I

Whether or not petitioners/appellants GSIS and GSIS Board of Trustees have the power and authority to
design and adopt the questioned GSIS Retirement Financial Plan.

II

Whether or not petitioners/appellant GSIS officials who are merely implementing the GSIS Act of 1997
and duly adopted Board Resolutions must be held responsible and accountable for the implementation
of the GSIS Retirement Financial Plan.

III

Whether or not the adoption of the GSIS Retirement Financial Plan violated Section 28 (b) of CA No. 186
as amended by Republic Act No. 4968, and Section 41(n) of Republic Act No. 8291, otherwise known as
the GSIS Act of 1997.

IV

Whether or not the COA disallowance of the GSIS Retirement Financial Plan is lawful, and the CAO I
Decision No. 2002-009 and the Notices of Disallowance issued by GSIS Corporate Auditor Dimagiba are
proper.34

On March 18, 2003, COA issued Decision No. 2003-062,35 wherein the issue was narrowed down to
"whether or not the GSIS Board can reward themselves with unusually large benefits in the face of an
unusually large actuarial deficit which will result in the denial of benefits of future retirees in other
government agencies for whom the fund is principally intended."36

COA zeroed in on the fact that to be entitled to the GSIS RFP, the employee "must be qualified to retire
with 5-year lump sum under R.A. No. 660 or R.A. No. 8291 or [must have] previously retired under the
applicable retirement laws."37 They affirmed Escarda’s ruling and contended that what the "still
valid"38 Teves Retirement Law permits is the creation of an early retirement or financial assistance plan,
and the above requirement imposed under the GSIS RFP does not apply to either plans. COA added:
Unmistakably, the Plan being a supplementary pension/retirement plan, it contravenes the Teves law.
Not even the renaming of [the] Employees Loyalty Incentive Plan (ELIP) to Retirement Financial Plan
(RFP), purportedly to conform with the wording of the law, could conceal its true nature or character as
a supplementary pension/retirement plan which incorporates the best features of R.A. Nos. 660 and
8291, creating in effect a third retirement plan for GSIS personnel only. This is all the more made
manifest by the fact that even Board members who are not qualified at all to retire under any existing
retirement laws could retire under the RFP. Strikingly, by promulgating another regular retirement
scheme, the GSIS Board enlarged the field of its authority and regulation as provided in the statute it is
supposed to administer.39

COA said that the power of GSIS in applying the law must not be abused. COA averred that GSIS was
found to be deficient actuarially by Fifteen Billion Pesos, and for it to reward its employees, who were
already enjoying salaries higher than their counterparts in other government agencies, meant that it
would have to dip into its principal fund to the prejudice of its members, who were the very raison
d’etre for its establishment.40

Addressing petitioners’ claim of discrimination, COA said that each of the government agencies that had
adopted its own retirement plans did so pursuant to a valid law and under factual circumstances that
were not present in the case of GSIS. COA also affirmed the liability of the petitioners who were held
accountable under the disallowances as they had failed to exercise the diligence of a good father of a
family in the performance of their functions.41 Finally, COA averred that while its general counsel’s
opinion boosted its position, such was not the basis of the disallowance.42

The petitioners sought reconsideration43 of this decision and even asked to be heard in oral
arguments,44 but COA, in its Decision No. 2004-004 dated January 27, 2004,45 denied both motions and
affirmed its Decision No. 2003-062 dated March 18, 2003 with finality.

The petitioners are now before us, asking us to nullify COA’s March 18, 2003 and January 27, 2004
decisions, on the ground that they were made with grave abuse of discretion amounting to lack or
excess of jurisdiction.46

The petitioners posit the following arguments to support their cause:

RESPONDENTS ACTED WITHOUT OR IN EXCESS OF JURISDICTION, OR WITH GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION, WHEN IN THE FOLLOWING
MANNER:
I

Respondents sought to interpret clear provisions of Republic Act No. 8291, otherwise known as the GSIS
Act of 1997, and declare null and void duly adopted resolutions of petitioner GSIS which has the power
and authority to design and adopt the questioned GSIS Retirement Financial Plan (RFP).

