Thirty-eight Legislators (hereinafter the “Petitioners”), including Chi-Chen CHIANG, Hung-Chun LEE and Su-Mei KAO CHIN, in relation to the exercise of legislative powers, believe that Article 3, Article 26, Paragraph 2, Subparagraphs 1 and 2, Paragraphs 3 and 4, Article 29, Paragraph 2, Article 34, Paragraph 1, Subparagraph 3, Article 46, Paragraph 4, Subparagraphs 1, Paragraph 5, Article 47, Paragraph 3, and Article 54, Paragraphs 2 of the amended Act of Military Service concerning Officers and Non-commissioned Officers of the Armed Forces (hereinafter the “Disputed Act”; the provisions listed in the Reasoning of this Interpretation, unless otherwise specified, all refer to the provisions of the Disputed Act; see Annex 1), which was promulgated on June 21, 2018, are in contravention of the Constitution and have lodged a petition with the Constitutional Court. The impugned provisions pertain to the change in the calculation basis for retirement severance pay for officers and non-commissioned officers, the reduction in retirement severance pay and preferential savings interest (hereinafter “preferential interest”), the restriction on retired and discharged personnel from employment or reappointment to specific positions and the suspension of their retirement payments, the allocation of the reduced retirement severance pay to replenish the Pension Fund, and the retroactive application of these provisions to retired and discharged personnel. The petitioners contend that these provisions contravene the principles of non-retroactivity, legitimate expectation, and proportionality. It was also argued that such rights of those to whom the impugned provisions apply as property, life, holding public office, work, and equality protected by the Constitution are violated. In order to prevent the irreparable and substantial impairment of the foregoing rights protected by the Constitution and public interest, the Petitioners also file an application for a preliminary injunction.
Article 5, Paragraph 1, Subparagraph 3 of the Constitutional Court Interpretation Act (herein after the “CCIA”) provides that one-third or more of the incumbent Legislators may lodge a petition with the Constitutional Court for constitutional interpretation if they, in relation to the exercise of their legislative powers, have doubts as to the meaning of the constitutional provisions concerned or the constitutionality of a statute concerned. The purpose thereof is to allow dissenting Legislators to petition the Constitutional Court for constitutional interpretation when they strongly believe that a statute passed by a majority in the Legislative Yuan is in contravention of the Constitution, in order to uphold the constitutional order.
After the legislative bill concerning the Disputed Act passed the second reading in the Legislative Yuan, the Petitioners openly declared on the parliamentary floor that “[U]njust pension reform; no endorsement.” Failing to stop the bill from proceeding to the third reading stage, they were absent from the relevant process (see Legislative Yuan Gazette Vol. 107, Iss. 74 No. 1, pp. 405-406). It is thus established that the Petitioners, comprising thirty-eight Legislators (one-third of the incumbent Legislators at the time), were the minority who disagreed the amendment of the Disputed Act passed by a majority in the Legislative Yuan. They strongly believed that the Disputed Act contravenes the Constitution and therefore lodge a petition with the Constitutional Court for constitutional interpretation. The petition is granted as it is not inconsistent with Article 5, Paragraph 1, Subparagraph 3 of the CCIA.
Furthermore, Article 39, Paragraph 1, First Sentence of the Disputed Act provides that“the pension and maintenance allowance received by an officer or a non-commissioned officer after retirement or discharge, as well as the survivor annuity provided to eligible surviving family members, may be adjusted by the Executive Yuan, in liaison with the Examination Yuan, who shall take into account the general government fiscal balance, population and economic growth rates, average life expectancy, the reserve ratio of the Pension Fund and its financial and investment performance, and the consumer price index.”Although this provision was not included in the petition, it concerns those whose retirement severance pay may be adjusted and reduced in accordance with Article 26 of the Disputed Act instead of being calibrated in line with the salary adjustments of active duty personnel of the same rank and is thus of important relevance to Article 26. Therefore, it is also included in the object of review.
In accordance with Article 13, Paragraph 1 of the CCIA, the Judicial Yuan notified the petitioners and the authorities concerned, including the Executive Yuan, the Ministry of National Defense, the Veterans Affairs Council (hereinafter the“VAC”), the Ministry of Education, and the Ministry of Civil Service, to appoint representatives and agents for a public preparatory session on the factual issues of this case on the afternoon of December 4, 2018. It was followed by an oral argument session on the afternoon of June 24, 2019.
The petitioners contended that the impugned provisions of the Disputed Act are unconstitutional for the following reasons:
(1) Article 10, Paragraph 9 of the Additional Articles of the Constitution provides that “[t]he State shall respect military servicemen for their contributions to society and guarantee education, employment, medical care, and livelihood for veterans who have retired from active duty.”The State is thus obligated to provide remuneration or retirement severance pay to military personnel so that their right to livelihood is protected. Retirement severance pay for veterans who have retired from active duty or have been discharged from military duty is a legal entitlement as required and governed by the laws effective during their service, and is therefore a right to property protected by the Constitution.
(2) The relationship between active duty military personnel and the government is a contractual one governed by public law. Retirement severance pay is a component of such a contract and constitutes deferred wage payments. The government is legally obliged to fulfil its responsibility to provide retirement severance pay, which is established as a vested property right. The amount of such pay is determined at the time of the administrative disposition approving retirement from active duty or discharge from military service. The government is responsible for providing the ultimate payment guarantee, regardless of whether the Military Pension Fund is on the brink of bankruptcy. The government’s financial difficulties cannot serve as a legitimate reason for reducing retirement severance pay. Pursuing the sustainability of the Military Pension Fund does not constitute the“public interest”stipulated in Article 23 of the Constitution.
(3) The retroactive application of Article 3 of the Disputed Act, which pertains to the definition of terms, and of Article 26, Paragraph 2, Subparagraphs 1 and 2, Article 26, Paragraph 3, and Article 46, Paragraph 4, Subparagraph 1, which concern, in relation to officers and non-commissioned officers, the changes in the calculation basis of retirement severance pay and the reduction in preferential interest, monthly compensation, and pension for retired and discharged personnel, violates the principle of non-retroactivity of law and contravenes the right to property of those to whom the relevant provisions apply. J.Y. Interpretation No. 717 needs to be amended or supplemented.
(4) Article 26, Paragraph 4 of the Disputed Act, which sets the“minimum guaranteed amount”to be calculated against the combined total of the first-grade basic pay and professional allowance for a second lieutenant, and provides that those whose original monthly retirement income is lower than the minimum guaranteed amount shall not be compensated for the difference, fails to fulfil the State’s obligation to provide adequate retirement severance pay and to support the livelihood of the retired or discharged personnel. Hence, it violates the protection of human dignity, and contravenes the right to life and the right to hold public office under the Constitution.
(5) Article 26, Paragraph 3 and Article 46, Paragraph 5 of the Disputed Act provides that, where the total monthly amount paid for pension, preferential interest, and monthly compensation exceeds the monthly pension payment calculated in accordance with Article 26, Paragraph 2 (i.e., the upper limit of statutory retirement income, hereinafter the "ceiling”), it shall be reduced annually and on a pro rata basis over 10 years from the effective date of the Disputed Act, in order to eliminate the difference in the paid monthly amount. Furthermore, the principal under the preferential savings scheme will only then be returned in the 11th year after the Disputed Act came into effect. Article 46, Paragraph 4, Subparagraph 1 of the Disputed Act provides that for those who received a lump sum retirement pay, if the monthly interest accrued on the combined principal of their foregoing payment and their retirement payment under military insurance (hereinafter "military insurance payment”) under the preferential savings scheme exceeds the minimum guaranteed amount, the annual interest rate on the portion of the said principal from which their excess monthly payment accrues shall be reduced from 18% to 12% for the first two years, to 10% for the third and fourth years, to 8% for the fifth and sixth years, and to 6% from the seventh year onward, starting from the date the Disputed Act came into effect. The aforementioned provisions, with the too short transition period and the too steep reduction, contravene the principles of legitimate expectation and proportionality.
(6) The retroactive application of Article 29, Paragraph 2 of the Disputed Act, which increases the base rate for contribution to the Pension Fund for active duty personnel, affects their career planning and contravenes their right to work protected by the Constitution.
(7) Article 34, Paragraph 1, Subparagraph 3 of the Disputed Act, which suspends the receipt of pension or maintenance allowance for an officer or a non-commissioned officer who, after retirement or discharge, is employed or reappointed as full-time teaching staff at a private university and receives a monthly remuneration exceeding the combined total of the highest basic pay for civil servants of the elementary rank (Rank 1) and professional allowance, unlawfully restricts both the right to property and the right to work, and contravenes the principle of equality.
(8) Article 47, Paragraph 3 of the Disputed Act, which provides for the settlement of the claims by those who had received monthly compensation before the Disputed Act came into effect, contravenes the principles of non-retroactivity, legitimate expectation, and proportionality.
(9) Article 54, Paragraph 2 of the Disputed Act provides that the annual savings in the government’s retirement and pension expenses, as a result of the reduction of retirement severance pay according to Article 26, Paragraph 3 and Article 46, Paragraph 4, shall be injected into the Pension Fund. This provision violates the requirement that the government should fill the gap, through budget allocations, in the Pension Fund that is created by the downsizing of the armed forces and the policy of recruiting an all-professional military. It also contradicts the principle that the government is responsible for providing the ultimate payment guarantee and therefore contravenes the affected individuals’ right to property.
(10) All the impugned provisions of the Disputed Act as mentioned above has given rise to comprehensive, urgent, and irreparable damage to constitutional goods (Verfassungsrechtsgut) and public interest. The existing administrative remedies and injunctive relief measures are only channels for individual cases, and may result in inconsistency in the decisions by public authorities or in court rulings, which no other means is sufficient to prevent from occurring. Therefore, it is necessary to issue a preliminary injunction for this petition.
The authority concerned, the Executive Yuan, argues that none of the impugned provisions of the Disputed Act is in contravention of the Constitution, with the following reasons:
(1) To ensure nation security and meet defence needs, it is necessary to establish a new pension fund system specifically for military personnel. This is due to the unique characteristics of their profession, which involves the requirement to be on standby 24/7, long working hours, hazardous duties, shorter periods of service, early retirement, and high turnover rates. The amendment of the Disputed Act aims to achieve the objectives of "promoting recruitment, stabilizing active service, and appeasing retirees”.
