roles broker perform]** - #### [Broker-Clients function] - **Client Registration Documents** - Co-Contract documents - Know Your Client (KYC) document - Member Constituent Agreement (MCA) document - **Contract note** - **Unique Client Code (UCC) allotment** - **Segregation of Bank Accounts** - **Segregation of DEMAT (Beneficiary) Accounts** - Security - Transaction Cost - Deposit and Withdrawal - Trading Platform - Customer Service - News about market #### Worker ethics for broker - Duty of Fair Dealing - Duty of Best Execution - Customer Confirmation - Restrictions on Insider Trading - Duty of Loyalty - Authorization for Trading - Brokerage commissions - Margin interest charges - Service charges ### OBJECTIVES: 1. Discuss the functions and products/services of pawnshops ### LECTURE: #### PRESIDENTIAL DECREE No. 114 January 29, 1973 a. to issue rules and regulations to implement the provisions contained herein: b. to require from pawnshops reports of condition and such other reports necessary to determine compliance with the provisions of this Decree: c. to exercise visitatorial powers whenever deemed necessary; and d. to impose such administrative sanctions including the imposition of fines for violations of this Decree and regulations issued by the Central Bank in pursuance thereto. ### OBJECTIVES: 1. Discuss the functions and products/services of GSIS and SSS ### LECTURE: #### Government Service Insurance System #### Life Insurance - Enhanced life policy - Life Endowment Policy #### Enhanced Life Policy - The GSIS provides life insurance coverage to you, GSIS member, even the very first day you entered government service after receipt of payment of the 1st monthly premium. #### Life Endowment Policy - As GSIS member, you automatically enjoy life insurance benefits, providing protection for you and your loved ones. If you entered the service prior to August 1, 2003 as, you are entitled to the Life Endowment Policy (LEP). - LEP also provides coverage against death whether due to natural or accidental causes, permanent total disability and other benefits upon maturity or separation from the service. #### Retirement Programs #### Different Retirement Program [Retirement under Republic Act 8291] - Five-year lump sum or cash payment with instant pension-choose your personal reward. #### [Retirement under Republic Act 660] - Also called \"Magic 87\", this option provides both annuity and lifetime pension. #### [Retirement under Republic Act 1616] - Refund your GSIS premiums with this \"take-all\" option at the same time get gratuity payment from your employer. #### [Portability Law (R.A 7699)] - Combine your GSIS and SSS creditable years of service to qualify for retirement for retirement program offered by both pension funds. #### [Retirement under Presidential Act 1146] - Only those who have been in government service after May 31, 1977 but before June 24, 1997 can avail of this retirement program. Retirement under PD 1146 gives you a choice between a Basic Monthly Pension (BMP) and Cash Payment. #### Disability Program #### Employees Compensation - #### Burial - #### Survivorship #### Eligibility Requirements - When a member or pensioner dies, the primary beneficiaries (surviving legal spouse and dependent children) or secondary beneficiaries, as the case may be, shall be entitled to the applicable survivorship benefits. - The primary beneficiaries shall be the following: - The legitimate spouse, until s/he re-marries, or co-habits/engages in common-law relationship; and - The dependent legitimate, legally adopted or legitimated children, including illegitimate children, who have not reached the age of majority, or, have reached the age of majority but incapacitated and incapable of self-support due to a mental or physical defect acquired prior to age of majority - The secondary beneficiaries shall be the dependent parents and, subject to the restrictions on dependent children, the legitimate descendants. #### Documentary Requirements Basic Documents - Application Form - Ombudsman Clearance - Death certificate of member/pensioner issued by the National Statistics Office (NSO) - Last Day of Actual Service; and - Two (2) valid IDs of payees #### If Married - Marriage certificate between the deceased and his/her spouse issued by NSO - Affidavit of Surviving spouse - If spouse is not a GSIS member, Birth Certificate issued by NSO - Birth Certificate/s of minor/incapacitated children issued by NSO - If with minor/incapacitated children, Affidavit of Guardianship - If the legal guardian is not the natural parent, the affidavit should be supported by a Certification from the Barangay and DSWD #### If Single - If with minor/incapacitated children, Affidavit of Guardianship - If the legal guardian is not the natural parent, the affidavit should be