II

Respondents ruled that petitioners GSIS officials who are merely implementing the GSIS Act of 1997 and
duly adopted Board Resolutions could be held responsible and accountable for the implementation of
the GSIS Retirement Financial Plan (RFP).

III

Respondents held that the adoption of the GSIS Retirement Financial Plan (RFP) violated Section 28 (b)
of CA No. 186, as amended by Republic Act No. 4968, and Section 41(n) of Republic Act No. 8291,
otherwise known as the GSIS Act of 1997.

IV

Respondent[s] disallowed the GSIS Retirement Financial Plan (RFP), and erroneously affirmed the
Notices of Disallowance issued by then GSIS Corporate Auditor Dimagiba.

Respondents touched on new and irrelevant matters which were not raised in the disallowances and/or
pleadings below, and which were never validated.47

The crux of the present case boils down to the legality of Board Resolution Nos. 360, 326, and 6, which
we shall refer to simply as "the GSIS RFP," in light of Republic Act No. 8291 or the GSIS Act of 1997, and
Commonwealth Act No. 186 or the Government Service Insurance Act as amended by Republic Act No.
4968 (the Teves Retirement Law).
Below are the pertinent provisions of the foregoing laws:

Republic Act No. 8291

SECTION 41. Powers and Functions of the GSIS. — The GSIS shall exercise the following powers and
functions:

xxxx

(n) to design and adopt an Early Retirement Incentive Plan (ERIP) and/or financial assistance for the
purpose of retirement for its own personnel; x x x.

Commonwealth Act No. 186 as amended by the Teves Retirement Law:

SEC. 28. Miscellaneous Provisions – x x x

(b) Hereafter no insurance or retirement plan for officers or employees shall be created by any
employer. All supplementary retirement or pension plans heretofore in force in any government office,
agency, or instrumentality or corporation owned or controlled by the government, are hereby declared
inoperative or abolished. x x x. 48

Republic Act No. 4968 or the

Teves Retirement Law

Is Still Good Law

The petitioners insist that under Section 3 of Republic Act No. 8291, which provides that "all laws or any
law or parts of law specifically inconsistent herewith are hereby repealed or modified accordingly," all
provisions of the Teves Retirement Law that are inconsistent with Republic Act No. 8291 are deemed
repealed or modified.49

We do not subscribe to petitioner’s interpretation of this law. This is because, unless the intention to
revoke is clear and manifest, the abrogation or repeal of a law cannot be assumed.50 The repealing
clause contained in Republic Act No. 8291 is not an express repealing clause because it fails to identify
or designate the statutes that are intended to be repealed. It is actually a clause, which predicated the
intended repeal upon the condition that a substantial conflict must be found in existing and prior
laws.51

Since Republic Act No. 8291 made no express repeal or abrogation of the provisions of Commonwealth
Act No. 186 as amended by the Teves Retirement Law, the reliance of the petitioners on its general
repealing clause is erroneous. The failure to add a specific repealing clause in Republic Act No. 8291
indicates that the intent was not to repeal any existing law, unless an irreconcilable inconsistency and
repugnancy exists in the terms of the new and old laws.52

We are likewise not convinced by petitioners’ claim of repeal by implication. It is a well-settled rule that
to bring about an implied repeal, the two laws must be absolutely incompatible and clearly repugnant
that the later law cannot exist without nullifying the prior law.53 As this Court held in Recaña, Jr. v.
Court of Appeals54:

Repeal of laws should be made clear and expressed. Repeals by implication are not favored as laws are
presumed to be passed with deliberation and full knowledge of all laws existing on the subject. Such
repeals are not favored for a law cannot be deemed repealed unless it is clearly manifest that the
legislature so intended it. x x x.55

This Court sees no incompatibility between the two laws being discussed here. In reconciling Section
41(n) of Republic Act No. 8291 with the Teves Retirement Law, we are guided by this Court’s
pronouncement in Philippine International Trading Corporation v. Commission on Audit56:

In reconciling Section 6 of Executive Order No. 756 with Section 28, Subsection (b) of Commonwealth
Act No. 186, as amended, uppermost in the mind of the Court is the fact that the best method of
interpretation is that which makes laws consistent with other laws which are to be harmonized rather
than having one considered repealed in favor of the other. Time and again, it has been held that every
statute must be so interpreted and brought in accord with other laws as to form a uniform system of
jurisprudence — interpretere et concordare legibus est optimus interpretendi. Thus, if diverse statutes
relate to the same thing, they ought to be taken into consideration in construing any one of them, as it is
an established rule of law that all acts in pari materia are to be taken together, as if they were one law. x
x x.57

While Republic Act No. 8291 speaks of an early retirement incentive plan or financial assistance for the
GSIS employees, Commonwealth Act No. 186 as amended by the Teves Retirement Law talks about
insurance or retirement plans other than our existing retirement laws. In other words, what the Teves
Retirement Law contemplates and prohibits are separate retirement or insurance plans. In fact, the very
same provision declared inoperative or abolished all supplementary retirement or pension plans.

The GSIS Retirement/Financial

Plan is Null and Void

It is true that under Section 41(n) of Republic Act No. 8291, GSIS is expressly granted the power to adopt
a retirement plan and/or financial assistance for its employees, but a closer look at the provision readily
shows that this power is not absolute. It is qualified by the words "early," "incentive," and "for the
purpose of retirement." The retirement plan must be an early retirement incentive plan and such early
retirement incentive plan or financial assistance must be for the purpose of retirement.

According to Webster’s Third New International Dictionary, "early" means "occurring before the
expected or usual time," while "incentive" means "serving to encourage, rouse, or move to action," or
"something that constitutes a motive or spur."58

It is clear from the foregoing that Section 41(n) of Republic Act No. 8291 contemplates a situation
wherein GSIS, due to a reorganization, a streamlining of its organization, or some other circumstance,
which calls for the termination of some of its employees, must design a plan to encourage, induce, or
motivate these employees, who are not yet qualified for either optional or compulsory retirement under
our laws, to instead voluntarily retire. This is the very reason why under the law, the retirement plan to
be adopted is in reality an incentive scheme to encourage the employees to retire before their
retirement age.

The above interpretation applies equally to the phrase "financial assistance," which, contrary to the
petitioners’ assertion, should not be read independently of the purpose of an early retirement incentive
plan. Under the doctrine of noscitur a sociis, the construction of a particular word or phrase, which is in
itself ambiguous, or is equally susceptible of various meanings, may be made clear and specific by
considering the company of words in which it is found or with which it is associated. In other words, the
obscurity or doubt of the word or phrase may be reviewed by reference to associated words.59 Thus,
the phrase "financial assistance," in light of the preceding words with which it is associated, should also
be construed as an incentive scheme to induce employees to retire early or as an assistance plan to be
given to employees retiring earlier than their retirement age.

Such is not the case with the GSIS RFP. Its very objective, "[t]o motivate and reward employees for
meritorious, faithful, and satisfactory service,"60 contradicts the nature of an early retirement incentive
plan, or a financial assistance plan, which involves a substantial amount that is given to motivate
employees to retire early. Instead, it falls exactly within the purpose of a retirement benefit, which is a
form of reward for an employee’s loyalty and lengthy service,61 in order to help him or her enjoy the
remaining years of his life.

Furthermore, to be able to apply for the GSIS RFP, one must be qualified to retire under Republic Act No.
660 or Republic Act No. 8291, or must have previously retired under our existing retirement laws. This
only means that the employees covered by the GSIS RFP were those who were already eligible to retire
or had already retired. Certainly, this is not included in the scope of "an early retirement incentive plan
or financial assistance for the purpose of retirement."

The fact that GSIS changed the name from "Employees Loyalty Incentive Plan" to "Retirement/Financial
Plan" does not change its essential nature. A perusal of the plan shows that its purpose is not to
encourage GSIS’s employees to retire before their retirement age, but to augment the retirement
benefits they would receive under our present laws. 62 Without a doubt, the GSIS RFP is a
supplementary retirement plan, which is prohibited by the Teves Retirement Law.