(2) In response to the changes in the demographic structure and the economic environment, and to meet the needs of safeguarding intergenerational justice, adjustments have been made to the original design of the retirement system to correct unreasonable retirement severance pay. These adjustments aim to achieve substantive equality among occupational groups and to promote the sustainability of the pension system.
(3) The right to claim retirement severance payments and the right to expect such payments are derivatives of the right to hold public office, not deferred wage payments. The right to claim retirement severance payments is a right of claim under public law and constitutes a right to property, entitled to varying degrees of protection depending on whether its funding comes from the government tax revenue or individual contributions. For continuous legal relationships concerning retirement severance payments, the Legislature may make necessary adjustments, under the condition that they do not contravene the principle of non-retroactivity and are necessary for the protection of public interest.
(4) In order to address the insufficient initial contribution rate, the lower-than-expected actual rate of return, and the significant funding gap in the Pension Fund caused by the policy to downsize the armed forces, it is necessary to raise the base contribution rate to the Pension Fund, increase the government’s share of the burden for retirement severance pay (70% by the VAC and 30% by the Pension Fund), and allocate savings from the reduced retirement payment to the Pension Fund in accordance with budgetary procedures. Furthermore, over a period of 10 years, NT$20 billion will be budgeted every two years for the replenishment of the Pension Fund, totaling NT$100 billion, to postpone the Pension Fund’s depletion date.
(5) The calculation basis for retirement severance pay (retirement income replacement rate) and the number of years that may count towards retirement severance pay (hereinafter the “creditable years of services”) have been adjusted. For those to whom the Disputed Act applies, if the original monthly retirement income does not exceed the amount calculated based on the above standard, their retirement income will not be reduced; if the original monthly retirement income does, the excess amount will be deduced from the original retirement income over a 10-year transition period, starting from the effective date of the Disputed Act. Such deduction will be made first from the preferential interest, followed by the monthly pension calculated based on the years of services under the Old Pension System. Furthermore, the principal of savings under the preferential savings scheme can only be returned on the 11th year after the Disputed Act came into effect. For those receiving a lump sum retirement pay, if the monthly preferential interest received exceeds the minimum guaranteed amount (NT$38,990), the annual interest rate on the portion of the principal from which the excess monthly income accrues shall be reduced to 6% over a six-year transition period. The reduction is subject to the statutory minimum guaranteed mount.
(6) For retired or discharged officers and non-commissioned officers who were injured or physically or mentally disabled as a result of combat or performance of their duties, who were below the rank of colonel and were already over 85 years old before the Disputed Act came into effect, or who receive the original monthly retirement income lower than the minimum guaranteed amount, the preferential interest rate on their retirement severance pay will not be subject to reduction.
(7) The suspension of pension or maintenance allowance for officers or non-commissioned officers who are employed or reappointed as full-time teaching staff at a private university and receive a monthly remuneration exceeding the combined total of the highest basic pay for civil servants of the elementary rank (Rank 1) and the professional allowance is necessary to prevent the situation of earning double salaries by receiving a monthly payment from the government and to protect the compelling public interest in creating more job opportunities for younger generations. This measure does not contravene the principle to equality.
(8) The provisions regarding the deduction of the original retirement severance pay for affected individuals in the Disputed Act are not in contravention with the principles of non-retroactivity of law, legitimate expectation, proportionality, and equality. There is no need to amend or supplement J.Y. Interpretation No. 717.
This Court, taking all the arguments into consideration, makes this Interpretation on the following grounds:
I. The History of the Military Pension System
(1) The military pension system, at its commencement in 1959, adopted a defined benefit scheme that was entirely funded by the government through the annual budget (hereinafter the“Old Pension System”). In addition, retired and discharged personnel could deposit their lump sum retirement pay and military insurance payments in designated banks (see Footnote 1), where the government paid interest at a preferential rate to support their basic livelihood.
(2) The government’s burden of subsidizing the preferential interest under the Old Pension System kept increasing as the interest rate has continued to decline in the financial market. The amount of preferential interest paid by the government to the retired and discharged personnel increased from NT$16.9 billion in 2007 to over NT$20.2 billion in 2016 (see Annex 2). This upward trend spiked as a result of rising average life expectancy, continued payments of preferential interest to the existing recipients, and the addition of would-be retired and discharged military personnel whose years of services began under the Old Pension System. It is estimated that the preferential savings system will naturally come to an end in 2055.
(3) Article 27, Paragraph 1, Subparagraph 1 of the Act of Military Service concerning Officers and Non-commissioned Officers of the Armed Forces, which came into effect on January 1, 1997 (hereinafter the “1997 Military Service Act”), introduced a new funding method for retirement severance pay under the New Pension System. Under this system, the government budget-funded“gratuity system”was replaced by the“joint contribution system.”Retirement severance pay, calculated based on years of services, will be disbursed by the Pension Fund, sourced from contributions by both the government and active duty personnel in accordance with the statutory ratio (63% from the government and 35% from military personnel); and the government would remain the ultimate bearer of the payment responsibility (hereinafter the New Pension System). The preferential savings scheme ceased to apply to the military insurance payments and the lump sum retirement pay calculated based on years of services under the New Pension System.
(4) The Contribution Rate and the Gap between the Expected Return and the Actual Operation of the Pension Fund
(i) The government began its exploration for a new pension system in 1973 and published an actuarial report in 1979, which indicated that the optimal contribution rate for maintaining the financial balance of the proposed Pension Fund was 18.97% (see Annex 3). However, taking into account the financial burden on the government and on the personnel on active duty, it was recommended that the contribution rate be initially set at between 5% and 7%, with gradual adjustments to follow. The gap in financing as a result of the difference between the optimal and the actual contribution rates was expected to be filled by the income generated by the Pension Fund.
(ii) The statutory base contribution rate for the New Pension Fund was set between 8% and 12% (see Article 27, Paragraph 2 of the 1997 Military Service Act). The actual contribution rate was initially set at 8% and was subsequently adjusted to 8.8% in 2002, 9.8% in 2004, 10.8% in 2005, and 12% in 2006; it has not been adjusted since. According to the first six triennial actuarial valuation reports of the Pension Fund issued by the Management Board of the Public Service Pension Fund (hereinafter the “PSPF Management Board”), with the evaluation dates at the end of June 1999, and at the end of the years 2002, 2005, 2008, 2011, and 2014 respectively, the optimal contribution rates for military personnel were 21.9%, 32%, 36.3%, 36.74%, 39.65%, and 38.14% (see Annex 3).
(iii) The average realized rate of return of the Pension Fund from 2007 to 2016 was 2.44% (see The Public Service Pension Fund Annual Report 2016, p. 98). If the contribution rate remained at 12%, for the portion related to military personnel, the required annual investment return rate for the Pension Fund to achieve financial balance, considering the amortization of its past debt, would need to reach the level of 27.7%, (see Annex 4).
(iv) Additional measures to minimize resistance to the implementation of the New Pension System alongside the under-contribution policy included the following: The calculation basis for the lump sum retirement pay and pension was set at twice the basic pay of active duty personnel of the same rank – compared to the basic pay plus NT$930 under the Old Fund system – to increase the payable amounts. The qualifying period for the military insurance payment deposited under the preferential savings scheme was calculated favorably, together with the aforementioned measure, to significantly enlarge the principal for the qualifying deposit under preferential savings scheme. The compensation payment was differentially calculated based on years of services under the Old and New Pension systems to vary retirement income among personnel who are of the same rank and with the same qualifying years of services but incur years of services under the Old or the New Pension system or both, with the highest monthly pension rate for personnel who incurred qualifying years of services across both the Old and New Pension Systems with more than one year and up to 15 years thereof incurred under the Old Pension, followed by those who incurred qualifying years of services across both the Old and New Pension Systems with more than 16 years thereof incurred under the Old Pension and then by those who incurred all qualifying years of services under the New Pension System, and with the lowest for those who incurred all qualifying years of services only under the Old Pension System (see Annex 5).
(v) The military underwent organizational streamlining and downsizing four times between July 1998 and December 2014, reducing the total number of armed forces from over 452.000 to 215.000. During this period, 75 % of the large number of early retirements or discharges involved individuals who received their retirement pay in a lump sum because they had only served between 3 and 20 years. The remaining 25% received a monthly pension because they had served for over 20 years, or for over 15 years but were age 60 or above when they retired from active service. As a result of the significant decrease in the number and amount of contributions, the Pension Fund has been in deficit since 2011. From 2011 to 2016, the expenditure-to-income ratios were 107.3%, 118%, 141.1%, 139.9%, 147.4%, and 161.5%, respectively (see Annex 6).
II. The Content of the Disputed Act
(1) Setting the Calculation Basis for the Upper Limit (hereinafter the “Ceiling”) of Statutory Retirement Income: With regard to the lump sum retirement pay option, the number of qualifying years of services has been extended from 35 to 40, with a cap of 60 units. As far as the monthly pension option is concerned, both the calculation basis for monthly pension rates and the qualifying years of services have been adjusted: for those with 20 years of services, the pension-salary percentage for the monthly pension has been increased from 40% to 55%, with an annual increase of 2%. A maximum of 40 qualifying years can be counted in, with the pension-salary percentage capped at 95% for non-commissioned officers and at 90% for officers. The current ceiling calculation basis applies to both active duty military personnel and those who have retired or been discharged, regardless of whether their qualifying years of services were calculated under the Old Pension System, the New Pension System or both (see Article 26, Paragraph 2 and Table 3 therein; see Annex 7 for Table 3).
(2) Setting a Minimum Guaranteed Amount: For those who retired or were discharged before the Disputed Act came into effect, the minimum guaranteed amount is set as the combined total of the first-grade basic pay and professional allowance for a second lieutenant, as of July 2018 (NT$38, 990, referred to as the “floor”). Those whose original monthly retirement income is below the floor are not subject to reduction (see Article 26, Paragraph 4 and Article 46, Paragraph 4, Subparagraph 2).
(3) Adjusting Monthly Statutory Retirement Income: Both the preferential interest and the compensation payment for years of services are retirement severance pay and constitute part of retirement income. For individuals whose monthly retirement income (i.e., the combined total of monthly pension, monthly preferential interest, and monthly compensation payment), calculated in accordance with the old formula, is below or equal to the ceiling, their monthly retirement income will continue to be paid without reduction. For those whose monthly retirement income exceeds the ceiling, the excess payment will be reduced annually over ten years until it reaches the ceiling. If the personal ceiling is lower than the uniform floor, no further reduction will be made (see Article 3, Item 4, Article 26, Paragraphs 3 and 4).