supported by a Certification from the Barangay and DSWD; and - If guardian is not a GSIS member, Birth Certificate issued by NSO #### If without primary beneficiary (without Parents; with Siblings) - Birth Certificate of member issued by NSO - Marriage Contract of member\'s parents issued by NSO - Death Certificates of member\'s parents issued by NSO - Birth Certificate of member\'s parents issued by NSO - Affidavit of Surviving Legal Heirs stating among others that affiants are the only surviving legal heirs of the deceased member, their date of birth and relationship to the deceased member and that they are executing the document for the purpose of claiming the benefit from GSIS - Birth Certificate of all the siblings of the deceased member issued by NSO - Marriage Contract of all the female siblings of the deceased member issued by NSO - If with deceased brother or sister, extra judicial settlement among the legal heirs of the deceased brother/ sister of the member designated one payee #### Additional Requirements for Muslim Members - Proof of Surviving legal heirs indicating all the wives and children - If only one (1) spouse is claiming: submit duly notarized affidavit that her husband has no other marriages/wife - Court Order for Guardianship should be issued in the absence of parent for minor children - Application for survivorship must be duly endorsed by the office and a certification indicating the legal spouse/s and children/s of the deceased. #### SSS Benefits #### Coverage #### Benefits Sickness 1. he/she is unable to work due to sickness or injury and is thus confined 2. either in the hospital or at home for at least four days; 3. he/she has paid at least three monthly contributions within the 12month period immediately before the semester of sickness; 4. he/she has used up all current company sick leaves with pay for the current year; and 5. he/she has notified his/her employer. #### Maternity Disability - Complete loss of sight of both eyes; - Loss of two limbs at or above the ankle or wrists; - Permanent complete paralysis of two limbs; - Brain injury causing insanity; and - Other cases as determined and approved by the SSS. Types of disability benefits: 1. The monthly pension which is paid to a disabled member who has paid at least 36 monthly contributions to the SSS; and 2. The lump sum amount which is granted to those who have not paid the required 36 monthly contributions. #### Retirement 1. he/she is 60 years old and unemployed and has paid at least 120 monthly contributions prior to the semester of retirement; 2. he/she is 65 years old, whether employed or not. If employed he/she should have paid 120 monthly contributions prior to the semester of retirement, whether employed or not. 1. the monthly pension; and 2. the lump sum amount. #### Death & Funeral 1. the monthly pension; and 2. the lump sum amount. ### COOP LAWS AND SOCIAL LEGISLATION #### Government Service Insurance System I. **What is GSIS?** #### Purpose of GSIS? #### Membership [Compulsory Membership] 1. An elective official who at the time of election to public office is below 65 years of age and will be 65 years or more at the end of his term of office, including the period/s of his re-election to public office thereafter without interruption. 2. Appointive officials who, before reaching the mandatory age of 65, are appointed to government position by the President of the Republic of the Philippines and shall remain in government service at age beyond 65. #### [Classes of Membership (By Type and By Status)] A. **Type of members:** 1. **Regular Members** -- are those employed by the government of the Republic of the Philippines, national or local, legislative bodies, government-owned and controlled corporations (GOCC) with original charters, government financial institutions (GFIs), except uniformed personnel of the Armed Forces of the Philippines, the Philippine National Police, Bureau of Jail Management and Penology (BJMP) and Bureau of Fire Protection (BFP), who are required by law to remit regular monthly contributions to the GSIS. 2. **Special Members** -- are constitutional commissioners, members of the judiciary, including those with equivalent ranks, who are required by law to remit regular monthly contributions for life insurance policies to the GSIS in order to answer for their life insurance benefits defined under RA 8291. B. #### Status of membership: 3. **Active member** -- refers to a member of the GSIS, whether regular or special, who is still in the government service and together with the government agency to which he belongs, is required to pay the monthly contribution. 