Lt. Gov. Eloy S. Inos painted for lawmakers yesterday a picture of the administration’s plans and scenarios to help retirees and active members of the NMI Retirement Fund, including weighing the U.S. Social Security Administration’s five-year buy back plan to re-accept the CNMI government and recalling from the governor House Bill 17-226, which allows active members to withdraw up to 50 percent of their contributions.
If the CNMI government elects not to re-enter the U.S. Social Security system and retain the NMI Retirement Fund, benefits will have to be cut by 50 percent.
Another scenario is for active members to also transition into the U.S. Social Security but this could also impact private firm ASC Trust Corp., the third-party administrator of the defined contribution program.
All these scenarios and options were also premised on the withdrawal or dismissal of the Fund’s Chapter 11 bankruptcy filing. The Fitial administration, the Senate, the Commonwealth Retirees Association and the U.S. Trustee, among other things, want the bankruptcy filing withdrawn.
Inos, now in charge of Retirement Fund recovery issues, was later joined by Gov. Benigno R. Fitial in yesterday’s meeting with 14 of 20 members of the House of Representatives and one senator, along with counsels.
The almost two-hour closed-door meeting was the first between the Fitial administration and the House since the Fund filed for Chapter 11 bankruptcy, the first public pension agency on U.S. soil to seek such protection.
Lawmakers said the Fitial administration will have another teleconference with U.S. Social Security officials on Tuesday. Depending on the outcome of that meeting, the administration may finally make a decision whether the terms presented by the other party is acceptable and affordable.
If the CNMI government accepts this, it has to pay five years of contributions to the U.S. Social Security. While employee contributions may involve just transferring money from the Fund to Social Security, the employer contribution may be more problematic. The government has been behind in its payments of employer contribution to the Fund.
“The good thing about this, that’s automatic five years of vested service in Social Security…You need 10 years of vested service before you can benefit from the system,” said Rep. Ray Yumul (R-Saipan).
House floor leader George Camacho (Ind-Saipan) said he personally favors moving back to U.S. Social Security but the specific terms have yet to be known “and if we can pay what needs to be paid.”
Requests to Legislature
Inos asked lawmakers to withdraw HB 17-226 and to adopt a joint resolution supporting the CNMI’s transition into the U.S. Social Security system.
Speaker Eli Cabrera (R-Saipan), author of HB 17-226, said he will be recalling his bill next week.
Yumul said the Fitial administration sees HB 17-226 as a hindrance to plans and scenarios presented.
“But it could also be amended,” he added.
Rep. Joseph Palacios (R-Saipan) said recalling HB 17-226 would disappoint many active members who have been hoping to get 50 percent of their contribution and roll over the rest to the defined contribution plan.
H.B. 17-226, which has been under review by the governor since mid-April, allows non-retired members of the Fund’s defined benefit plan to withdraw up to 50 percent of their contributions regardless of years of service and without penalty or the need for them to quit their jobs. Under the bill, the rest of the employee contributions to the Fund will be rolled over to the defined contribution plan.
Inos also told lawmakers that if the CNMI government chooses to keep the Fund alive, benefits paid to members should be cut by 50 percent.
Palacios acknowledges that the CNMI’s pension system is one of the most luxurious and most generous on U.S. soil.
The average government pension in the CNMI is $20,000 a year. In the U.S., it is only $10,000, based on Inos’ presentation to lawmakers.
Palacios said a retired judge in Hawaii, for example, gets less than $40,000 a year. In the CNMI, judges and justices receive $80,000 to over $100,000 a year.
Palacios said he disagrees with a “uniform 50 percent cut in benefits.”
“I’m hoping that they would start the 50 percent cut among those getting pension of $50,000 to over $100,000 a year. Those who are receiving less than $20,000 a year should not receive cuts. It will be too difficult for them to receive cuts when they’re already receiving a little,” said Palacios.
Some members also suggested that the Fund should be placed under the Department of Finance.
The Fitial administration is expected to meet with retirees and active members to share its plans and scenarios related to the Fund.
Yumul said had the Fund and the entire government heeded Judge Kenneth Govendo’s recommendations, the Fund wouldn’t have spent $475 an hour on bankruptcy lawyers and other expenses.
“We’re back to what Judge Govendo has been saying all along,” he said.