G.R. No. L-26175, July 31, 1970
LUZON STEVEDORING CORPORATION, petitioner, vs. SOCIAL SECURITY COMMISSION, LEOCADIO PAROHINOG, HERMENEGILDO RAYMUNDO and ANTANO CASTILLO, respondents.

FACTS

The petitioner-employer, Luzon Stevedoring Corporation, had maintained a private Pension and Death Benefits plan for its employees since 1952, before the enactment and implementation of the compulsory Social Security Act. Upon compulsory coverage under the Social Security System (SSS), the employer integrated its private plan with the SSS plan as mandated by law. This integration resulted in a reduction of the monthly retirement pensions payable to the private respondents (employees) under the private plan. The employees contested this reduction.

ISSUE

Whether the reduction of the employees’ benefits under the employer’s private pension plan, as a consequence of the mandatory integration with the Social Security System plan under Section 9 of the Social Security Act, is legal and proper.

RULING

Yes, the reduction is legal and proper. The mandatory integration under Section 9 of the Social Security Act expressly provides that where an employer’s contribution to a pre-existing private plan is more than that required under the Act, the employer shall pay only the required contribution to the SSS and shall continue contributions to the private plan, reduced by the amount of the SSS contribution. The employer’s total contribution to both plans must remain the same as its contribution solely to the private plan before compulsory coverage.
The reduction in the private plan pension corresponds to the employer’s contribution now paid to the SSS. Crucially, the employees receive an increased total pension from the combined private and SSS plans. For example:
* Parohinog’s private pension was reduced by P29.99, but he gained a SSS pension of P51.42, resulting in a net increase.
* Castillo’s private pension was reduced by P14.60, but he gained a SSS pension of P25.00, resulting in a net increase.
* Raymundo’s private pension was reduced by P28.59, but he gained a SSS pension of P49.02, resulting in a net increase.
The doctrine established in Rivera vs. San Miguel Corporation is controlling. The law does not intend to penalize employers who voluntarily established private plans by forcing them to bear a greater economic burden after integration. The reduced private plan benefits, when combined with SSS benefits, result in greater overall security for the employees, consistent with the Act’s objectives.