4. **Inactive member** -- a member who is separated from the service either by resignation, retirement, disability, dismissal from the service, retrenchment or, who is deemed retired from the service under this Act. #### [Effect of Separation from the Service.] #### Computation of the Amount of Contribution #### For Regular Members -- -- -- -- V. #### Remittance of Contribution to GSIS 3. Each government agency shall remit directly to the GSIS the employees' and government agency's contributions within the first Ten (10) days of the calendar month following the month to which the contributions apply. The remittance by the government agency of the contributions to the GSIS shall take priority over and above the payment of any and all obligations, except salaries and wages of its employees. 4. The government agency shall also deduct from the fixed monthly compensation of the employee the loan amortizations (consolidated loans, policy loan, emergency loan, housing loan, and other loans), premium payments (optional, pre-need and other non-life insurance) and other amounts due the GSIS. 5. The said amounts shall be remitted to the GSIS within the first Ten (10) days of the calendar month following the month when the deductions were effected, accompanied by supporting lists in the form prescribed by the GSIS. 6. The member has the corresponding responsibility to ensure that the required premium contributions and other amounts due the GSIS that were deducted from his compensation are promptly remitted to GSIS. VI. #### Penalty for Late Remittances [For the Agencies] 7. Agency pays not less than two percent (2%) interest per month on unremitted collections computed from the due date and until the time GSIS receives the payments 8. The head of your agency including the finance officer, cashier and other officials who failed to remit to GSIS the loan amortizations will face administrative and criminal charges and if convicted by the court, will be imprisoned from one to five years and be fined with amount ofP10,000.00 to P20,000.00 9. Those convicted for failure to remit loan amortizations will pay the surcharges and interests incurred from the unpaid loans of all the agency's members #### [For the Members] 1. Annual dividend privileges are cancelled 2. All unpaid loans, including interests and surcharges, will be deducted from the proceeds of the loans and the claims that will be due the member especially their retirement claims. #### Benefits Provided under GSIS and Procedures of Claims in It Separation Benefits 10. For members with at least 3 years but less than 15 years of service: 11. For members with at least 15 years of service and less than age 60 upon separation: a. A cash payment equivalent to eighteen (18) times the BMP payable at the time of resignation or separation. b. An old-age pension benefit equal to the BMP, payable monthly for life upon reaching the age of 60. 12. Reckoning Date of Separation of Uniformed PNP, BJMP and BFP Personnel shall be February 1, 1996. The computation of benefit shall be based on their basic monthly salary (premium-based) when they ceased to be members of the GSIS. #### [Processing of Separation Benefit of Members Who Died While Their Claims are] [Being] [Processed] #### Unemployment Benefits 1. If the contributions have been made for a period of 1 year but less than 3 years, the benefit duration is for 2 months. 2. If the contributions have been made for a period of 3 or more years but less than 6 years, the benefit duration is for 3 months. 3. If the contributions have been made for a period of 6 years or more but less than 9 years, the benefit duration is for 4 months. 4. If the contributions have been made for a period of 9 years or more but less than 11 years, the benefit duration is for 5 months. 5. If the contributions have been made for a period of 11 years or more but less than 15 years, the benefit duration is for 6 months. #### Retirement Benefits 1. Five (5) year lump sum equivalent to sixty (60) months of the BMP, subject to qualification requirements, less all outstanding obligations of the member in accordance with the CLIP, plus an old-age pension benefit equal to the BMP payable for life, starting on the first day of the month following the expiration of the five year guaranteed period; 2. A cash payment benefit equivalent to eighteen (18) times of the BMP, subject to qualification requirements, less all outstanding obligations of the member in accordance with the CLIP, plus monthly pension for life payable on the first month following the date of retirement; #### [Processing of Retirement Benefits of Qualified Members Who Died While their Claims are] [Being Processed] a. If the deceased member opted for five year lump sum benefit as indicated in his/her claim for retirement application, his legal heirs shall be entitled to five-year lump sum benefit equivalent to sixty (60) months basic monthly pension (BMP). However, the survivorship pension to qualified primary