GSIS Provident Fund is a Trust Fund (Trust vs. Co-ownership)

"TRUST is the legal relationship between one person having an equitable ownership in property and another person owning the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter.[19] A trust fund refers to money or property set aside as a trust for the benefit of another and held by a trustee.[20] Under the Civil Code, trusts are classified as either express or implied. An express trust is created by the intention of the trustor or of the parties, while an implied trust comes into being by operation of law.[21]

There is no doubt that respondent intended to establish a trust fund from the employees’ contributions (5% of monthly salary) and its own contributions (45% of each member’s monthly salary and all unremitted Employees Welfare contributions). We cannot accept petitioners’ submission that respondent could not impose terms and conditions on the availment of benefits from the Fund on the ground that members already own respondent’s contributions from the moment such was remitted to their account. Petitioners’ assertion that the Plan was a purely contractual obligation on the part of respondent is likewise mistaken.

Republic Act No. 8291, otherwise known as “The Government Service Insurance System Act of 1997,” mandated respondent to maintain a provident fund subject to rules and regulations it may adopt. Thus:

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

x x x x

(s) to maintain a provident fund, which consists of contributions made by both the GSIS and its officials and employees and their earnings, for the payment of benefits to such officials and employees or their heirs under such terms and conditions as it may prescribe; (Emphasis supplied.)

In Development Bank of the Philippines v. Commission on Audit,[22] this Court recognized DBP’s establishment of a trust fund to cover the retirement benefits of certain employees. We noted that as the trustor, DBP vested in the trustees legal title over the Fund as well as control over the investment of the money and assets of the Fund. The Trust Agreement therein also stated that the principal and income must be used to satisfy all of the liabilities to the beneficiary officials and employees under the Gratuity Plan.[23]

Here, petitioners as beneficiaries of the Fund contend that they became co-owners of the entire Fund including respondent’s contributions and its accumulated earnings. On this premise, they demand a proportionate share in the GRF which was deducted from the earnings on respondents’ contributions.

Under the PFRR, however, the GRF is allocated for specific purposes and not intended for distribution to members. Section 8,[24] Article IV thus provides:

Section 8. Earnings. At the beginning of each quarter, the earnings realized by the Fund in the previous quarter just ended shall be credited to the accounts of the members in proportion to the amounts standing to their credit as of the beginning of the same quarter after deducting therefrom twenty per cent (20%) of the proportionate earnings of the System’s contributions, which deduction shall be credited to a General Reserve Fund. Whenever circumstances warrant, however, the Committee may reduce the percentage to be credited to the General Reserve Fund for any given quarter; provided that in no case shall such percentage be lower than five per cent (5%) of the proportionate earnings of the System’s contributions for the quarter. When and as long as the total amount in the General Reserve Fund is equivalent to at least ten per cent (10%) of the total assets of the Fund, the Committee may authorize all the earnings for any given quarter to be credited to the members.

The General Reserve Fund shall be used for the following purposes:

(a) To cover the deficiency, if any, between the amount standing to the credit of a member who dies or is separated from the service due to permanent and total disability, and the amount due him under Article V Section 4[25];

(b) To make up for any investment losses and write-offs of bad debts, in accordance with policies to be promulgated by the Board;

(c) To pay the benefits of separated employees in accordance with Article IV, Section 3[26]; and

(d) For other purposes as may be approved by the Board, provided that such purposes is consistent with Article IV, Section 4[27].

It is clear that while respondent’s monthly contributions are credited to the account of each member, and the same were received by petitioners upon their retirement, they were entitled to only a proportionate share of the earnings thereon. The benefits of retiring members of the Fund are covered by Section 1(b), Article V which states:

(b) Retirement. In the event the separation from the System is due to retirement under existing laws, such as P.D. 1146, R.A. 660 or R.A. 1616, irrespective of the length of membership to the Fund, the retiree shall be entitled to withdraw the entire amount of his contributions to the Fund, as well as the corresponding proportionate share of the accumulated earnings thereon, and in addition, 100% of the System’s contributions, plus the proportionate earnings thereon.

We find nothing illegal or anomalous in the creation of the GRF to address certain contingencies and ensure the Fund’s continuing viability. Petitioners’ right to receive retirement benefits under the Plan was subject to well-defined rules and regulations that were made known to and accepted by them when they applied for membership in the Fund.

Petitioners have the right to demand for an accounting of the Fund including the GRF. Under Section 5,[28] Article VIII of the PFRR, the Committee is required to prepare an annual report showing the income and expenses and the financial condition of the Fund as of the end of each calendar year. Said report shall be submitted to the GSIS Board and shall be available to members. There is, however, no allegation or evidence that the Committee failed to comply with the submission of such annual report, or that such report was not made available to members."


G.R. No. 189827, October 16, 2013

GERSIP ASSOCIATION, INC., LETICIA ALMAZAN, ANGELA NARVAEZ, MARIA B. PINEDA, LETICIA DE MESA AND ALFREDO D. PINEDA, PETITIONERS, VS. GOVERNMENT SERVICE INSURANCE SYSTEM, RESPONDENT.


https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/56303