The Supreme Court ruled that retired justices are entitled to receive retirement gratuity differentials equivalent to salary increases granted to incumbent justices within five years of their retirement. This decision ensures that retired justices benefit from salary adjustments, reflecting the principle that retirement benefits should keep pace with current salaries to provide adequate sustenance during retirement. The ruling clarifies the duty of the Department of Budget and Management (DBM) to allocate funds for these differentials, underscoring the importance of honoring the vested rights of retired members of the judiciary.

Pension Parity: Do Retired Justices Benefit from Salary Hikes for Incumbents?

The Association of Retired Court of Appeals Justices, Inc. (ARCAJI) filed a Petition for Mandamus against the Secretary of the Department of Budget and Management (DBM), seeking the release of retirement gratuity differentials for twenty-eight retired Court of Appeals (CA) Justices. These justices retired between 2005 and 2010, a period during which incumbent CA Justices received salary increases under Salary Standardization Laws 2 and 3 (SSL 2 and SSL 3). ARCAJI argued that its members were entitled to have their retirement gratuities adjusted to reflect these salary increases, ensuring their benefits kept pace with those of current justices. The DBM denied their request, leading to the Supreme Court case.

The central legal question was whether the retired justices were entitled to retirement gratuity differentials equivalent to the salary increases granted to incumbent CA Justices during the five-year period following their retirement. This hinged on the interpretation of Republic Act (R.A.) No. 910, as amended by R.A. No. 1797 and R.A. No. 9946, which governs the retirement benefits of justices. The issue also involved determining the proper funding source for these differentials, specifically whether they should be sourced from the Special Allowance for the Judiciary (SAJ) Fund or the Pension and Gratuity Fund managed by the DBM.

The Supreme Court addressed the procedural issue of whether mandamus was the appropriate remedy to compel the DBM to act. Mandamus is a legal writ compelling a government body or officer to perform a duty required by law. The Court clarified that mandamus is appropriate when the law imposes a clear duty on the respondent to perform a specific act. Thus, the justices had to demonstrate that a specific law mandated the DBM to pay the retirement gratuity differentials being claimed.

Examining R.A. No. 910, as amended, the Court emphasized Section 3, which states that retired justices are entitled to a lump sum gratuity computed based on their highest monthly salary and allowances at the time of retirement. Further, Section 3-A explicitly provides that “all pension benefits of retired members of the Judiciary shall be automatically increased whenever there is an increase in the salary of the same position from which he/she retired.” The Court interpreted this to mean that any salary increase granted to incumbent justices during the five-year period after a justice’s retirement should be reflected in the retiree’s benefits.

To further clarify the intent of the law, the Court cited A.M. No. 91-8-225-CA, which addressed a similar request from retired CA Justices. This administrative matter underscored that the lump sum gratuity represents the 60 monthly pension entitlements given in advance. Therefore, if incumbent justices receive salary increases during that five-year period, retired justices are equally entitled to those adjustments. The Court rejected the argument that the lump sum payment somehow forfeited the retirees’ right to benefit from subsequent salary increases, stating that denying these adjustments would misperceive the nature of “pension” and applicable laws.

The DBM argued that R.A. No. 910 distinguished between the lump sum retirement gratuity and the monthly pension after five years, suggesting that only the latter was subject to automatic adjustments. The Supreme Court refuted this interpretation, clarifying that Section 3-A of R.A. No. 910 covers the payment of differentials when salary adjustments are granted to incumbent justices within the five-year period following retirement. This ensures that the retirement benefits keep pace with the salaries of those currently holding the same positions, reflecting the intent of the law to provide adequate sustenance to retired justices.