(4) Order of Priority in Deduction of Monthly Retirement Income: Preferential interest is the first to be deducted, followed by the monthly pension calculated based on years of services under the Old Pension System, and then the monthly pension calculated based on years of services under the New Pension System (see Note 4 of Table 4 in Article 26; see Attachment 8 for Table 4).
(5) Reducing the Preferential Interest Rate for Lump Sum Retirement Pay: For recipients of lump sum retirement pay, if the preferential interest on the principal that comprises the retirement pay and the military insurance payment does not exceed the minimum guaranteed amount, it will be calculated at an annual interest rate of 18%. If it exceeds this amount, the annual interest rate on the portion of the said principal from which their excess monthly payment accrues shall be reduced from 18% to 12% for the first two years, to 10% for the third and fourth years, to 8% for the fifth and sixth years, and to 6% from the seventh year onward, starting from the date the Disputed Act came into effect. (See Article 46, Paragraph 4).
(6) Exception to Reduction and Deduction of Retirement Severance Pay: The preferential interest for retired or discharged officers and non-commissioned officers who were injured or became physically or mentally disabled in combat or in the line of duty, or who were under the rank of colonel and over 85 years old before the Disputed Act came into effect, will continue to be calculated at an annual interest rate of 18% and will not be reduced (Article 46, Paragraph 4, Subparagraph 2).
(7) Adjustment of Approved Retirement Severance Pay: The pension and maintenance allowance received by an officer or a non-commissioned officer after retirement or discharge, as well as the survivor annuity provided to eligible surviving family members, may be adjusted by the Executive Yuan, in liaison with the Examination Yuan. Adjustments may be based on factors such as the overall government fiscal balance, population and economic growth rates, average life expectancy, the Pension Fund’s reserve ratio and financial and investment performance, and the consumer price index (see Article 39, Paragraph 1, First Sentence).
(8) Increasing the Base Contribution Rate to the Pension Fund: The base contribution rate has been increased from the original 8% to 12%, and subsequently from 12% to 18% (see Article 29, Paragraph 2).
(9) Refund of Contributions with Interest: Officers and non-commissioned officers who are not eligible for retirement severance pay can apply for a lump sum refund of their contributions to the Pension Fund, including interest. Those who have contributed to the Pension Fund for more than three years, except those who retired or were discharged without receiving retirement severance pay as stipulated by law, may also apply for a lump sum payment of the government’s contributions to the Pension Fund, including interest (see Article 29, Paragraph 7, First Sentence).
(10) Government Injection into the Pension Fund: After the Disputed Act came into effect, the government’s share of the burden for retirement severance pay was increased (70% by the VAC and 30% by the Pension Fund). The savings resulting from the implementation of the Disputed Act will be injected into the Pension Fund through budgetary procedures. Furthermore, over a period of 10 years, every two years, NT$20 billion will be budgeted for the replenishment of the Pension Fund, totaling NT$100 billion (see Article 54, Paragraphs 2, 3, 5, and 6 of the Disputed Act, and Article 59, Paragraphs 3 and 4 of the Enforcement Rules of the Disputed Act).
(11) Settlement of Monthly Compensation: For individuals who received monthly compensation in accordance with the regulations before the Disputed Act came into effect, the lump sum compensation amount should be calculated based on their approved service years and salary grade, in accordance with the regulations in place prior to the implementation of the New Pension System. This compensation should be paid in a lump sum after deducting the monthly instalments of compensation received both before and after the Disputed Act came into effect. If the compensation amount is reduced to zero after the deduction, no payment will be made (see Article 47, Paragraph 3).
(12) Extending the Period for Basic Pay Calculation and Combining Years of Services: For active duty personnel, the period for calculating the average basic pay, which serves as the basis for calculating retirement severance pay, has been extended. Years of services already accrued are preserved, and relevant periods (such as military school attendance and unpaid parental leave) count towards years of services (see Article 26, Paragraph 2, Subparagraph 2, Article 29, Paragraphs 1, 2, 4, and 9).
(13) Suspension of Pension or Maintenance Payment: An officer or a non-commissioned officer who is employed or reappointed as full-time teaching staff at a private university and receives a monthly remuneration exceeding the combined total of the highest basic pay for civil servants of the elementary rank (Rank 1) plus professional allowance, will have their pension or maintenance payment suspended (see Article 34, Paragraph 1, Subparagraph 3).
(14) Operation and Delegated Management of the Pension Fund: The Pension Fund should be managed by a dedicated agency for professional, judgment-based investment. The income, expenditure, and financial status of the Pension Fund should be published quarterly (see Article 29, Paragraph 11).
(15) Periodic Review: The Executive Yuan, in liaison with the Examination Yuan, should establish a supervisory mechanism to monitor the pension system, review the institutional design and financial sustainability of the system within five years, and conduct periodic reviews thereafter (see Article 59).
III. The Court’s Reasoning on Subjects of Review (see Annex 1)
(1) The Constitutional Protection for Retired or Severed Personnel, the Nature of Retirement or Severance Pay, the Extent of Such Protection, and the Level of Judicial Scrutiny by This Court
Article 10, Paragraph 9 of the Additional Articles of the Constitution provides that “[T]he State shall respect military servicemen for their contributions to society, and guarantee studies, employment, medical care, and livelihood for retired servicemen.” It takes into account that military personnel owe a duty of loyalty to the State and undertake highly dangerous military tasks to safeguard the security of the State and our people, as well as the unique nature of their profession, which includes mandatory retirement upon reaching a certain age. The State is therefore obliged to provide retired or severed personnel with adequate living support and maintenance to ensure their post-service livelihood and dignity. However, the realization of such constitutional delegation must take into consideration factors including the need to ensure an adequate standard of living for retired or severed personnel, the limitations of the State’s fiscal resources, and economic and social factors (such as demographic changes), so as to achieve a reasonable allocation of public financial resources. In this regard, the legislature, representing diverse public interests and possessing comprehensive information, should be allowed broad discretion in formulating and adjusting relevant policies. The Disputed Act indeed reflects the intent of this constitutional amendment by providing relatively favorable measures for retired or severed personnel, such as establishing a higher minimum payment threshold, maintaining preferential interest rates for particularly vulnerable individuals, and allocating budgetary funds to supplement the Pension Fund, thereby expressing special respect toward such personnel.
Article 18 of the Constitution guarantees the people’s right to hold public office, which includes derivative rights such as status protection, the right to salary and the right to pension (see J.Y. Interpretation No. 605). Military personnel, as a category of public servants, are accordingly entitled by law to receive severance pay and pensions (see J.Y. Interpretation No. 455). The right to severance pay and pension refers to the entitlement of military personnel, arising from their service, to receive payments from the State in fulfilling its obligation to provide them with support and maintenance after retirement or severance. Such entitlements to payment constitute a constitutional right to property.
Although the right to claim retirement or severance pay is indeed a constitutionally protected property right, the extent of such protection varies depending on the source of the funds. In other words, the level of constitutional protection should differ according to whether the funds originate from contributions made by retired or severed personnel during their service. Under the New Pension System, retirement or severance pay calculated based on seniority are funded by the Pension Fund, whose financial resources consist mainly of three components: (1) individual contributions: the principal and interest of monthly contribution made by active personnel at statutory rates; (2) government contributions: the principal and interest of monthly contribution made by the government at statutory rates; and (3) government subsidies: the principal and interest of funds allocated by the government only when (a) the Pension Fund fails to achieve the statutory minimum rate of return, or (b) the Pension Fund is insufficient to cover retirement or severance pay. The aforementioned individual contributions, government contributions, and government subsidies are all managed by the Pension Fund Management Committee. Separate accounts are maintained according to the level of government (central or local) and the category of personnel (political appointees, military personnel, civil servants, and educators), with each account operated on the principle of maintaining a balance between income and expenditure. The Fund is financially independent, and its use is restricted to retirement or severance (bereavement) pay, or expenditures related thereto (see Article 1, Paragraph 2, Article 3, Paragraph 1, Article 4, Paragraph 1, Article 5, Paragraph 3, and Article 8 of the Public Service Pension Fund Act). Furthermore, the amounts of these three types of contributions and subsidies can be determined through calculation and may be segregated within the Pension Fund.
Among the components of retirement or severance pay, the portion derived from item (1), namely the principal and interest of individual contributions, constitutes a claim to property. This portion, given its close connection to the individual’s salary, being subject to the individual’s control and derived from prior payments, should receive a higher level of constitutional protection. Accordingly, this Court should apply stricter scrutiny of judicial review with respect to item (1). If the legislature were to reduce retirement or severance pay in a way that infringes upon the portion derived from individual contributions, such action would in essence be tantamount to an expropriation of private property by the State and therefore impermissible constitutionally.
With respect to item (2), namely the principal and interest of the monthly contributions by the government at the statutory rate, such contributions represent the government’s legal obligation under the shared contribution scheme. Given the financial independence of the Pension Fund, the principal and interest of the government’s contributions, calculated at sixty-five percent, may be managed only by the Pension Fund Management Committee in accordance with the law, and may be used solely for the payment of retirement or severance pay or for related expenditures. Although the government is prohibited from using these funds for any other purposes, the financial resources for this portion originate from the government budget and differ in nature from the individual contributions that are deducted from personal salaries described in item (1). This portion, therefore, falls within the category of superannuation. In situations where the conditions for retirement or severance pay are not met, whether the portion derived from item (2), the principal and interest of the government’s contributions, should nonetheless be granted, as well as the criteria for such payment, falls within the legislature’s discretionary authority (Footnote 2). As for the financial sources of items (3)(a) and (3)(b), they, like the payments made by the government under the Prior Pension System (such as monthly retirement pensions calculated based on seniority, lump-sum retirement pay, and preferential interest) are entirely funded by the government budget and therefore fall within the category of superannuation. Since these resources pertain to the allocation of the State’s fiscal resources with social relevances, the legislature enjoys relatively broad discretion in adjusting or formulating the property claims arising from such sources. Accordingly, when this Court reviews the legislation in dispute for compliance with the principle of proportionality and the principle of legitimate expectation, a more lenient standard of review should be applied.
