Recomputation of Retirement Benefits: Step Increments and Special Allowances for Retired Justices

The Supreme Court, in a 2008 En Banc Resolution, granted the request of retired Chief Justice Andres R. Narvasa for the recomputation of his retirement benefits. The ruling clarifies important principles on what components should be included in the base salary for computing the pensions of justices and judges, specifically addressing step increments and special allowances.

Background of the Case

Chief Justice Narvasa served as Chief Justice from December 8, 1991 to November 29, 1998. After receiving his accumulated monthly pensions and special allowances, he requested a recomputation of his retirement benefits. He claimed that his Basic Monthly Salary (BMS) should have included step increments he had earned under the Salary Standardization Law (Republic Act No. 6758), which would have placed him at Salary Grade 32, Step 3, rather than Step 1.

The Fiscal Management and Budget Office (FMBO) initially computed his pension based on the lower salary grade. The retired Chief Justice also pointed out discrepancies in the computation of his terminal leave pay, specifically regarding the inclusion of certain allowances.

The Issue of Step Increments

The Court addressed whether step increments earned by a justice should form part of the basic salary base for computing retirement benefits. Under the Salary Standardization Law and the implementing rules issued jointly by the Department of Budget and Management and the Civil Service Commission, step increments are granted based on merit and length of service, with one step increment given for every three years of continuous satisfactory service in a position.

The Court had previously issued resolutions in 2000 and 2002 establishing the formula for computing step increments. While these resolutions provided that step increments accruing from January 1, 1990 until January 1, 1999 would only be paid starting from the latter date, with no back pay for the earlier period, the Court clarified that this did not mean the earned step increments were forfeited entirely. Rather, the January 1, 1999 date was merely the reckoning point for payment, not a bar to recognizing the increments as part of the salary base.

The Court emphasized that step increments already earned should form part of the BMS of a government official at the time of compulsory retirement for purposes of computing retirement gratuity and monthly pension.

Inclusion of Special Allowances

The Court also addressed the inclusion of the Personnel Emergency Relief Allowance (PERA) and additional compensation (ADCOM) in the computation of terminal leave pay. Citing its earlier ruling in Borromeo v. Civil Service Commission, the Court held that these allowances are part of the compensation of government employees, including members of the judiciary, and should be included in computing retirement benefits and terminal leave pay.

The Court further discussed the Special Allowance for the Judiciary (SAJ) under Republic Act No. 9227. The Court had previously clarified that the BMS under this law includes step increments and longevity pay. Additionally, when a subsequent salary increase is implemented, the special allowance equivalent to that increase shall be converted as part of the basic salary.

The Ruling

The Court granted the request for recomputation and directed the FMBO to:

1. Pay the deficiency in the monetary value of the retired Chief Justice's terminal leave pay;
2. Pay the deficiency in his accumulated monthly pensions resulting from the inclusion of step increments he had earned during his service; and
3. Adjust his monthly pension, including the SAJ component, to reflect the 10% salary increase authorized under Executive Order No. 611, with a corresponding deduction from the SAJ component.

Practical Takeaways

• Step increments earned through length of service form part of the basic monthly salary base for computing retirement benefits, even if payment of the increments was deferred.
• Special allowances such as PERA and ADCOM are included in computing terminal leave pay and retirement benefits of justices and judges.
• When salary increases are implemented, special allowances equivalent to the increase are converted into part of the basic salary, which then becomes the basis for computing retirement pensions.
• Retirement laws are interpreted liberally in favor of the retiree.
• Justices and judges who served before the 1999 reckoning date for step increment payments may still have those increments credited to their salary base for retirement purposes.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.