AGO: House bills on NMIRF violate constitution

The Attorney General’s Office has warned the House of Representatives against the passage of two proposed measures affecting the CNMI Retirement Fund which violate the Commonwealth Constitution.

Assistant Attorney General Elliot A. Sattler has conducted an analysis on House Bill 12-126 which will allow the conversion of unpaid salary to Retirement Fund vesting service, as well as HB 12-070 which will provide Fund loans for emergency purposes.

According to Mr. Sattler, the grant of emergency loans to members appears to be contrary to the Constitution and the investment guidelines of the Commonwealth statute.

HB 12-109 proposes to amend the Commonwealth statute which will authorize the Board of Trustees of the Retirement Fund to promulgate regulations for making emergency loans.

Mr. Sattler noted that the bill imposes upon the Retirement Fund a definition of “emergency” when in fact the defined event ( example, educational expenses for member’s dependents) is not an emergency at all.

“It interferes with the duty of the Retirement Fund Board to independently exercise their discretion when determining whether an investment of Retirement Fund assets is consistent with the individual fiduciary duties,” he added.

However, if the Legislature would want to grant discretionary authority to the Trustees to “invest” Retirement Fund money in loans to its members, then there is a need to amend the language of the bill. This will allow the Board of Trustees of the Retirement Fund to exercise their constitutionally mandated fiduciary duty and independently determine whether emergency loans may be granted and to what extent without violating their fiduciary duties and responsibility to all members of the Retirement Fund.

HB 12-126 allows government employees still awaiting their salary adjustment to have the value of their unpaid salary adjustment be converted to “vesting service” in the Retirement Fund.

Mr. Sattler said the bill is constitutionally deficient and should not be adopted by the Legislature because it appears to constitute an unauthorized delegation of legislative authority and or interfere with the constitutionally mandated fiduciary responsibility of the Retirement Fund Board of Trustees.

Article III of the NMI Constitution provides that the trustees, managers and employees of the CNMI Retirement System have a fiduciary responsibility to manage the member’s contribution in such a way that assets of the Retirement Fund shall be neither diminished nor impaired.