(2) The Meaning of the Government’s Final Responsibility of Guarantee to Pay and Related Considerations in This Interpretation
It is noted that the phrase“the government shall take the final responsibility of guarantee to pay” appears in various retirement and bereavement compensation statutes governing military personnel, civil servants, and teachers. Article 8, Paragraph 1 of the Civil Service Retirement Act, as amended on January 20, 1993, and enforced on July 1, 1995, provides that“[C]ivil servants’pensions shall be paid from the Pension Fund established through shared contributions by the government and civil servants, and the government shall take the final responsibility of guarantee to pay.”Article 8, Paragraph 1 of the Teaching and Other Staff Members of Schools Retirement Act, as amended on August 2, 1995, and enforced on February 1, 1996, provides that “[P]ensions of teachers and staff shall be paid from the Pension Fund established through shared contributions by the government and teachers and staff, and the government shall take the final responsibility of guarantee to pay.”Article 27, Paragraph 1 of the 1997 Military Service Act, promulgated on August 11, 1995, and enforced on January 1, 1997, provides that“[R]etirement or severance pay for officers and non-commissioned officers shall be paid from a fund established through shared contributions by the government and Active Service Personnel, and the government shall take the final responsibility of guarantee to pay.” Article 29, Paragraph 1 of the Disputed Act also provides:“Unless it is otherwise stipulated in the Act, the retirement severance pay for officers and non-commissioned officers after the implementation of New Pension System shall be paid out from a pension fund established with joint contributions from government and active service personnels (hereinafter referred to as the “Pension Fund”); if the Pension Fund is insufficient, the government will review and adjust the contribution rate in view of national fiscal condition, and shall take the final responsibility of guarantee to pay.” (Footnote 3)
The phrase“the government shall take the final responsibility of guarantee to pay”in the above provisions serves as a complementary measure to the New Pension System, which adopts a shared contribution scheme. Under the New Pension System, retirement or severance pay is, in principle, financed through the operation of the Fund. However, when the fund experiences a shortfall, appropriate measures must accordingly be taken to address the deficiency.
With respect to the measures designed to address shortfalls in the Fund’s revenues and expenditures, the above provisions are not entirely consistent. The Civil Servants Retirement Act enforced in 1995, the Teaching and Other Staff Members of Schools Retirement Act enforced in 1996, and the 1997 Military Service Act, all did not specifically provide measures responding to shortfalls in the Fund, but instead stipulated that the government shall take the final responsibility of guarantee to pay. From the perspective of interpretation, these provisions do not preclude the government, when an actual shortfall in the Fund occurs, from adopting other responsive measures. Such measures may include reviewing and adjusting the basis for contribution rates, postponing the starting age for retirement or severance pay, extending the period used to calculate the average basic pay (salary), or adjusting the rate for pension (i.e., the retirement income replacement rate), as means to increase revenue and reduce expenditure, thereby increasing the Pension Fund’s financial resources and enhancing its capacity to make payments. With respect to the above provision of the Disputed Act, it requires that the option to “review and adjust the contribution rate” be adopted in consideration of the national fiscal conditions. Since the financial burden on the State under “adjusting the contribution rate” is comparatively smaller than the final responsibility of guarantee to pay borne by the State, if this provision were interpreted as requiring the State to make up any shortfall in the Fund under all circumstances, without taking into account national fiscal conditions (especially the reasonable allocation of fiscal resources), then the implementation of this provision would lead to an imbalance. In other words, the reform option under which the State bears a lighter responsibility (“adjusting the contribution rate”) would need to consider national fiscal conditions, whereas the obligation under which the State bears a heavier responsibility (“the final responsibility of guarantee to pay”) would not have to do so.
Furthermore, in keeping with the spirit of the shared contribution scheme, the original intent of this institutional design is to ensure that the Pension Fund operates on a self-sustaining basis and maintains a balance between its revenues and expenditures (see Article 8 of the Public Service Pension Fund Act). This represents a fundamental difference from the earlier superannuation, under which all pension and compensation payments were fully funded by the government budget. If, when the Pension Fund encounters financial difficulties in maintaining a balance between income and expenditures, it fails to first adopt the aforementioned responsive measures to increase revenue or reduce expenses, and instead relies entirely on government budgetary support, this would be no different from reverting to the old system of superannuation. Such an approach would, in fact, run counter to the spirit of the shared contribution scheme. Therefore, under the shared contribution system, before the State provides budgetary support, it should take measures such as adjusting the basis for contribution rates, postponing the starting age of the Retirement or Severance Pay, extending the period used to calculate the average basic pay (salary), and adjusting the rate for pension (i.e., the retirement income replacement rate), in order to address the Fund’s financial difficulties, thus aligning with the original intent of the system. Accordingly, the phrase “the government shall take the final responsibility of guarantee to pay” as stated in the relevant provisions, when understood in light of the fundamental purpose of the shared contribution scheme, should be interpreted to mean that when various revenue-increasing and expenditure-reducing measures, taken in accordance with the principle of legitimate expectation and the principle of proportionality, are still insufficient to address the situation, the government shall, in order to ensure that retired or severed personnel continue to receive their adjusted retirement or severance pay, make timely budgetary allocations to sustain the operation of the Fund.
In summary, the purpose behind the government’s final responsibility of guarantee to pay is that, when measures to increase revenue and reduce expenditure are still insufficient to maintain the financial balance of the Pension Fund, the government shall provide additional budgetary subsidies. As for whether the legislative reforms of retirement or severance pay adopted to address the Fund’s financial shortfalls are unconstitutional, such determination should be examined under principles such as the principle of legitimate expectation and the principle of proportionality. The mere existence of the government’s final responsibility of guarantee to pay would not automatically lead to the conclusion that other reform options adopted by the legislature to address the Fund’s financial imbalance are unconstitutional.
(3) Retirement or Severance Pay Not Considered Deferred Wages
Claims for remuneration, allowances, and retirement payments (Retirement or Severance Pay) constitute entitlements derived from the right to hold public office. Remuneration and allowances refer to the compensation received in exchange for performing official duties while in service, including basic pay, post allowance, professional allowance, regional allowance, and service allowance (see Articles 2, Paragraph 3, Subparagraph 1, and Article 5 of the Pay Act of the Armed Forces). Since the period of service is definite, the total amount of remuneration and allowances can be determined. Retirement payment (retirement or severance pay), on the other hand, refers to the payment granted by the State to public officials in recognition of its obligation to provide support and maintenance after their retirement, arising from their service in public office. Lump-sum retirement pay, pension, preferential interest, and seniority-based stipends all fall under the category of “retirement or severance pay.” Among these, preferential interest refers to the interest earned after retirement or severance on the deposits made under preferential savings contracts, using as principal the lump-sum retirement pay received under the Prior Pension System or the payment paid under the military insurance. This preferential interest is therefore not part of remuneration and allowances. Similarly, the seniority-based stipend is a compensatory payment granted to individuals who have service years under both the Prior Pension System and the New Pension System, specifically to those with more than one year but less than fifteen years of service under the Prior Pension System, upon the implementation of the New Pension System. It is unrelated to the remuneration received during the period of active service and therefore cannot be regarded as a form of deferred wages. Furthermore, under the New Labor Pension System, each worker has an individual pension account. During the period of employment, the employer is required to make monthly contributions to this account, calculated based on the worker’s salary grade according to Monthly Contribution Classification, at a rate of no less than six percent of the employee’s monthly wage. The worker may receive pension payments only upon meeting the retirement conditions, and the amount is limited to the sum of the principal contributions and accumulated earnings (see Articles 14, 16 and 23 of the Labor Pension Act). In nature, such payments may be understood as a form of deferred wage. To the contrary, the monthly retirement income of military personnel depends on the average life expectancy after retirement, which is fundamentally different. Therefore, retirement or severance pay cannot be regarded as a payment of deferred wages.
(4) Article 3; Article 26, Paragraph 2, Subparagraphs 1 and 2, Paragraph 3, and the first sentence of Paragraph 4; and Article 46, Paragraph 4, Subparagraph 1: Unrelated to the principle of lex retro non agit, Nor in Violation of the Principle of Legitimate Expectation and the Principle of Proportionality
(i) The Above Provisions Unrelated to the principle of lex retro non agit
In principle, a newly enacted regulation that restricts or deprives individuals of their rights, or imposes additional legal obligations, shall not apply to facts or legal relationships that have already been concluded before the regulation came into effect. This is known as the principle of lex retro non agit. However, if the legal relationship governed by the new regulation spans the periods of both the old and new laws, and the constitutive facts of that relationship are not fully realized until after the new regulation comes into effect, the new regulation shall apply unless otherwise specified by law. Such application of the new regulation to facts or legal relationships that arose under the old regulation but continue to exist after the new regulation takes effect does not constitute a retroactive application of law and thus does not involve the principle of lex retro non agit. (see J.Y. Interpretations Nos. 620 and 717).
Retirement or severance pay refers to the payment made to officers and non-commissioned officers upon retirement or severance (see Article 3, Subparagraph 4). In cases involving a one-time retirement or severance pay, for example, when an individual receives a lump-sum retirement pay and does not participate in the preferential deposit scheme, the legal relationship concludes once the payment has been received by the beneficiary. However, for a non-one-time retirement or severance pay, the legal relationship does not conclude until the entire amount has been paid in full. This is illustrated by the following: (1) The right to claim retirement or severance pay may be suspended, forfeited, or reinstated due to circumstances that arise after retirement or severance. (2) Prior to the enforcement of the Disputed Act, the monthly pension of retired or severed personnel, once reviewed and approved, was adjusted in accordance with the salary changes of active service personnel. After the enforcement of the Disputed Act, it may be adjusted based on changes in the consumer price index and other factors. (3) During the period in which monthly pensions or alimony are being received, the beneficiary may apply to convert such payments into a lump-sum retirement pay, among other provisions (see Article 34, Article 36, Paragraph 1, Article 39, Paragraph 1, Article 40, Article 41, Article 46, Paragraph 3 of the Disputed Act, and Articles 25, 34, and 35 of the 1997 Military Service Act). All of these are founded on the existence of a continuing legal relationship, which accounts for their legal nature. Therefore, with respect to non-one-time retirement or severance pay, such as monthly preferential interest, monthly stipend, or monthly pension, since the constitutive facts of the legal relationship governing such payments have not yet been fully realized in actual life, if a new regulation modifies the content of the retirement or severance pay and applies it to facts or legal relationships that continue to exist after the new regulation takes effect, without reducing or recovering payments already received, such application does not constitute retroactive application of the new regulation and thus does not involve the principle of lex retro non agit.
