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Wednesday, April 23, 2014

Fund has 2 options: Workout agreement or appoint receiver

Given its dire state, the NMI Retirement Fund has two options—a workout agreement between the Fund and the CNMI government or appoint a receiver, according to the Fund’s trustee ad litem’s report.

Attorney Joyce Tang of the trustee ad litem’s Law Offices of Civille and Tang, presented the state of the Fund report in the U.S. District Court for the NMI on Tuesday.

With the current trajectory, the Fund has predicted that assets will be zero on March 1, 2014.

Under the first option, Tang said the CNMI government and its autonomous agencies should enter a workout agreement with the Fund.

Tang said the agreement should include the following elements—defer and/or reduce benefits to Fund members, increase annual contributions by government and autonomous agencies, and infusion of cash to catch up government’s contributions.

Under the second option, the lawyer said if can agree on a restructuring plan, the receiver will implement the plan.

If they cannot agree on a restructuring plan, Tang said the receiver will liquidate the Fund’s assets.

The Fund will “self-liquidate” due to inability to quickly determine liquidation amounts, she said, suggesting that generally it takes one year to fully liquidate.

Tang, however, clarified that liquidation is not a complete solution because once the Fund is depleted or has no more assets, the unfunded liabilities will be a liability of the government’s general fund.

Tang also discussed in the report the problems with payment of Public 17-82 refund and regular interest payments.

The payment of Public Law 17-82 refund in the amount of $113 million, she pointed out, requires accurate data but that the Fund’s computer system are deficient and date is unreliable.

She underscored the importance of completing the computation of all applicants before any payout is made to ensure there are sufficient funds to pay all applicants.

On payment of regular interest, Tang said this requires accurate and reliable data, which are not readily available at the Fund.

The lawyer said calculation of regular interest needs to be based on a time-weighted methodology which requires recording of time of contribution.

Tang said should there be verification if there are funds which to pay “regular interest.”

At Tuesday’s hearing, Dylan Porter of Dylan-Buck Consultants LLC also presented to the court their preview valuation of the Fund using the recently released Governmental Accounting Standards Board’s Statements Nos. 67 and 68.

Porter predicts the Fund’s depletion on Nov. 1, 2016 for Case 1 and on March 1, 2014 for Case 2.

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