CNMI government owes Fund $84M

The financial soundness of the NMI Retirement Fund came into question yesterday when records showed that it has an average monthly shortfall of $436,064 and uncollected outstanding obligations from the CNMI government amounting to over $84.4 million.

Annually, the Retirement Fund disburses a total of $51.274 million to pay out various vendors and consumers, which include $39.2 million for retirement pensions; $3.7 million for survivor payments; $1.2 million for disability payments; $3.4 million for refunds of contributions, and a total cost of administrative operations that amount to $1.4 million.

The Retirement Fund also noted that the agency needs financial assistance for the 2004 Cost Of Living Allowance to retirees that amount to $476,375.

In a presentation made to the 14th CNMI Legislature yesterday, Fund officials disclosed that the CNMI government’s total outstanding obligation to the Retirement Fund has reached $84.410 million, broken down as:

* $70.1 million in total employer share payments that remain outstanding;

* $8.4 million in total appropriations from Public Law 11-41;

* $1.4 million in total appropriations from the government for FY2003;

* $780,733 in Trust Territory Prior Service costs; and

* $3.54 million representing the 30 percent bonus paid by the Fund.

The Retirement Funds said it is imposing the maximum 25 percent penalty on the CNMI government for its unpaid employer contribution pursuant to 1 CMC Section 8362(e).

“The Fund continues paying the health and life insurance premiums of retirees as if it is the employer,” the report stated.

Fund officials also said that it receives total funds of $46 million annually but disburses $51.2 million on a yearly basis. Its annual shortfall reached $5.23 million and average monthly shortfall reached $436,064.

Also, the Fund stressed that it is facing problems in the collection of $70.1 million in outstanding employer contribution from the CNMI government, along with the collection of the $9.8 million in outstanding appropriation that it should be getting as part of the its annual share of the budget.

According to Fund officials, there has been no new investment since 1997 and problems facing the agency include funding for the new retirees. As of January 2004, the Fund recorded 106 new retirees who would receive a total annual pension of $3.79 million.

Also, the Fund stressed that untimely receipt from local investment revenue collection has been bringing problems to the NMIRF especially since it needs to pay $118,245 in monthly loan payments. Its loan balance remains at $11 million, the report added.

Fund officials also need to pay out $2.3 million to the Office of Public Auditor, representing the 1 percent fee that it is supposed to pay the OPA as mandated by law. The amount represents the amount owed for six years.

The Retirement Fund also stressed that one of its concerns are its frozen Time Certificates of Deposit at the Bank of Saipan, amounting to $3 million.

Further, at least $2.3 million subsidies from investments since November 2002 to the present were reallocated to fill in the shortage in pension payments.

Some of Funds’ money, amounting to $600,000, was also re-appropriated to the CNMI Group Health and Life Insurance Program in November 2002.

The Fund stressed that its mounting problems are exacerbated by unfunded pension liabilities, which have grown from $488.4 million in 2001 to $574.5 million in 2002.

Because of these compounded financial obligations and uncollected debts, the Retirement Fund stressed that there might be payless paydays for pensioners and employees, unless the Fund dips into its investments.

The Fund added that the shortage would continue for annuity payout and there would be unfavorable tax burdens to the Fund if it draws from its investments.

To resolve these problems, the Fund hopes to work closely with the administration to collect on the overdue employer contributions and to revamp its investment asset allocation to liquidate unfunded pension liability in 16 years.

The Fund hopes to recover its frozen TCDs from the Bank of Saipan amounting to $3 million for the NMIRF and $2.75 million for the Judicial Building Fund.

The Fund warned that there would also be foreclosures on delinquent home loan borrowers.

According to Fund officials, to rescue and maintain the NMIRF’s financial soundness, it proposes to relieve some of the government’s escalating burden by repealing the 3-percent retirement bonus for certain elected officials, benefits for board and commission members, vesting credits for education, military service, compensatory time and unused sick leaves, and prior service vesting credits.