It is found that the legal relationship concerning retirement or severance pay regulated by the Disputed Act spans the periods of both the old regulation and the new regulation. After the enforcement of the Disputed Act, the authorities shall, in accordance with the retirement or severance requirements and the income calculation standards prescribed in the Act, determine whether the original retirement income exceeds the amount calculated under the new standards. For any excess amount, deductions shall be made in sequence: first from preferential interest, then from pensions accrued under the Prior Pension System, and finally from pensions accrued under the New Pension System. Based on these calculations, the monthly pension amount payable after the new law takes effect shall be adjusted and reduced accordingly, and the excess portion to be deducted shall no longer be paid (see Article 26, Paragraph 3; Article 46, Paragraph 4, Subparagraph 1 of the Disputed Act; and Article 10, Paragraph 1 of the Regulations Governing the Preferential Savings Scheme for Retirement Severance Pay and Military Insurance Payment of Retired or Discharged Officers and Non-Commissioned Officers in the Armed Forces). It is thus evident that the above provisions apply the new regulations to the legal relationship concerning retirement or severance pay that arose during the period of the old regulation and continued to exist after the new regulation took effect. This does not constitute a retroactive application of the new law and therefore does not involve the principle of non-retroactivity of law. Accordingly, there is no need to amend J.Y. Interpretation No. 717.
(2) The Above Provision Reducing the Original Retirement Income Not Violating the Principles of Legitimate Expectation or Proportionality
(i) The Reduction of Original Retirement Income Prior to the Enforcement of the Disputed Act Serving a Legitimate Purpose in Pursuit of Compelling Public Interests
After the amendment and enforcement of the Disputed Act, the object of deduction from retirement or severance pay was limited to the preferential interest. Retired or severed personnel whose seniority is only under the New Pension System are not subject to such deductions from their original retirement or severance pay, and the principal and interest of their individual contributions are not adversely affected (see Executive Yuan Letter replying to this Court Tai-Nien-1080014121 of May 27, 2019; and Ministry of National Defense Letter replying to this Court Kuo-Tzu-Jên-Li-1080001743 of July 11, 2019). The funding for preferential interest comes entirely from the government budget and falls within the scope of superannuation. Therefore, when this Court examines whether the legislature’s reduction measure complies with the principle of proportionality and whether it violates the principle of legitimate expectation, less stringent scrutiny should be applied.
The stability of the legal order pursued by the principle of legitimate expectation, on the one hand, and the need for reform constantly arising in modern states in response to social changes, on the other, are both fundamental constitutional values. The two must be brought into harmony. Moreover, no legal regulation is permanently immutable, and those subject to regulation cannot claim to have had no foresight regarding possible future changes, whether by enactment, amendment, or repeal, of such regulations. In response to changing times and the needs arising from the current social environment, the legislature, so long as it does not violate the principle of lex retro non agit, generally retains discretion to decide whether and how to maintain existing rights or interests of individuals. However, where an old law granting certain rights or interests does not specify a period of validity, and where, objectively speaking, those subject to the law could reasonably expect its continued application, such that they typically base their life or business arrangements upon it, and such expectation is worthy of protection, any changes must be justified by the public interest requirement. Moreover, when making such changes, in order to achieve the intended purpose, the legislature must take into account the differing capacities of those affected and adopt measures to mitigate the impact on their livelihood and financial planning, so as not to violate the principle of legitimate expectation and the principle of proportionality (see J.Y. Interpretations Nos. 525 and 717).
It is noted that the provisions concerning retirement or severance pay in the 1997 Military Service Act did not specify a period of validity. By the time the Disputed Act was promulgated, the 1997 Military Service Act had been in force for more than twenty years. Those subject to the regulation had relied on the old law to make plans for their livelihood and finances, thereby objectively demonstrating their reliance on the continued enforcement of the old law. Their expectation that the old law would remain in effect, therefore, cannot be regarded as a mere wish. To the contrary, their reliance interests are worthy of constitutional protection. However, it is further noted that:
(1) The preferential interest included in the monthly retirement income is paid only on the principal of the preferential deposit derived from the lump-sum retirement pay and/or the payment paid under the military insurance, calculated based on the seniority under the Prior Pension System. The seniority-based stipend is provided only to those who have more than one year but less than fifteen years of seniority under the Prior Pension System, while also having seniority under both the New Pension System and the Prior Pension System. For the Prior Pension System, each unit of monthly pension is calculated as one month’s basic pay plus NT$930. At the same time, under the New Pension System each unit of monthly pension is calculated as two months’ basic pay. Due to these differing designs of the pension systems in different periods, retired or severed personnel with the same seniority and rank may nonetheless receive significantly different amounts of monthly retirement income depending on when they served.
(2) The preferential deposit system was established at the inception of the pension system, when the remuneration and allowances of military personnel were relatively low. Because retirement income was calculated based on their basic pay, it was insufficient to meet their basic livelihood after retirement or severance, and thus the preferential deposit system was introduced. This system has been in place for over fifty years. Since 1974, the government has repeatedly raised the salaries of military personnel, civil servants, and teachers: seven times between 1974 and 1980, eight times between 1981 and 1990, annually between 1991 and 1999, and four times between 2001 and 2008. By the end of 1996, each salary adjustment ranged from five percent to twenty percent (except for three percent in 1995), and since 1997, each increase has been three percent. By 1980, the starting salary for military personnel (see Annex 9) was no lower than the average starting salary of employees in other sectors, which was NT$6,175 (Footnote 4). As the remuneration and allowances of military personnel have not remained persistently low, the retirement income calculated based on their basic pay can no longer be regarded as insufficient to cover basic livelihood after retirement. Therefore, the rationale for continuing to provide preferential interest far higher than market rates, solely on the grounds that retirement income is too low, has lost its legitimacy and thus become untenable.
(3) When the preferential deposit system was first implemented, the preferential interest rate was set at 1.5 times the one-year fixed deposit rate offered by the Bank of Taiwan. The annual interest rate of the preferential deposit initially fluctuated along with the one-year fixed deposit rate, but in 1983 it was fixed at eighteen percent. Since then, the one-year fixed deposit rate has fallen from 7.55% in 1983 to 2.95% in 2001, 1.16% in 2010, and 1.07% in 2016 (Note 5). Despite this decline, the annual interest rate of the preferential deposit remained unchanged at eighteen percent, resulting in an increasingly heavy financial burden on the government due to the subsidy required to cover the payment of preferential interest.
(4) The seniority-based stipend was introduced upon the implementation of the New Pension System to compensate those who possess seniority under both the New Pension System and the Prior Pension System, and it has been in effect for over twenty years. The payment of the seniority-based stipend results in uniform and highest pension rates for individuals who have between one and fifteen years of seniority under the Prior Pension System in addition to service under the New Pension System (a situation most advantageous to those with only one year of seniority under the Prior Pension System). Those with sixteen or more years of seniority under the Prior Pension System receive slightly lower monthly pension rates, followed by those with seniority only under the New Pension System, while those with seniority only under the Prior Pension System receive the lowest rates (see Appendix 5). This disparity in retirement income among these groups will become increasingly pronounced as the proportion of seniority calculated under the New Pension System continues to grow, while that under the Prior Pension System continues to decline.
(5) Due to demographic aging, both the number of beneficiaries and the duration of payments for retirement or severance pay have increased, resulting in a continuously rising fiscal burden on the government to fund the payments under the Prior Pension System. Furthermore, as a consequence of declining birth rates, the number of contributors to the system has decreased, making reforms necessary.
(6) The Pension Fund, which is used to pay retirement or severance pay under the New Pension System, has faced financial shortfalls due to insufficient contribution rates and investment returns since its inception. In addition, the streamlining of the armed forces further reduced contributions, leading to deficits beginning in 2011, with projections indicating that the Fund would be depleted by 2020 (see the Sixth Actuarial Report). Accordingly, the government timely and appropriately adjusted the basis for contributions and reduced the retirement or severance pay under the New Pension System in order to preserve the sustainability of the Pension Fund.
In sum, for the foregoing reasons, the moderate reduction of the original retirement or severance pay was undertaken in pursuit of a compelling public interest, which constituted a legitimate purpose.
(ii) The Reduction Measures Adopted Under the Above Provisions Contributing to the Objectives and Not Exceeding What Is Necessary
(1) Using seniority of service and basic pay as the two factors for calculating the rate for pension remains reasonable, and the setting of the rate for pension is helpful for the achievement of the objectives of the Disputed Act.
The pension prescribed in the Disputed Act is calculated by multiplying the basic pay by two as the base unit. (Specifically, for personnel who had already retired or been severed, or who had already met the statutory conditions for receiving a pension at the time the Disputed Act came into force, the base unit is the basic pay of active personnel of the same rank and pay rate as of July 2018, plus one time thereof. For those who retire or are severed after the enforcement of the Disputed Act, the base unit is the average basic pay of active service personnel of the same rank and pay rate during the final one-fifth of their years of service up to the effective date of retirement or severance, plus one time thereof.) The result is then multiplied by the rate for pension, which is determined on the basis of the seniority of service. The core elements in calculating the pension are therefore the basic pay and seniority of service.
As to the element of basic pay, the Disputed Act calculates the pension by multiplying the basic pay by two. Although it does not directly include allowances in this calculation, it should be noted that the post allowance, professional allowance, regional allowance, and service allowance received by active service personnel are compensations for the performance of their specific duties while in service. Once they have retired or been severed, they no longer perform such duties; therefore, the various allowances that created differences in remuneration among active service personnel should not appropriately serve as the basis for calculating retirement income. Considering that basic pay is determined by the pay scale and points of pay, embodying a comprehensive reflection of the position and seniority of active service personnel; that under the New Pension System, the contribution rate to the Pension Fund for retirement or severance pay is calculated as basic pay plus one time the basic pay; and that the total of the basic pay plus the professional allowance per month generally amounts to about 1.6 to 1.7 times the basic pay, adopting basic pay plus one time the basic pay as the base unit for calculation is, for the vast majority of personnel whose professional allowance is lower than their basic pay, relatively advantageous (Footnote 6). Accordingly, the provision of the Disputed Act that continues to use basic pay plus one time the basic pay as the base unit, as has been applied since the implementation of the New Pension System, should be regarded as reasonable.