beneficiaries, if any, shall be granted after the end of the 5-year guaranteed period, but filing of claim for survivorship benefit should be done before the end of the 4-year prescription period. b. If the deceased member opted for immediate pension as indicated in his/her claim for retirement benefit his legal heirs shall be entitled to retirement benefits equivalent to eighteen (18) months of BMP, plus accrued pension, if any, up to the date of death of the retiree. The corresponding survivorship pension shall be paid to the qualified primary beneficiaries, if any, and shall be computed from the date of death of the retiree, subject to filing of claim. c. In case the deceased member failed to indicate in his/her retirement option, it shall be computed as if he/she opted for immediate pension. d. The proceeds of retirement benefits shall be paid and distributed to the legal heirs in accordance with the law on succession under the Civil Code of the Philippines. #### [Effects of Re-Employment] a. the retiree re-entered government service before June 24, 1997; b. the total amount of benefit previously received, if any, including the prescribed interest was refunded to GSIS on or before March 2, 2006 #### [Computation of Total Service and Creditable Service] #### [Computation of Average Monthly Compensation] (AMC) #### [Computation of Revalued Monthly Compensation] #### [Adjustment/Increase in Pension] #### [Policies Affecting Pension Administration] a. There will be suspension of payment of monthly pension b. Non-entitlement to cash gift if status is suspended at the time of declaration c. Non-entitlement to pension increase if status is suspended at the time of declaration #### Disability Benefits #### [Permanent Total Disability (PTD)] a. complete loss of sight for both eyes; b. loss of two limbs at or above the ankle or wrists; c. permanent complete paralysis of two limbs; and d. brain injury resulting in incurable imbecility or insanity. e. such other cases as may be determined and approved by the GSIS a. he/she is in the service at the time of disability; or b. if separated from the service, he has paid at least thirty six (36) months contributions within the five year (5) period immediately preceding his/her disability; or has paid a total of at least one hundred eighty (180) months contributions prior to his/her disability; - he/she is gainfully employed prior to the commencement of disability resulting in loss of income as evidenced by any incontrovertible proof thereof; - he/she is not a registered member of any social insurance institution; and - he/she is not receiving any other pension either from GSIS or another local or foreign institution or organization #### [Permanent Partial Disability (PPD)] a. he/she is in the service at the time of disability; or b. if separated from the service, he has paid at least thirty six (36) months contributions within the five year (5) period immediately preceding his/her disability; or has paid a total of at least one hundred eighty (180) months contributions prior to his/her disability; - he/she is gainfully employed prior to the commencement of disability resulting in loss of income as evidenced by any incontrovertible proof thereof; - he/she is not a registered member of any social insurance institution; - he/she is not receiving any other pension either from GSIS or another local or foreign institution or organization #### [Temporary Total Disability (TTD)] a. he/she is in the service at the time of disability; or b. if separated from the service, he has paid at least thirty six (36) months contributions within the five year (5) period immediately preceding his/her disability; or has paid a total of at least one hundred eighty (180) months contributions prior to his/her disability; - he/she is gainfully employed prior to the commencement of disability resulting in loss of income as evidenced by any incontrovertible proof thereof; - he/she is not a registered member of any social insurance institution; and - he/she is not receiving any other pension either from GSIS or another local or foreign institution or organization a. is re-employed; or b. recovers from his/her disability as determined by the GSIS, whose decision shall be final and binding; or c. fails to present himself for medical examination when required by GSIS; or d. is receiving any other pension either from GSIS or another local or foreign institution or organization. #### [Notice and Filing of Claims and Other Documents Required] a. Name and address of the member; b. His/her agency if in the government or employer if in the private sector; c. Date and nature of sickness or injury; d. Place of confinement; and e. Any other pertinent information that may be required by the GSIS. #### [Periodic Medical Report] #### [Forfeiture of