Alternatives to the single IRA ‘Defined Contribution Plan’

Simply put, an IRA is a great investment as a supplemental retirement plan, but only that—not the only retirement plan. Go back 20 or so years and look at why IRA’s were created in the first place: It was because retirement systems of the day, especially the Federal Social Security System, were deemed not to be able to pay enough to support a retiree in the future primarily due to inflation that was quickly eroding purchasing power of the dollar. So IRAs were devised as a voluntary and supplemental vehicle for deferring taxable income into ones retirement years when one’s personal tax rate would supposedly be smaller and working people from both the public and private sectors could augment what would be a retirement check too small to meet daily needs.

Why is the CNMI government trying to turn upside down the very foundation of retirement? It appears that the only real reason is to eliminate the government’s own responsibility to its employees because of a previous inability to control spending, the size of its workforce or an overly generous retirement system that provided fat rewards for its designers. There is no real reason why we can’t fix up the current “leaky” system and offer the “new” IRA as a supplement—to everyone. There is no reason why current employees can’t also choose to invest additional voluntary amounts in the “new” IRA to augment future retirement dollars that will have a much reduced purchasing power in 20 or 30 years.

For current employees, why must it be an either/or condition? I don’t believe any current employee will switch on Jan. 1 and that means the “new” plan will start with only one employee if that, but it will take a lot more than just one or a few employees to make the plan feasible. With a supposed “hiring freeze” in place, there simply won’t be enough employees available to make it a viable plan from the get-go. I’d be willing to bet that if it were offered as a supplement, more than 75 percent of current employees would add it to their portfolio.

Another choice: When I was an employee here in 1975, I had the option of contributing to the federal Social Security System. If our government is now determined not to permit new employees into the “old” local retirement system, why not work with the federal government to make SSS an option (again) for these employees? By combining all of the above and applying the “fixes” previously mentioned to the current retirement system, every employee could have basic options of more than a single retirement plan in his or her basket of nest eggSSSSS. And the CNMI will not bankrupt itself (over retirement) nor will the elderly of 2050 be faced with crude, rude choices.

There is no need for us to change all four tires when only one needs a patch or two and re-inflation. The bottom line seems to be that we are going to have this act shoved down our throats anyway simply because our employer couldn’t seem to control himself—but at the very least, let’s hope the Legislature will work on some of those areas of concern and try to present the best bill possible under the circumstances and combine it with viable alternatives. Remember, government is your uncle, not your father!

I truly hope that many of you will not remain apathetic to this issue and shall raise your voices to let your representative in the Legislature know what you want. I’m sure that many of you also have some very good ideas about how to make this system better. Our legislators need to hear them. After all, you are the boss and this will affect you and your children—forever. Don’t be afraid to speak up—and, legislators, don’t be afraid to listen and make changes when the majority speaks. After all, good legislation is a true compilation of the voice of the people tempered with a rational and orderly system of control that ultimately serves to benefit the well-being of “we the people.” We are not your enemy and the majority of us put you there to represent all of the people’s collective views and needs—not solely those of some other elected or appointed official.

Dr. Thomas D. Arkle Jr.
San Jose, Tinian