As to the element of seniority, the Disputed Act provides that the rate for pension used as the standard for calculating the monthly pension is determined according to the seniority of service. This ensures that retirement income varies reasonably in accordance with differences in seniority and rank. The Disputed Act raises the standard of the rate for pension, setting the rate for those with twenty years of seniority at fifty-five percent (compared to forty percent prior to the enforcement of the Disputed Act), with an annual incremental rate of two percent, up to a maximum of forty years of seniority. Under this scheme, the maximum rate for pension is ninety-five percent for non-commissioned officers and ninety percent for officers. Based on this standard of the rate for pension, for those whose monthly pension exceeds the above benchmark, the difference is gradually reduced over a ten-year period. Starting from July 2028, the statutory pension rates are set, in sequence for twenty, twenty-five, thirty, thirty-five, and forty years of seniority, at fifty-five percent, sixty-five percent, seventy-five percent, eighty-five percent, and ninety-five percent respectively (or ninety percent for officers with forty years of seniority). These rates are calculated with twice the basic pay of active service personnel of the same rank and pay rate as of July 2018 serving as the denominator (see Article 26). For the vast majority of the affected individuals, the converted real wage income corresponding to these figures are approximately 64.9%, 76.7%, 88.5%, 100.3%, and 112.1% (or 106.2% for officers) respectively (Footnote 7).
The term“original monthly retirement income”refers to the total amount composed of the following: the monthly pension based on the seniority under the Prior Pension System (calculated as basic pay × 1 × rate for pension based on seniority of service under the Prior Pension System, plus an in-kind allowance of NT$930, and including a monthly stipend); the monthly pension based on the seniority under the New Pension System (calculated as basic pay × 2 × 2% × seniority of service); and the preferential interest (derived from the payment paid under the military insurance, calculated based on the seniority under the Prior Pension System, and placed in a preferential deposit with an annual interest rate of eighteen percent in accordance with law). When the total of these amounts exceeds the pension amount calculated according to the above-mentioned statutory rates for pension, the excess shall be reduced accordingly. The establishment of rates for pension contributes to achieving the objectives of the Disputed Act.
(2) The above provisions concerning the transition period, minimum threshold, and exemptions from reduction constitute appropriate measures to mitigate the impact on the livelihood and financial planning of the affected individuals.
In addition to setting an assured minimum amount as the lower threshold for deductions, the above provisions also take into account differences in the capacity of affected individuals to bear financial adjustments, and therefore adopt the following measures to alleviate the impact on their livelihood and financial planning. For those receiving a monthly pension, the portion of their original retirement income that exceeds the statutory ceiling of retirement income is to be gradually reduced in the following order: the preferential interest; the monthly pension based on the seniority under the Prior Pension System (including the seniority-based stipend); and the monthly pension based on the seniority under the New Pension System—averaged over a ten-year transitional period, until no difference remains. The principal of the preferential deposit shall be fully refunded in the eleventh year. For those who made a preferential deposit using their lump-sum retirement pay and the payment paid under the military insurance, if the preferential interest they receive exceeds the assured minimum amount, the interest rate applied to the corresponding portion of the deposit principal shall be reduced as follows: twelve percent in the first and second years, ten percent in the third and fourth years, eight percent in the fifth and sixth years, and six percent starting from the seventh year, with a six-year transitional period before full adjustment. For officers and non-commissioned officers below the rank of colonel who were injured or disabled in combat or in the line of duty, or who were aged eighty-five or above before the implementation of the Disputed Act, the preferential interest and retirement or severance pay shall not be reduced. Accordingly, both the number of affected individuals and the average amount of reduction remain moderate (see Annex 10).
(iii) In short, Article 3; Article 26, Paragraph 2, Subparagraphs 1 and 2, Paragraph 3, and the first sentence of Paragraph 4; and Article 46, Paragraph 4, Subparagraph 1, do not conflict with the principle of legitimate expectation, nor the principle of proportionality.
In conclusion, the pension system that was originally more favorable to retired or severed personnel had its historical justifications. However, as society evolved, a number of unreasonable phenomena emerged from that system. That said, these developments cannot be attributed to the affected individuals themselves, who also possess a legitimate expectation that the former regulations would remain in force. Nevertheless, for the reasons stated above in Sections (2)(i) and (ii), the relevant provisions of the Disputed Act that reduce the original retirement income, by appropriately lowering the original retirement or severance pay, were adopted to achieve the following objectives: (1) to alleviate the significant disparity in retirement income among retired and severed personnel of the same rank and seniority, arising solely from differences in their periods of service; (2) to address the unreasonableness of allowing affected individuals to continue receiving the full amount of preferential interest; (3) to reduce the government’s fiscal burden resulting from subsidizing preferential interest payments; (4) to respond to demographic aging and the increasing costs of retirement or severance pay, which are largely borne by the next generation amid declining birth rates; and (5) to ensure the sustainability of the Pension Fund and safeguard the financial security of retired or severed personnel in old age. Taken together, these objectives pursue compelling public interests that outweigh individual reliance interests. Moreover, the provisions include appropriate measures to mitigate the impact on the livelihood and financial planning of those affected. Therefore, the means adopted do not exceed necessity and can be regarded as compliant with the principle of legitimate expectation and the principle of proportionality.
V. Article 26, Paragraph 4, of the Act does not contradict the intent and purpose of the constitutional guarantees of the right to hold public office and the right to life.
Article 26, Paragraph 4, of the Act provides:“For those who retired before the enforcement of the amendment to this Act, the base amount of their pension shall be twice the base salary of persons on active service with the same rank and salary grade. However, when the discrepancy in the pension amount is reduced pursuant to the preceding paragraph, the adjusted amount shall not be lower than the total of the level-one base salary and professional allowance of a second lieutenant. Where the previously received amount is lower than the total of the level-one base salary and professional allowance of a second lieutenant, the pension shall continue to be disbursed at the previously received amount.”In setting this guaranteed minimum amount, the legislature took into account the profession’s unique characteristics and the limits on years of service of the military profession, and also consulted the provisions governing the guaranteed minimum amounts prescribed in the Act Governing Retirement, Severance, and Bereavement Compensation for Civil Servants, and the Act Governing Retirement, Severance, and Bereavement Compensation for the Teaching and Other Staff Members of Public Schools, both of which had been enacted earlier (i.e., at the time this Act came into force, those statutes provided that the total of the highest level base salary of a civil servant at grade-one of the designated appointment rank and professional allowance for that rank equaled thirty-three thousand one hundred and forty dollars (NT$33,140) (which is fourteen thousand eight hundred and ninety dollars (NT$14,890) plus eighteen thousand two hundred and fifty dollars (NT$18,250)) (Footnote 8). Consequently, the Act adopted the total of the level-one base salary and professional allowance of a second lieutenant (an officer, not a non-commissioned officer) as the guaranteed minimum amount of retirement income (i.e., thirty-eight thousand nine hundred and ninety dollars (NT$38,990) (which is twenty thousand three hundred and eighty dollars (NT$20,380) plus eighteen thousand six hundred and ten dollars (NT$18,610)). This amount exceeds what is required to maintain the basic standards of living of retired civil servants (i.e., the amount of the monthly salary of an in-service civil servant at grade-one, level-one, of the designated appointment rank; see J.Y. Interpretation No. 280). Thus, this amount is reasonable and does not contradict the intent and purpose of the constitutional guarantees of the right to hold public office.
There are two bases for calculating retirement income: seniority of service and the base salary determined by salary grade and salary point. This scheme is designed to maintain the retirement income differentials resulting from varying seniority of service and rank. Where a veteran’s existing retirement income is lower than the guaranteed minimum amount, this is attributable to either less seniority of service or a lower base salary while in service, rather than to the Act. The proviso of the aforementioned provision (Article 26, Paragraph 4, of the Act) protects such veteran’s retirement income, which is lower than the guaranteed minimum amount, from being reduced and is in essence a safeguard of, not a restriction on, the rights and interests of retired or severed personnel. The guaranteed minimum amount refers to the amount of the retirement income after the downward adjustment of any discrepancy, which may not fall below the total of the level-one base salary and professional allowance of a second lieutenant (see the proviso to the first sentence of Article 26, Paragraph 4, of the Act). This concept is distinct from the minimum living expense standard (see Article 4 of the Public Assistance Act). Accordingly, even if the retirement income if a veteran whose original income is lower than the guaranteed minimum amount is not supplemented up to the guaranteed minimum amount, such treatment does not contradict the intent and purpose of the constitutional guarantee of the right to life.
In sum, the aforementioned provision does not contradict the intent and purpose of the constitutional guarantees of the right to hold public office and the right to life.
VI. Article 29, Paragraph 2, of the Act does not implicate the principle of non-retroactivity of law or the protection of the right to work, run afoul of the principle of proportionality, or contradict the intent and purpose of the constitutional guarantee of the people’s right to property.
Article 29, Paragraph 2, of the Act provides:“The standard for the shared contribution to the Pension Fund referred to in the preceding paragraph shall be a rate between twelve percent and eighteen percent of twice the base salary of persons on active service, sixty-five percent of which is contributed by the government and thirty-five percent of which is contributed by the persons on active service.”This provision governs the standard for the shared contribution to the Pension Fund and raises the shared-contribution rate for the Pension Fund from between eight to twelve percent to twelve to eighteen percent.
Raising the standard for the shared contribution to the Pension Fund will reduce the monthly disposable income of persons on active service, thereby restricting their right to property. Although the higher rate increases the burden of persons on active service, the higher rate applies only prospectively, after (the 2018 amendment to) the Act came into force, and does not retroactively apply to contributions already made in the past. Thus, there is no retroactive application of law nor any infringement of the regulated persons’right to work, as alleged by the petitioner.
Whether and how to raise the standard for the shared contribution to the Pension Fund implicates the overall financial planning of the Pension Fund and the allocation of the fiscal resources of the State. In reviewing whether the resulting restriction on the right to property of persons on active service violates the principle of proportionality, this Court, in light of the expertise required for fiscal planning, the organization and division of power among government agencies, and the decision-making procedures, in principle defers to the judgment of the political branches on this matter and applies a lenient standard of review.