Disability Benefits] a. have himself/herself medically treated by a physician when required by the GSIS; or b. take the prescribed medications ; or c. have himself/herself confined in a hospital without justifiable reason, when such confinement is required by the GSIS; or d. avail himself/herself of such rehabilitation facilities as may be duly recommended by the GSIS and made available for him/her; or e. Observe such precautionary and /or preventive measures as prescribed by a physician or expressly required of him/her to prevent the aggravation or continuance of his/her disability. However, upon compliance with the requirements, his/her benefits shall be resumed if he/she is still qualified. #### Survivorship Benefits 1. **Primary** -- the legitimate spouse, until he/she remarries and the dependent children. In this regard, dependent children shall be the legitimate, legitimated and/or legally adopted child, including any illegitimate child, who is below 18 years of age, unmarried, not gainfully employed, or being more than 18 years of age but incapacitated and incapable of self-support due to mental or physical incapacity acquired prior to age of majority. 2. **Secondary** -- are the dependent parents and legitimate descendants. a. not engaged in any gainful occupation as defined in Sec 2 (p) of RA 8291; b. the surviving spouse and the deceased member were living together as husband and wife; c. not gainfully engaged in a business or economic activity (self- employed); d. employed/engaged in a business or economic activity but receiving income less than the minimum compensation of government employees. e. not receiving any other pension from the GSIS or another local or foreign institution or organization; and f. In the case of the dependent spouse, payment of the basic survivorship pension shall discontinue when he remarries, cohabits, or engages in common-law relationship. 1. Survivorship pension consisting of: a. the basic survivorship pension which is fifty percent (50%) of the BMP; and b. the dependent children's pension equivalent to 10% of the BMP for each child but not to exceed fifty percent (50%) of the BMP. 2. Cash payment equivalent to eighteen (18) months BMP; 3. Cash payment equivalent to one hundred percent (100%) of the AMC for every year of service with paid contributions but not less than Twelve Thousand Pesos (P12,000.00). c. his primary beneficiaries shall receive the survivorship pension and cash payment equivalent to 18 x the BMP; or d. in the absence of primary beneficiaries, his secondary beneficiaries shall receive the cash payment equivalent to 18 x the BMP; or e. in the absence of secondary beneficiaries, the legal heirs shall receive the cash payment equivalent to 18 x the BMP. a. Who have at least 15 years of creditable service shall receive the survivorship pension only. b. Who have at least 3 years but less than 15 years of creditable service and were less than 60 years old at the time of death shall receive the cash payment equivalent to 100% of the AMC for every year of creditable service, but not less than P12,000.00. c. Who have less than 15 years of creditable service but were at least 60 years old at the time of separation and have received the corresponding separation benefit, shall not be entitled to survivorship benefits. However, if the member has not received yet his separation benefit within four years after his/her separation, the primary beneficiaries shall receive the cash benefit equivalent to 100% of the inactive member's AMC for every year of creditable service, but not less than P12,000.00. a. When the dependent spouse is the only survivor, he shall receive the basic survivorship pension; b. When only the dependent children are the survivors, they shall be entitled only to the dependent children's pension equivalent to 10% of the BMP for every dependent child, not exceeding five (5), counted from the youngest and without substitution; c. When the survivors are the dependent spouse and the dependent children, the dependent spouse shall receive the basic survivorship pension for life or until he remarries or cohabits, and the dependent children shall receive the dependent children's pension. d. When the dependent spouse and dependent children are already receiving the basic survivorship pension and dependent children's pension, respectively, any subsequent death, emancipation or disqualification of any one of them shall not entitle the other beneficiaries to the forfeited share. e. In the absence of a natural guardian, the guardian de facto of dependent children, as well as the physically or mentally incapacitated dependent children, must file a Petition for Guardianship to be able to claim the survivorship benefits on behalf of the dependent children. f. When the pensioner dies within the 5-year period after receiving the five-year lump sum, the survivorship pension shall be paid only after the end of the said five-year period. However, filing of claim for survivorship benefit should be done before the end of the 4-year prescription period. #### Funeral Benefits 1. Legitimate spouse 2. Legitimate child who spent for the funeral services, or 3. any other person who can show unquestionable proof of his having borne the funeral expenses of the deceased. 