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Tuesday, February 1, 2011

Questions and Answers for OFW-Members on the PAG-IBIG/HDMF Mandatory Coverage under R.A. 9679 - Part 1

After implementing the PAG-IBIG Membership as mandatory requirement for OFWs, there has been some confusions for those existing PAG-IBIG Overseas Program (POP) member. To clear this, here are some important information as dissimated by the HDMF.

Existing members under the Pag-IBIG Overseas Program may still withdraw their savings upon maturity of their POP membership. Those who want to enjoy the advantages of Pag-IBIG savings with a shorter term may opt to join Pag-IBIG II.

Q: What is the Pag-IBIG II program?

Pag-IBIG II is a voluntary program that gives Pag-IBIG members a savings option with higher yields and shorter terms. It is open to all Pag-IBIG I members and OFWs with a monthly gross income exceeding P5,000.

Under Pag-IBIG II, a member may contribute as low as P500 monthly, with a term as short as five years. Pag-IBIG II savings are entitled to a preferential dividend rate that is higher than that of Pag-IBIG I. The dividend rate is determined within the first quarter of the year and approved by the Board of Trustees.

Q: What is Republic Act 9679?

Republic Act (9679) or the Home Development Mutual Fund Law of 2009 seeks to strengthen the Fund’s capability as an instrument that will effectively achieve the following objectives:

• Improve the quality of life of Filipinos by providing them with sufficient shelter;
• Provide an integrated nationwide provident savings system; and
• Provide housing through the mobilization of funds for shelter finance

Q: What are the salient features of the law?

Here are some major amendments of RA 9679 which set it apart from previous Pag-IBIG laws:
First, the new law provides for universal coverage. All Filipino employees who are covered by SSS and GSIS, regardless of salary, and those employed by foreign-based employers, including sea-based and land-based OFWs, are now covered by the Pag-IBIG Fund.
Second, the law restores Pag-IBIG’s exemption from any tax, assessment, fee, charge, custom or import duty. This will result in a P3-billion annual savings that can be invested in the Fund’s housing loan program, and higher dividends to be credited to the members’ savings.

And third, the HDMF’s Board of Trustees now has the authority to set contribution rates. While other government institutions have increased their rates several times in the past 23 years, the Fund has retained the same contribution rates since 1986. Despite this, the benefits the institution grants to its members have increased several times over. Aside from translating to more benefits to members, increasing the contribution rates will rationalize the Fund’s savings scheme. At present, a contribution to the Fund is at two percent, with the Monthly Compensation ceiling pegged at P5,000. In effect, members, whether earning monthly salaries of P5,000 or P50,000 contribute the same amount: P100 per month. Higher contribution rates will mean members with higher income will contribute and save more while those belonging to the lower income bracket will continue to save the same amount.

Q: When did the law become effective?
The law became effective on 27 August 2009.
Q. When will the law be implemented?
Implementation of the new HDMF Law begins on 1 January 2010.
Q: Are all OFWs covered by the Mandatory Membership under RA 9679?
Yes. RA 9679 and its Implementing Rules and Regulations (IRR) provide that all OFWs, sea-based or land-based, and those employed by foreign-based employers, should register with the Pag-IBIG Fund.

A Filipino seafarer will be mandatorily covered upon the signing of the standard contract of employment between him and the manning agency. Together with the foreign ship owner, the manning agency acts as the employer, and thus, should provide the mandatory employer counterpart contribution which is fixed at two percent of the seafarer’s monthly compensation. Land-based OFWs are deemed covered upon employment in foreign-based companies.
Q: Why are OFWs included in the Mandatory Membership Coverage?
Since its founding, the Pag-IBIG Fund has been competently and quietly pursuing its twin mandates of savings generation and provision of affordable shelter. Pag-IBIG members are able to save, borrow short term loans, and have access to housing loans with the lowest interest rates in the market. Through the years, the Fund has become a lifeline and is filling a big financing gap for Filipino workers—with many of its members turning to the Fund for their various financial needs.

The Pag-IBIG Fund releases an average of P188 million in housing loans every day, enabling around 305 Filipino families to buy or build their own homes, 60 of whom are OFWs. This only proves that more and more Filipino workers are reaping the huge benefits of Pag-IBIG membership from the small amount they save every  month

A member may also withdraw his savings before the 20-year maturity under these valid grounds:
• Optional withdrawal after 15 years of continuous contributions
• Upon reaching age 65
• Retirement
• Permanent or total disability
• Insanity
• Death
• Permanent departure from the country
• Other causes as may be provided for by the board of trustees
Q: What can a member claim at membership termination?
A member will be able to withdraw his TAV, which consists of his personal contributions, his employer counterpart contributions, if any, and the dividend earnings credited to his account.

Q: If the member dies, what will happen to his TAV?
The heirs will receive the deceased member’s savings, less any pending obligations with the Fund. Beneficiaries will also be entitled to the additional death benefit grant, the amount of which will depend on the member’s TAV and membership status at point of death.

Q: Why was the membership term for OFW-Members increased to 20 years?
With Pag-IBIG’s universal coverage under RA 9679, the membership of local employees and OFWs are now essentially the same, and are governed by the same guidelines. Hence, the 20-year term now also applies to OFW members.

It also makes sense, as far as the sustainability of the Pag-IBIG housing loan program is concerned. Housing loans are drawn from the pooled savings of members, and repaid by borrowers over a period of up to 30 years. If members’ savings are withdrawn much earlier, there would be a mismatch against the long-term funding for housing. Pag-IBIG cannot sustain its housing loan program with this mismatch. This is precisely one of the reasons why a new Pag-IBIG law was needed, to mobilize more funds on a long-term basis.

The maximum monthly compensation used in computing the employee contributions is currently set at P5,000. This means that the maximum member contribution and employer counterpart per month are both currently P100. A member, however, may opt to increase his monthly contribution in order to save more in the long term.

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