Under Article 29, Paragraph 1, of the Act, the Pension Fund, jointly funded by proportional contribution from the government and persons on active service, is responsible for paying the retirement or severance pay calculated on the basis of seniority accrued under the New Pension System. As noted above, this shared-contribution scheme is a financial mechanism to balance the income and expenditure of the Pension Fund. Since the inception of this shared contribution scheme, however, the government has not appropriated sufficient funds to the Pension Fund as recommended by actuarial reports rendered in the previous successive years but has long pursued an underfunding policy, failing to inject into the Pension Fund the financial resources it requires in a timely manner; coupled with the Pension Fund’s inherently stable and conservative, rather than speculative, investment strategy, all these factors have contributed to a scenario where the longer the New Pension System has been in effect, the more the implicit contingent liabilities (academically termed“Unfunded Actuarial Accrued Liability”) (Footnote 9) has increased. The persistent widening gap between the optimal contribution rate (identified in the six actuarial reports rendered during the period between the implementation of the New Pension System and 2016) and the actual contribution rate under the New Pension System fully illustrates this phenomenon.
The Pension Fund is the source of retirement income under the New Pension System (implemented since January 1, 1997) and a key safeguard of economic security of retired or severed personnel in their old age. When the implicit contingent liabilities of the Pension Fund increase and the Pension Fund’s expenditures begin to exceed its income so that a future financial crisis becomes foreseeable (see Annexes 6 and 11), it is necessary to timely raise the standard for contributions in order to extend the lifespan of the Pension Fund. Extending the lifespan of the Pension Fund thus constitutes an important public interest.
The legislature raised the standard for the contribution to the Pension Fund, in accordance with the statutory procedure, from the previous rate eight to twelve percent to the rate twelve to eighteen percent. In doing so, the legislature not only sought to gradually restore the financial soundness of the Pension Fund but also considered the actual affordability of the government and the persons on active service. The legislature authorized the Executive Yuan, in conjunction with the Examination Yuan, to jointly set and adjust the contribution rate based on the financial situation of the State and the results of the regular financial, actuarial evaluations of the Pension Fund (see Article 29, Paragraphs 1 and 3, of the Act), and gradually raise the rate to the upper limit of eighteen percent. Compared with the optimal contribution rate of thirty-eight point one four percent (see Annex 3) identified in the sixth actuarial report of the Pension Fund in 2016 for balancing the Pension Fund’s income and expenditure, the gradual increase approach adopted by the Act to raise the standard for the contribution to the Pension Fund to eighteen percent bears a reasonable connection to the legislative purposes mentioned above.
In sum, Article 29, Paragraph 2, of the Act does not implicate the principle of non-retroactivity of law or the protection of the right to work, run afoul of the principle of proportionality, or contradict the intent and purpose of the constitutional guarantee of the people’s right to property.
VII. Article 46, Paragraph 5, of the Act does not contradict the intent and purpose of the constitutional guarantee of the right to property.
Article 46, Paragraph 5, of the Act provides: “Where the discrepancy is reduced by equal annual downward adjustments over ten years in accordance with Paragraph 3 of Article 26, the principal of the preferential deposit shall be returned to the person concerned in the eleventh year, and his pension shall be disbursed in accordance with the standards set forth in Paragraph 2 of Article 26.”This provision sets out the time at which the principal of preferential deposit is to be returned.
Under the Act, the discrepancy in original retirement income subject to downward adjustment is deducted in the following order: preferential interest, the monthly pension based on seniority under the Prior Pension System (including seniority-based stipend), and the monthly pension based on seniority under the New Pension System. During the ten-year transition period for this downward adjustment, the government continues to pay preferential interest, at a rate below eighteen percent per annum, on the entire principal amount of the preferential deposit (see Article 4 of the Regulations of the Preferential Deposit of the Retirement or Severance Pay and the Retirement Payment Paid under the Military Insurance of Officers and Non-commissioned Officers of the Armed Forces). Moreover, there are no cases where a regulated person subject to the ten-year adjustment under Article 26, Paragraph 3, of the Act, has had their preferential interest fully deducted before the end of the ten-year period. Furthermore, regulated persons may terminate the preferential deposit contract at any time before the end of the ten-year period to retrieve the principal of the preferential deposit, thereby ceasing to receive the relatively preferential interests (see Ministry of National Defense Letter Kuo-Tzu-Jen-Li-1080001743 of July 11, 2019, to this Court). Therefore, Article 46, Paragraph 5, of the Act, which stipulates that the full principal of the preferential deposit shall be returned in the eleventh year after the full discrepancy has been reduced from the retirement income, conforms to the principle that interest is generated only where there is principal and does not contradict the intent and purpose of the constitutional guarantee of the right to property.
VIII. Article 47, Paragraph 3, of the Act neither violates the principle of non-retroactivity of law nor contradicts the principle of legitimate expectation or the principle of proportionality.
The base for calculating the monthly pension payable under the Prior Pension System is different from that under the New Pension System (see Tables 1 and 2 under Article 26 of the Act). Moreover, under the New Pension System, but not under the Prior Pension System, officers and non-commissioned officers on active service must pay contributions to the Pension Fund. To facilitate implementation of the New Pension System and to avoid reducing the monthly pension of officers and non-commissioned officers who retired or were severed after implementation of the New Pension System but had accrued less than fifteen years of seniority under the Prior Pension System, a seniority-based stipend scheme was established. Under this scheme, for those with seniority accrued under both the New the Prior Pension System whose seniority under the Prior Pension System is at least one year but less than fifteen years, the entire portion of seniority accrued under the Prior Pension System is fully credited (see Annex 5). From the standpoint of its funding, the aforementioned seniority-based stipend remains within the category of a gratuity-based pension scheme. Accordingly, any adjustment to that stipend is subject only to a lenient standard of review by this Court.
Article 47, Paragraph 3, of the Act provides:“For those who have been receiving monthly stipends in accordance with the applicable provisions before the enforcement of the amendment to this Act, the lump sum one-time stipend to which they are entitled shall be calculated, based on their approved seniority and salary grade upon retirement or severance, in accordance with the provisions governing such stipends before implementation of the New Pension System. After deducting the monthly stipends received before and after enforcement of the amendment to this Act, any remaining balance shall be disbursed in a single lump sum. If there is no remainder, no further payment shall be made.”Thus, for those with seniority accrued under both the New and Prior Pension System who has been receiving monthly stipends, the government, following enforcement of (the amendment to) the Act, pays in one lump sum any remaining amount of the one-time seniority-based stipend after netting the monthly stipends already received, and makes no further payment if there is no remaining balance. The aforementioned provision does not contradict the principle of non-retroactivity of law.
Retired or severed personnel who chose to receive monthly stipends do have a legitimate expectation, deserving protection, of continuing to receive such monthly stipends. However, where the legislature adopts the aforementioned seniority-based stipend measures in pursuit of a legitimate public interest that outweighs individual expectations, and, after considering difference in the regulated persons’ ability to bear the impact, adopts reasonable remedial measures or transitional provisions to mitigate that impact, Article 47, Paragraph 3, of the Act does not contradict the principle of legitimate expectation or the principle of proportionality.
As noted above, recalculating and settling monthly stipends following enforcement of the amendment to this Act is intended to ensure that retirement or severance pay for persons in the same group with the same seniority of service and rank will not differ significantly merely because of different periods of service. The purpose thus pursued is legitimate. The aforementioned provision applies a uniform rule based on the total amount of the one-time stipend, deducts the monthly stipends already received, and pays any remaining balance in a single lump sum as a remedial measure, while making no further payments and reframing from clawing back any amount already received in excess of the lump-sum stipend. These are all reasonable mitigating measures and bears a rational connection to the achievement of the aforementioned purpose. Accordingly, the aforementioned provision does not contradict the principle of legitimate expectation or the principle of proportionality.
Furthermore, according to Ministry of National Defense Letter Kuo-Tzu-Jen-Li-1070001907 of July 9, 2018, monthly stipends have in practice continued to be disbursed to retired or severed officers and non-commissioned officers in accordance with Article 26 of the Act. Hence, the aforementioned provision has, in fact, not been implemented. It is hereby noted as well.
IX. Article 54, Paragraph 2, of the Act does not implicate the right to property of the regulated persons, as guaranteed by the Constitution.
Article 54, Paragraph 2, of the Act provides: “The pension expenditure saved each year from the deduction of the post-retirement or post-severance payments to officers or non-commissioned officers in accordance with Article 26, Paragraph 3, and Article 46, Paragraph 4, of the Act shall be injected in full into the Pension Fund and shall not be diverted for other uses.”This provision requires that all savings in pension expenditures be injected into the Pension Fund.
Paragraph 3 of the same Article imposed on the government an obligation, through the budget process, to inject in full into the Pension Fund an amount equal to the expenditure saved by deducting retirement or severance pay pursuant to the Act. In other words, through budgetary procedures, the government gratuity-based pension scheme transfers to the Pension Fund that portion of retirement or severance pay expenditure which previously belonged to the gratuity-based pension scheme, without reducing the government’s responsibility for paying retirement or severance pay. The purpose of this budgetary injection into the Pension Fund is to strengthen the long-term payment capacity and sustainability of the Pension Fund, thereby safeguarding the economic security of retired or severed personnel in their old age. In this respect, Article 54, Paragraph 2, of the Act does not implicate the right to property of the regulated persons.
X. Article 34, Paragraph 1, Subparagraph 3, of the Act contradicts the intent and purpose of the constitutional guarantee of the right to equality and shall become null and void from the date of publication of this Interpretation.
The foundation of the principle of equality under the Constitution is that equals should be treated equally and unequals should be treated unequally. Accordingly, treating the same matters differently without justifications, or failing to treat different matters differently without reasonable grounds, constitute a violation of the principle of equality. Whether a legal provision complies with the requirements of the principle of equality depends on whether the purpose of the differential treatment is constitutional, and whether there is a certain degree of nexus between the classification adopted and the achievement of the regulatory purpose (see J.Y. Interpretation Nos. 593, 682, 694, 701, 760, and 764).
