Section 17Sec./Art. 17

Section 27 of the same Act is hereby amended to read as follows:

"SEC. 27. Reserve Fund. The Corporation shall set aside a portion of its accumulated revenues not needed to meet the cost of the current years expenditures as reserve funds: Provided, That the total amount of reserves shall not exceed a ceiling equivalent to the amount actuarially estimated for two (2) years projected Program expenditures: Provided, further, That whenever actual reserves exceed the required ceiling at the end of the Corporations fiscal year, the excess of the Corporations reserve fund shall be used to increase the Programs benefits, decrease the members contributions, and augment the health facilities enhancement program of the DOH.

"The remaining portion of the reserve fund that are not needed to meet the current expenditure obligations or used for the abovementioned programs shall be placed in investments to earn an average annual income at prevailing rates of interest and shall be known as the Investment Reserve Fund which shall be invested in any or all of the following:

"(a) In interest-bearing bonds, securities or other evidences of indebtedness of the Government of the Philippines, or in bonds, securities, promissory notes and other evidences of indebtedness to which full faith and credit and unconditional guarantee of the Republic of the Philippines is pledged;

"(b) In debt securities and corporate bonds issuances: Provided, That such securities and bonds are rated triple A by authorized accredited domestic rating agencies: Provided, further, That the issuing or assuming entity or its predecessor shall not have defaulted in the payment of interest on any of its securities and that during each of any three (3) including last two (2) of the five (5) fiscal years next preceding the date of acquisition by the Corporation of such bonds, securities or other evidences of indebtedness, the net earnings of the issuing or assuming institution available for its recurring expenses, such as amortization of debt discount and rentals for leased properties, including interest on funded and unfunded debt, shall have been not less than one and one quarter (1 ) times the total of the recurring expenses for such year: Provided, further, That such investment shall not exceed fifteen percent (15%) of the investment reserve fund;

"(c) In interest-bearing deposits and loans to or securities in any domestic bank doing business in the Philippines: Provided, That in the case of such deposits, this shall not exceed at any time the unimpaired capital and surplus or total private deposits of the depository bank, whichever is smaller: Provided, further, That said bank shall first have been designated as a depository for this purpose by the Monetary Board of the Bangko Sentral ng Pilipinas;

"(d) In preferred stocks of any solvent corporation or institution created or existing under the laws of the Philippines: Provided, That the issuing, assuming, or guaranteeing entity or its predecessor has paid regular dividends upon its preferred or guaranteed stocks for a period of at least three (3) years immediately preceding the date of investment in such preferred or guaranteed stocks: Provided, further, That if the stocks are guaranteed the amount of stocks so guaranteed is not in excess of fifty percent (50%) of the amount of the preferred common stocks as the case may be of the issuing corporation: Provided, furthermore, That if the corporation or institution has not paid dividends upon its preferred stocks, the corporation or institution has sufficient retained earnings to declare dividends for at least two (2) years on such preferred stocks and in common stocks of any solvent corporation or institution created or existing under the laws of the Philippines in the stock exchange with proven track record of profitability and payment of dividends over the last three (3) years; and

"(e) In bonds, securities, promissory notes or other evidences of indebtedness of accredited and financially sound medical institutions exclusively to finance the construction, improvement and maintenance of hospitals and other medical facilities: Provided, That such securities and instruments are backed up by the guarantee of the Republic of the Philippines or the issuing medical institution and the issued securities and bonds are both rated triple A by authorized accredited domestic rating agencies: Provided, further, That said investments shall not exceed ten percent (10%) of the total investment reserve fund.

"As part of its investments operations, the Corporation may hire institutions with valid trust licenses as its external local fund managers to manage the investment reserve fund, as it may deem appropriate, through public bidding. The fund managers shall submit annual reports on investment performance to the Corporation.

"The Corporation shall set up the following funds:

"(1) A fund to secure benefit payouts to members prior to their becoming lifetime members;

"(2) A fund to secure payouts to lifetime members; and

"(3) A fund for any optional supplemental benefits that are subject to additional contributions.

"A portion of each of the above funds shall be identified as current and kept in liquid instruments. In no case shall said portion be considered part of invested assets.

"Another portion of the said funds shall be allocated for lifetime members within six (6) months after the effectivity of this Act. Said amount shall be determined by an actuary or pre-calculated based on the most recent valuation of liabilities.

"The Corporation shall allocate a portion of all contributions to the fund for lifetime members based on an allocation to be determined by the PHIC actuary based on a pre-determined percentage using the current average age of members and the current life expectancy and morbidity curve of Filipinos.

"The Corporation shall manage the supplemental benefits and the lifetime members fund in an actuarially sound manner.

"The Corporation shall manage the supplemental benefits fund to the minimum required to ensure that the supplemental benefit payments are secure."