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Fund still awaiting COLA funds
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Posted on Oct 27 2006
The NMI Retirement is trying its luck with the financially distressed central government, hoping it could still pay off retirees’ cost of living allowance for 2006.
Fund administrator Mark A. Aguon said that the 2006 COLA has not been given to eligible retirees.
“There’s no remittance from the government yet. I’m getting inquiries from retirees on this,” said Aguon. “I’ll call the Department of Finance to inquire about the payment.”
He said, though, that the government has only acted recently on the COLA obligation for FY 2007. “We’re not hearing about the 2006,” he added.
The Fiscal Year 2007 budget provides $808,000 to pay the COLA of eligible retirees.
The COLA obligation had not been paid by the central government for several years except in 2005 when the Department of Finance issued money totaling over $800,000.
Before this, the Fund was using its own money to pay off the COLA in anticipation of reimbursement from the government.
According to the Fund, the government has never reimbursed the paid COLA. This prompted the Fund board to decide in 2005 not to use any more of its own funds to meet the COLA obligations.
Meantime, the $800,000 funding level for 2007 would be insufficient since COLA rate rose to 4.1 percent this year from 2.7 percent the previous year.
In June this year, then NMI Retirement Fund administrator Karl T. Reyes said the COLA rate went up by more than 50 percent. This increase would translate to about $1.3 million in COLA payment a year.
Reyes said the 4.1 percent rate is based on the Social Security rate. The NMI government is required by law to follow Social Security rate for COLA and not to go below 2 percent.
“Social Security comes out with the COLA rate. We basically take that number because they study and measure the rate of inflation. COLA is set to maintain the buying power,” said Augon.
Retirees who are 55 years and older are eligible to receive COLA each year.