Article 34, Paragraph 1, Subparagraph 3, of the Act provides: “Where an officer or non-commissioned officer who is receiving a pension or alimony falls under any of the following circumstances, payment of the pension or alimony shall be suspended until the circumstance ceases to exists: . . . 3. where such person assumes or reassumes a full-time faculty position at a private university and receives a monthly salary exceeding the total of the highest level base salary and professional allowance of a civil servant at grade-one of the designated appointment rank.”This provision restrains a regulated person who is subject to this provision from receiving his pension or alimony if such regulated person has assumed or reassumed a full-time faculty position at a private university or a private college and receives a salary in excess of a specific amount set forth in this provision. Article 34, Paragraph 1, Subparagraph 3, of the Act apparently uses the classification bases of that whether a regulated person assumes or reassumes a full-time faculty position at a private university or a private college, as well as that whether a regulated person receives a salary in excess of a specific amount set forth in this provision, to identify certain regulated persons and directly imposes a restriction on the right to property of the identified regulated persons. Since most of the retired or severed personnel are people in their middle age or old age, the application of the aforementioned provision actually constitutes a restriction on subjective qualifications subjecting these regulated persons to relatively unfavorable treatment and results in the imposition of a restriction on the right to work of these regulated persons. After taking into account as a whole the aforementioned classification bases used by the aforementioned provision, as well as the type of rights involved in the differential treatment prescribed therein, this Court must apply stricter scrutiny to determine the constitutionality of the said provision. Only if Article 34, Paragraph 1, Subparagraph 3, of the Act serves an important public interest and means that are substantially related to that public interest are adopted will this Court find this provision to be in line with the intent and purpose of the right to equality guaranteed by Article 7 of the Constitution.
The legislative purposes of the aforementioned provision are, first, to prevent a dual-remuneration situation in which an officer or non-commissioned officer receives a pension or alimony from the government while simultaneously drawing a salary as a full-time faculty at a private university that receives government incentives or subsidies, and, second, to create more employment opportunities for younger generations (see Minutes of the Plenary Session, Legislative Yuan Gazette 74(107): 341 (Vol. 1); Minutes of the Committee Meetings, Legislative Yuan Gazette 82(105): 364-402; and the explanatory materials from the Ministry of Civil Service attached to Examination Yuan Letter Kao-Tai-Tsu-Erh-Tzu-1080003710 of May 10, 2019, to this Court). These two purposes pursue important public interests.
However, in terms of the means adopted:
1. The Act was amended and promulgated on June 21, 2018. Under Point 9, Subparagraph 5, Item 3, of the Ministry of Education Directions on the Allocation and Applications of Funds for Incentivizing and Subsidizing the Overall Development of Private Technical and Vocational Universities and Colleges (amended and promulgated on November 23, 2017), Point 8, Subparagraph 1, Item 1, of the Ministry of Education Directions on Funding for Incentivizing Institutional Development Plans of Private Universities and Colleges (amended and promulgated on January 30, 2018), and Article 8, Paragraph 8, of the Act Governing the Retirement, Bereavement Compensation, Resignation, and Discharge with Severance Pay Benefits for Teaching and Other Staff of School Legal Persons and Their Respective Private School(s) (amended, promulgated, and came into force on June 10, 2015), private universities may not use government incentive or subsidy funds to pay salaries to officers or non-commissioned officers who receive pensions or alimony from the government and who assume or resume full-time positions at such universities, and the government does not bear responsibility for retirement or bereavement contributions for such position. These demonstrates that, in principle, government incentives and subsidies to private schools do not give rise to a situation in which retired military personnel who assume or reassume full-time faculty positions at a private university or college. Even assuming arguendo that government subsidies to private universities could constitute substantial payment for the salaries of retired or severed personnel assuming or reassuming full-time faculty positions, thereby raising concerns of actually receiving double remuneration from the government, the amount of subsidy funds granted by the Ministry of Education based on existing scale, policy performance, and financial aid measures, or incentive funds granted based on school characteristics and administrative operations (under the Ministry of Education Directions on Funding for Incentivizing Institutional Development Plans of Private Universities and Colleges), varies significantly among universities (for the year of 2019, ranging from a maximum of over one hundred sixty-three million one hundred and forty thousand New Taiwan dollars (NT$163,140,000) to a minimum of five hundred thousand New Taiwan dollars (NT$500,000)). Some private universities even voluntarily declined such incentives and subsidies (see Annex 12). Thus, it is evident that not all cases of assuming or reassuming full-time faculty positions at private universities result in the aforementioned issue of actually receiving double remuneration from the government. However, the aforementioned provision suspends the pension or alimony of all regulated persons who assume or reassume full-time faculty positions at private universities and receive renumeration exceeding the specific amount, without distinguishing whether the private university receives government incentives or subsidies, or whether the amount of such incentives or subsidies is sufficient to cover the faculty member’s salary. The classification standard adopted by the aforementioned provision is obviously overbroad in scope and can hardly be deemed substantially related to the purpose of preventing regulated persons from receiving double remuneration from the government.
2. Recipients of government incentives or subsidies are not limited to private universities. The government may, in accordance with law, grant incentives, subsidies, or tax reliefs to other private entities. For instance, by providing project-based subsidies or tax credits against profit-seeking enterprises income tax in order to support and promote industrial innovation and enhance industrial competitiveness, and expressly allowing such funds to be used for personnel expenses in the relevant projects (see Articles 9 and 10 of the Statute for Industrial Innovation, and Articles 4 and 10 of the Ministry of Economic Affairs Regulations on Subsidies, Incentives, and Guidance for Industrial Innovation Activities). However, the aforementioned provision does not suspend the pension or alimony of regulated persons who work full-time for other private entities that receive such incentives or subsidies. Thus, regulated persons employed by private entities that receive government incentives or subsidies are treated differently depending on whether they work at a private university or at another private organizations, as to whether their pensions or alimony are suspended. In terms of achieving the purposes of preventing the government from in fact paying double remuneration and of creating more employment opportunities for young people, the classification standard adopted by the aforementioned provision are obviously too narrow in scope and can hardly be deemed substantially related to the aforementioned purposes.
3. In addition, private schools at all levels, not limited to private universities, are eligible to apply for government incentives and subsidies in accordance with statutory procedures. Full-time positions in private universities or private schools at other levels include an administrative and teaching positions, both of which may be held by officers or non-commissioned officers receiving retirement or severance pay. The aforementioned provision restricts the receipt of retirement or severance pay only for full-time faculty in private universities receiving remuneration exceeding the specific amount, but does not extend to retired or severed personnel serving as a teachers in private schools other than universities or holding administrative positions in any private school. In terms of achieving the two aforementioned legislative purposes, the classification standard adopted by the aforementioned provision is obviously too narrow in scope and can hardly be deemed substantially related to those purposes.
4. Furthermore, retired or severed personnel are free to choose either a one-time lump-sum retirement pay or monthly pensions as the mode of receiving their retirement income. These two options differ only in the form of payment, but are both part of retirement or severance pay in nature. The aforementioned provision suspends only the monthly pensions or monthly alimony of retired or severed personnel, but does not restrict those who choose to receive a one-time lump-sum retirement pay. The classification standard adopted is obviously too narrow in scope and can hardly be deemed substantially related.
In sum, the aforementioned provision, which suspends the receipt of pension or alimony for regulated persons assuming or reassuming full-time faculty positions at private universities with remuneration exceeding a certain amount contradicts the intent and purpose of the constitutional guarantee of the right to equality and shall be null and void from the date of publication of this Interpretation.
In the future, if the legislature wishes to increase employment opportunities for young people, it may, within the scope of aforementioned legislative, design reasonable constraints on the types of jobs at private schools or private entities that retired or severed personnel may take, taking into account the nature of the work and the actual level of income. If the legislature wishes to encourage the re-employment of middle-aged and elderly persons, it may, for retired or severed personnel who receive pensions or alimony, adopt measures such as proportionally suspending, rather than totally suspending, payment of pensions or alimony, so as to mitigate the severity of differential treatment, or employ other appropriate means. While the legislature inherently possesses a certain margin of legislative discretion in devising future amendments to the Act, such amendments must nonetheless comply with the principle of equality.
XI. Article 39, Paragraph 1, First Sentence, of the Act is not entirely consistent with the reform objective pursued by the Act. The relevant authorities shall promptly amend this provision in light of the intent and purpose of this Interpretation. When the accumulated changes in the consumer price index reaches a certain percentage, the pension, alimony, and bereavement annuity should be adjusted in a timely manner so as to conform to the requirements of systematic justice under the Constitution.
Article 39, Paragraph 1, First Sentence, of the Act provides:“The Executive Yuan, in conjunction with the Examination Yuan, may adjust the amount of pensions and alimony which retired or severed officers and non-commissioned officers may receive following their retirement or severance, and the bereavement annuity which their bereaved members may receive, after taking into account the overall financial status of the State, population and economic growth rates, average life expectancy, the reserve ratio and financial investment performance of the Pension Fund, and the consumer price index.”The pension or alimony which retired or severed officers and non-commissioned officers may receive following their retirement or severance, and the bereavement annuity which their bereaved members may receive are calculated based on pension rate and base salary. The pension rate is set according to seniority of service (see Table 3 of Article 26 of the Act). The base salary for those who retired or severed before the enforcement of the amendment to this Act is calculated as double the base salary of an officer or non-commissioned officer on active service with the same rank and salary grade on the day the amendment to this Act came into force (July 1, 2018). The base salary for those who retired or severed after the enforcement of the amendment to this Act is calculated twice the average base salary of the last one-fifth period of their years of service before the effective date of retirement or severance. In both cases, the amount will no longer change with adjustment to the pay of personnel on active service (Footnote 10). To implement the reform purpose of setting a reasonable pension rate (retirement income replacement rate) at the current stage under Article 26 of the Act, the State inherently has an obligation to maintain the pecuniary value of the retirement or severance pay re-determined under the Act and to prevent its real value from being substantially reduced by the passage of time (see Article 48 of the Enforcement Rules of the Act, Article 65-4 of the Labor Insurance Act, and Article 31 of the Insurance Act for Civil Service Employees and Teachers). The aforementioned provision does not impose an obligation on relevant authorities to adjust the pension, alimony, and bereavement annuity in accordance with the consumer price index, which is not entirely consistent with the reform objective pursued by the Act. The relevant authorities shall promptly amend the aforementioned provision in light of the intent and purpose of this Interpretation. When the accumulated changes in the consumer price index reaches a certain percentage, the pension, alimony, and bereavement annuity should be adjusted in a timely manner, so as to conform to the requirements of systematic justice under the Constitution.
Fourth. The motion for a preliminary injunction Is denied.
Since this Court has rendered an Interpretation in this case, there is no necessity for a preliminary injunction. The petitioner’s motion for a preliminary injunction is denied, which is hereby noted.
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*Translated by Hui-Wen Chen (case name, issue, holding, reasoning 1-52), Ya-Wen Yang (reasoning 53-94), Yen-Chia Chen (reasoning 95-113)