Regarding the funding source, the DBM contended that the claimed increases should be sourced from the SAJ Fund rather than the Pension and Gratuity Fund. The DBM reasoned that since the increases were based on SAJ allowances, the SAJ Fund should cover the differentials. The Supreme Court found this argument incorrect, noting that the petitioners’ claim was primarily based on salary adjustments under SSL 2 and SSL 3, not solely on SAJ allowances. By June 1, 2011, SAJ allowances had been fully converted into the basic monthly salary of justices, meaning subsequent increases became part of the base salary. Citing A.M. No. 04-7-05-SC, the Court reiterated that the SAJ Fund is a special fund meant only for incumbent justices and judges and cannot be used for retirement gratuities.

Moreover, the Court referenced A.M. No. 07-5-10-SC and A.M. No. 07-8-03-SC, which explicitly ordered that the SAJ component of retirement gratuity and terminal leave benefits should be sourced from the Pension and Gratuity Fund. Therefore, the DBM’s refusal to issue the necessary Special Allotment Release Order (SARO) and Notice of Cash Allocation (NCA) was deemed a grave abuse of discretion, and mandamus was the appropriate remedy. The Court concluded that the retirement gratuities of the petitioners should be sourced from the Pension and Gratuity Fund, ensuring that the retired justices receive the full benefits to which they are entitled under the law.

In summary, the Court outlined the rules on payment of retirement gratuities, including the payment of the sixty monthly pensions and the right to benefit from any increases in the salary of incumbent justices.

WHEREFORE, in view of the foregoing, a writ of mandamus is hereby ISSUED against respondent Department of Budget and Management, directing it to immediately issue the necessary Special Allotment Release Order, with the corresponding Notice of Cash Allocation payable from the Pension and Gratuity Fund, to cover the funding requirements for the retirement gratuity differentials of the twenty-eight retired Court of Appeals Justices, enumerated in Annex “D” of the petition, with a total amount of Twenty-Three Million, Twenty-Five Thousand, Ninety-Three and 75/100 Pesos (P23,025,093.75).

FAQs

What was the key issue in this case?	The key issue was whether retired justices are entitled to retirement gratuity differentials equivalent to salary increases granted to incumbent justices within five years of their retirement.
What is a retirement gratuity differential?	A retirement gratuity differential is the difference between the retirement benefits initially received by a retired justice and the increased benefits they are entitled to due to subsequent salary increases for incumbent justices.
What is the legal basis for the justices’ claim?	The claim is based on Section 3-A of R.A. No. 910, as amended, which states that all pension benefits of retired members of the Judiciary shall be automatically increased whenever there is an increase in the salary of the same position from which they retired.
What is a Writ of Mandamus?	Mandamus is a legal writ that compels a government body or officer to perform a duty required by law. In this case, it compels the DBM to issue the necessary SARO and NCA.
From which fund should the retirement gratuity differentials be sourced?	The Supreme Court ruled that the retirement gratuity differentials should be sourced from the Pension and Gratuity Fund, not the Special Allowance for the Judiciary (SAJ) Fund.
What was the DBM’s argument against releasing the funds?	The DBM argued that R.A. No. 910 differentiated between the lump sum retirement gratuity and the monthly pension, and that the SAJ component should be sourced from the SAJ Fund.
How did the Supreme Court refute the DBM’s argument?	The Court clarified that Section 3-A of R.A. No. 910 covers differentials during the five-year period after retirement, and that the SAJ Fund is only for incumbent justices, with retirement benefits to be sourced from the Pension and Gratuity Fund.
What is the practical implication of this ruling?	The ruling ensures that retired justices receive retirement benefits that keep pace with current salaries, providing them with adequate sustenance during retirement and honoring their vested rights.

The Supreme Court’s decision reinforces the principle that retirement benefits should be adjusted to reflect salary increases granted to incumbent justices, ensuring that retired justices receive fair compensation that keeps pace with the evolving economic landscape. This ruling serves as a reminder of the government’s obligation to honor the rights and entitlements of those who have dedicated their careers to public service.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: ASSOCIATION OF RETIRED COURT OF APPEALS JUSTICES, INC. (ARCAJI) V. ABAD, G.R. No. 210204, July 10, 2018