1. Active member or 2. A member who has been separated from the service but who is entitled to future separation or retirement benefit; or 3. A member who is an old age pensioner or 4. A retiree who at the time of his retirement was of pensionable age under RA 8291 but who opted to retire under RA 1616; or 5. A member who retired under RA 1616 prior to the effectivity of RA 8291 with at least 20 years of service, regardless of age 1. Original copy of Death Certificate of the member from NSO. 2. Original copy of Marriage Contract from NSO 3. Two valid ID (original to be shown, photocopy to be submitted) 4. Original copy of NSO certified Birth Certificate of the claimant (if there will be claims for death and survivorship benefits). If not registered, may apply for late registration. 1. Original copy of Death Certificate of the member from NSO. 2. GSIS Affidavit of Funeral Expense Form 3. Original & Xerox copy of Official Receipt under the claimant's name or if a Funeral Plan was used, a Certification from the memorial service provider that the plan was availed of. 4. Two valid ID's (original to be shown, photocopy to be submitted) 5. Birth certificate of the claimant or valid ID (issued by the government) indicating his/her date of birth. #### Life Insurance Benefits 1. Maturity benefits, which is the face amount payable to the member upon maturity of the policy. 2. Cash Surrender Value, which are earned values during the term of the insurance payable to the member when he is separated from the service before maturity date of the policy or when he is considered as a case of PTD. 3. Permanent Total Disability 4. Death Benefit, which is the face value of the policy payable to designated beneficiary/beneficiaries or legal heirs, in the absence of the former, upon the death of a member. 5. Accidental Death Benefit (ADB) is an additional benefit equivalent to the amount of Death Benefit when the member dies by accident. In this connection, proof must be presented to sufficiently establish that the cause of the member's death is accidental. The right to present sufficient proof to show that death was accidental shall prescribe if the claim for ADB is filed four 6. Sickness Income Benefit is a purely employer-based contribution benefit. Sickness must be listed /considered an \"occupational disease\"; or even if not listed as one, it must be shown that the risk of contracting the sickness is increased by the working conditions. List of Occupational Diseases (under PD626) 7. Annual Dividend, a policyholder is entitled to dividends subject to the guidelines as approved by the GSIS Board. This is not a guaranteed benefit. #### Type 2. Enhanced Endowment Policy (ELP) =Compulsory 1. Termination Value, the policy earns a Termination Value during the life of the policy computed from the percentage of life insurance premiums actually remitted and paid to GSIS. 2. Death Benefit equivalent to the latest annual salary multiplied by amount of insurance (AOI) factor which is 1.5 or 18 times the current monthly salary of the member or as determined by the GSIS, payable to the legal heirs, less all outstanding obligations of the member in accordance with the CLIP. 3. Annual Dividend, a policyholder is entitled to dividends subject to the guidelines as approved by the GSIS Board. This is not a guaranteed benefit. #### Type 3. Policy Loan = Optional #### Personal Insurance #### [Home Shield Fire Insurance] 1. Transfer of Certificate of Title (TCT), and/ or Tax Declaration or a copy of the Articles of Incorporation for corporate properties 2. Birth certificates and marriage contracts as proof of relationship for the extended and immediate family of active members #### [Auto Shield Car Insurance] 1. Duly accomplished Auto Shield Application Form 2. Photocopy of Certificate of Registration (CR) 3. Latest Official Receipt (OR) from LTO 4. Photocopy of previous motor vehicle policy insurance 5. Retiree number for retired employee and pensioner 6. Copy of Bank Financing for Mortgaged Unit 7. Photocopy of Sales Invoice 8. Any documentary proof of relationship with active GSIS member #### Service Loans #### [[Consolidated Loan]](http://www.gsis.gov.ph/default.php?id=46) -- -- -- -- #### Ancillary Benefits #### [Christmas Cash Gift for Pensioners] #### [Cash Benefits] #### [Loan Privileges] #### [Exemption from Tax]