Define the benefit, please

Sounds like we are grasping at straws. While I am for exploring all possible means of rescuing the CNMI’s woeful financial situation, reaching for the sacred cow seems to be coming a little too fast. The recent proposal to change our retirement fund system, although sort of declared DOA by some congressmen who have labeled it unconstitutional, is dangerous and such things here in the CNMI sometimes take on an immortal life of their own. So I just have to respond and concur with William Stewart in his recent column and hopefully add a little more.

The major question I have is: If such a bill were to become law and, as of Jan. 1, 2007, we all are given our own IRA type retirement account, what will that account be funded with? Or will it be funded at all? By all rights, the government should “translocate” the funds each employee has contributed into the retirement fund PLUS the government’s legitimately owed share over to the new account. But as Mr. Stewart pointed out, that would cost the government some estimated $468 million. Nobody said how that’s going to be paid for. Please answer this question for me.

Or is it the intention of the government to start that IRA with and build on your payroll contributions and the 4 cents per dollar contribution from the government? That puts almost the entire burden on the employee and comes nowhere close to being the normal “matching fund” amount given by most systems—private or government. Each employee would then have to contribute a substantial amount of his/her already meager paycheck to the IRA, possibly as much as 30 or 40 percent! But, let’s not forget that all IRA account contributions are limited by the Federal government to a certain dollar amount per year. If I were an employee with several years of service and several thousands of dollars in the Fund and suddenly was left with my own personal account but dollars I’d be pretty upset. Why?

When you retire with only an IRA account to draw from, you cannot draw out more cash than is in there, like you can with a very large central fund that everyone contributes to. Unless you have a large enough amount in your individual IRA to produce more interest income than cash you draw out each month as benefits (approximately a half million dollars for a livable monthly benefit amount!), the account will draw down over time and that time could be very short. Then you are left with nothing! One thing is for sure: no more early retirements. You will have to work until you’re 70 years old at least!

In most retirement systems, including the Federal system, such separate IRA accounts are offered to employees and a certain amount of matching government funds are contributed but these accounts are almost always merely supplementary to the primary retirement system for the very reason that they will draw down to at some fixed time after retirement, depending on the amount you decide to withdraw each month. This is not a very good idea if you plan on living a long time and I do!

My second question is: Is the government now looking at the Retirement Fund as its own personal checkbook? “Oh, let’s just go there cause there’s a lot of money in there and take some to pay our bills” but at the same time don’t bother making any more deposits. After all, we can just live for today; don’t worry about tomorrow’s children! Please answer this one, too, and then I have more. As Mr. Stewart asked, please present the facts and answer the questions then we can all decide if this is a “good” idea or the very, very, very, very “bad” one it appears to be.

Dr. Thomas D. Arkle Jr.
San Jose Tinian