Does RA 7641 require companies to set up a retirement plan?

No. RA 7641 requires the employer to pay a retirement benefit to qualifying employees, but it does not require a formal plan or a funded trust. Benefits may be settled on a pay as you go basis. The obligation exists either way and must still be measured under PAS 19.

What is the difference between RA 7641 and PERA?

RA 7641 is a mandatory employer obligation to pay retirement benefits to qualifying employees. PERA, under RA 9505, is a voluntary retirement account an individual opens in their own name. One is a company liability, the other is a personal savings vehicle.

Can an employer contribute to an employee's PERA?

Yes. Under CMEPA and its implementing rules, employers may contribute to their employees' PERA accounts and claim a deduction for doing so. This is separate from, and does not replace, the RA 7641 obligation.

Does PERA satisfy the RA 7641 requirement?

No. PERA is voluntary and individually owned, while RA 7641 is a statutory obligation on the employer. Employer supported PERA can sit alongside the statutory benefit but does not discharge it.

The Retirement Pay Law (RA 7641) and PERA (RA 9505)

Q: How much can be contributed to a PERA account each year?

The annual limit is ₱200,000 for locally employed and self employed contributors, and ₱400,000 for overseas Filipino workers.

Two different things get confused in Philippine retirement planning. RA 7641 is an obligation your company already carries whether or not you have a plan. PERA is a voluntary account an individual opens for themselves. They solve different problems, and since 2025 they finally work together.

RA 7641 is an obligation, not an option

The Retirement Pay Law requires employers to pay a retirement benefit to employees who reach 60 with at least five years of service, and it becomes compulsory at 65. The statutory minimum is 22.5 days of pay for every year of credited service.

What the law does not require is a retirement plan or a funded trust. A company can settle the benefit on a pay as you go basis when each employee retires. That is where employers get caught out: choosing not to fund the obligation does not make it go away. It still exists, it still grows every year your employees accrue service, and it still has to be measured and disclosed in your audited financial statements under PAS 19.

Where employers get this wrong

No retirement plan does not mean no retirement liability. The obligation is statutory.
The liability accrues quietly year after year and lands as a cash cost when employees retire together.
It must be measured annually under PAS 19 regardless of whether you fund it.

PERA is the individual layer

The Personal Equity and Retirement Account, created by RA 9505, is a voluntary retirement account an individual opens in their own name. Contributions are invested in accredited products, earnings are tax exempt, and the contributor earns a 5% tax credit on what they put in.

The annual contribution limit is ₱200,000 for locally employed and self employed contributors, and ₱400,000 for overseas Filipino workers. PERA sits on top of SSS or GSIS rather than replacing either.

What changed, and why it now matters to employers

For most of its life PERA was a purely personal product with little reason for an employer to engage with it. That changed with CMEPA and its implementing rules, which introduced a deduction for employers contributing to their employees' PERA accounts and confirmed the higher contribution ceiling.

This turns PERA into something an employer can use as a benefit, alongside the RA 7641 obligation rather than instead of it. The two now stack: RA 7641 remains the statutory floor you must meet, while employer supported PERA becomes a way to give employees a funded, portable, tax advantaged account they control. Our guide to PERA for employers covers the mechanics and the deduction in detail.

How the two fit together

	RA 7641 retirement pay	PERA
Nature	Mandatory employer obligation	Voluntary individual account
Who funds it	The employer	The contributor, and now optionally the employer
Who owns it	Paid on retirement, not portable	Owned by the individual, fully portable
Tax treatment	Tax free when paid through a BIR registered, tax qualified plan	Tax exempt earnings plus a 5% tax credit on contributions
Appears on your books	Yes, measured annually under PAS 19	No liability to the employer

What to do about it

Start by knowing the size of the obligation you already carry. If you have audited financial statements you need an annual PAS 19 valuation regardless. From there, whether you formalise a retirement plan, fund the existing obligation, or add employer supported PERA is a design question that depends on your workforce and your objectives.

Zalamea is an accredited PERA Administrator and has advised Philippine employers on retirement obligations since 1966. Read the full RA 7641 guide, or talk to us about where your company stands.