Conte v. Commission on Audit63 squarely applies in this case. In that case, the Social Security System
(SSS) issued Resolution No. 56, which provided financial incentive and inducement to SSS employees
who were qualified to retire, to avail of retirement benefits under Republic Act No. 660, as amended
(which GSIS would have to pay), rather than the retirement benefits under Republic Act No. 1616, as
amended (which SSS would have to pay). Under SSS Resolution No. 56, those who retire under Republic
Act No. 660 would be given a "financial assistance" equivalent in amount to the difference between
what a retiree would have received under Republic Act No. 1616, less what he was entitled to under
Republic Act No. 660. COA disallowed in audit all claims for financial assistance under SSS Resolution No.
56 for being similar to those separate retirement plans or incentive/separation pay plans adopted by
other government corporate agencies, which resulted in the increase of benefits beyond what was
allowed under existing retirement laws. This Court sustained COA’s disallowance and held that SSS
Resolution No. 56 constituted a supplementary retirement plan proscribed by Section 28(b) of
Commonwealth Act No. 186, as amended by Republic Act No. 4968. 64

The petitioners argue that Conte finds no application in this case, since SSS had no authority under its
charter to adopt such a resolution, unlike the GSIS, which was cloaked with authority to issue the
questioned resolutions. Furthermore, petitioners argue that Republic Act No. 8291 became effective in
1997, which was after this Court had already decided the Conte case.

We find no merit in the petitioners’ arguments. The laws have not changed, and the doctrine in Conte
has not been overturned or abandoned. The fact that Republic Act No. 8291 was approved and enacted
after Conte is of no moment, as what was interpreted in Conte was the provision in the Teves
Retirement Law in issue here. Moreover, we have already discussed above how such provision has
neither been repealed nor modified by Section 41(n) of Republic Act No. 8291. Thus, it is just fitting that
we find guidance in the application and interpretation of Section 28(b) of Commonwealth Act No. 186,
as amended by Republic Act No. 4968, from the Conte case.

As we have held in that case:

Section 28(b) [of C.A. No. 186] as amended by R.A. No. 4968 in no uncertain terms bars the creation of
any insurance or retirement plan – other than the GSIS – for government officers and employees, in
order to prevent the undue and inequitous proliferation of such plans. x x x.65

The petitioners asseverate that many laws such as Republic Act Nos. 8291, 1161, 8282, 6683, and 7641,
were validly enacted after the Teves Retirement Law; thus, the evil that it seeks to avoid is the
proliferation of those retirement plans that are not so authorized by law.66 The petitioners even go so
far as comparing themselves to other government agencies, which have adopted their own retirement
schemes at one time or another such as the Development Bank of the Philippines, the Securities and
Exchange Commission, the National Power Corporation, the COA, the Court of Appeals, and even this
Court.67

The petitioners themselves admit that those retirement schemes were adopted as a "[one-time] grant
[by] reason of reorganization"68 pursuant to Republic Act No. 668369 or the Early Retirement Law. As
for the additional benefits extended to retiring justices or commissioners, suffice it to say that they were
also given pursuant to laws passed by Congress. Moreover, those retirement plans enjoy the
presumption of validity and regularity.

In stark contrast, the GSIS RFP was not created because of a valid company reorganization. Its purpose
did not include the granting of benefits for early retirement. Neither did it provide benefits for either
voluntary or involuntary separation from GSIS. It was intended for employees who were already eligible
to retire under existing retirement laws. While the GSIS may have been clothed with authority to adopt
an early retirement or financial assistance plan, such authority was limited by the very law it was seeking
to implement.

Borrowing this Court’s words in the Conte case, "it is beyond cavil that [the GSIS Retirement/Financial
Plan] contravenes [Section 28(b) of C.A. No. 186 as amended by R.A. No. 4968 or the Teves Retirement
Law], and is therefore invalid, void, and of no effect. To ignore this and rule otherwise would be
tantamount to permitting every other government office or agency to put up its own supplementary
retirement benefit plan under the guise of such ‘financial assistance.’"70
Another compelling reason to nullify the GSIS RFP is that it allows, and in fact mandates, the inclusion of
the years in government service of previously retired employees, to wit:

