G.R. No. 162372. October 11, 2011.

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GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS) petitioner, vs. COMMISSION ON AUDIT (COA) ,respondent.

Facts:
Republic Act No. 8291, otherwise known as The Government Service Insurance System Act of 1997 (the GSIS
Act) was enacted and approved, amending Presidential Decree No. 1146, as amended, expanding and increasing the
coverage and benefits of the GSIS, and instituting reforms therein. Pursuant to the powers granted to it under Section
41(n) of the said law, the GSIS Board of Trustees, upon the recommendation of the Management-Employee Relations
Committee (MERCOM), approved Board Resolution No. 326 wherein they adopted the GSIS Employees Loyalty Incentive
Plan (ELIP).
On November 21, 2000, Board Resolution No. 326 was amended by Board Resolution No. 360, which provided
for a single rate for all positions, regardless of salary grade. Dimagiba, the corporate auditor of GSIS, communicated to
the President and General Manager of GSIS that the GSIS RFP was contrary to law. However, the GSIS Legal Services
Group opined that the GSIS Board is authorized to adopt the plan according to Sec. 28 (b) of Commonwealth Act No.
186 as amended by R.A. No. 4968 has been repealed by Sec. 3 and 41(n) of R.A. No. 8291.
On January 16, 2001, Board Resolution No. 69 was approved, wherein ELIP was renamed GSIS
Retirement/Financial Plan (RFP) to conform strictly to the wordings of Section 41(n) of Republic Act No. 8291.
Upon Garcias assumption of office as President and General Manager, Dimagiba requested to again review the
GSIS RFP, but this was denied by Garcia. Dimagiba sought the assistance of COA in determining the legality and/or
morality of said plan. COA General Counsel Alquizalas, issued a memorandum to Commissioner Flores and opined that
the GSIS RFP is a supplementary retirement plan, which is prohibited under R.A. 4968 or the Teves Retirement Law.
On August 14, 2001, Commissioner Flores forwarded this Memorandum to Dimagiba, who in turn forwarded it
to Garcia. But Garcia responded, taking exception to the notice of disallowance for being highly irregular and
precipitate as it was based on mere opinion of COAs consel who had no authority to declare GSIS Board of Trustees as
null and void. Moreover, Garcia said that COA had neither power nor authority to declare null and void certain
resolutions approved by the Board of Government Corporations, as the power to do so was exclusively lodged before
the courts.

Issue:
Whether or not GSIS is clothe with authority to adopt a Retirement/Financial Assistance to its employees.

Held:
NO.It is true that under Section 41(n) of Republic Act No. 8291, Government Service Insurance System (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 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.
While the Government Service Insurance System (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.
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.