PROCEDURE:

xxxx

4. Government service of previously retired employees shall be considered in computing the loyalty
incentive.71

In Santos v. Court of Appeals,72 we affirmed the Court of Appeals and the Civil Service Commission’s
ruling that for the purpose of computing or determining Santos’ separation pay, his years of service in
his previous government office should be excluded and his separation pay should be solely confined to
his services in his new government position. We gave the rationale for this as follows:

Such would run counter to the policy of this Court against double compensation for exactly the same
services. More important, it would be in violation of the first paragraph of Section 8 of Article IX-B of the
Constitution, which proscribes additional, double, or indirect compensation. Said provision reads:

No elective or appointive public officer or employee shall receive additional, double, or indirect
compensation, unless specifically authorized by law… .73

Our ruling therein is likewise applicable in this case. To credit the years of service of GSIS retirees in their
previous government office into the computation of their retirement benefits under the GSIS RFP,
notwithstanding the fact that they had received or had been receiving the retirement benefits under the
applicable retirement law they retired in, would be to countenance double compensation for exactly the
same services.74

To emphasize COA’s "distaste"75 for the huge retirement benefits of GSIS’s board members, officers,
and employees, who are already receiving significantly higher salaries than their counterparts in other
government agencies, COA illustrated the glaring discrepancy between what a GSIS employee would get
under the GSIS RFP, and what a mere GSIS member would get under applicable retirement laws:

GSIS EMPLOYEE vs GSIS MEMBER not covered by [GSIS RFP]

GSIS EMPLOYEE SALARY GRADE GSIS MEMBER

GSIS Vice-President 27 Director III

46.36895 Length of Service 46.36895

₱ 110,775.00 Basic Salary ₱ 25,223.00

65 years old Age at Retirement 65 years old

August 21, 2001 Date of Retirement August 21, 2001

April 8, 1954 First Day in Govt Service April 8, 1954

April 8, 1954 First Day in GSIS/Other office April 8, 1954

BENEFITS UNDER DIFFERENT MODES OF RETIREMENT

[GSIS Employee] [GSIS Member]

[GSIS RFP] RA 1616 RA 660 [GSIS RFP] RA 1616 RA 660

90.92238 67.7379 46.36895 CGS N/A 67.7379 46.36895

10,071,926.00 7,503,665.87 NONE GA 1,708,553.05 NONE

3,176,380.80 5YLS 1,210,704.00

52,939.68 BMP 20,178.40

NONE with refund NONE RRP with refund NONE

*[GSIS RFP] less 5YLS = FINANCIAL ASSISTANCE plus MP of ₱ 52,939.68 after five years

= ₱ 6,895,545.20 Financial Assistance + Monthly Pension after five years

* CGS - Creditable Government Service

* GA - Gratuity Amount Payable by Employer

* 5YLS - Five (5) Year Lump Sum Payable by GSIS

* BMP - Basic Monthly Pension

* RRP - Refund of Retirement Premiums76

With the above illustration, it can be readily seen and understood why the Teves Retirement Law
prohibits the proliferation of additional retirement plans in our government offices. While it is true that
a better compensation package will not only attract more competent and capable individuals to work in
GSIS, but will also ensure that they remain loyal and faithful therein, this has already been addressed by
the GSIS employees’ exemption from Republic Act No. 678 or the Salary Standardization Law (SSL),
under Sec. 43(d) of Republic Act No. 8291. As shown in the above tables, the salary of a GSIS employee
is much higher compared to his counterpart in another government agency. This remains to be true
even with the recent increase of the salaries in the SSL.

The petitioners also question COA’s authority to nullify the resolutions involved in this case. It must be
remembered that none of the COA decisions nullified the Board Resolutions adopted by GSIS’s Board of
Trustees. What the COA decisions affirmed were the disallowances made by GSIS’s own Corporate
Auditor, Dimagiba. It is irrelevant that COA, in its decisions, touched upon issues not brought before it,
or that it referred to its general counsel’s opinion on the GSIS RFP, as these were done only to reinforce
COA’s position. They have no bearing upon the weight of COA’s decisions, which are based upon our
existing laws and jurisprudence.