Govt owes $72M in retirement contributions

To date, the CNMI government owes the NMI Retirement Fund some $72 million in employer’s contribution, according to Fund administrator Karl T. Reyes yesterday.

Reyes said the debt continues to pile up because the government’s remittance “is never enough.”

“They always fall short,” said Reyes.

He said, though, that the situation is understandable because the government has been paying “way too high” for retirement contribution at 24 percent per member.

“It’s like one fourth of the entire budget of the Commonwealth,” said Reyes, a former congressman.

He said the $72 million in unpaid contribution is the accumulated amount since 1996.

“What happens is that the government remits to us the employees’ share. It comes in but the government’s share as employer does not. It’s really hard for the government to do that,” he said.

Right now, he said, the government remits $835,000 per payday. “But this is still short because every year, we get more retirees,” said Reyes.

The current level of remittance, he said, is already an improvement on the previous $500,000 amount. The increase in remittance came following the amendment of an agreement between the Fund and the Department of Finance sometime in 2002.

Reyes said the situation would improve if the government decides to reduce its contribution share.

“It’s either that or they increase their payment,” said the administrator.

He said the Fund also favors a measure that would prohibit retirees from returning to government work within six months after retirement.

“If you retire today, you shouldn’t be able to come back until after six months. That should be the case,” he said.

He noted that there have been cases where employees would retire to get their benefits but get re-employed after only seven days.

Meantime, other unpaid liabilities of the government include $3.5 million from Public Law 8-30, for the 30 percent early retirement bonus.

“They passed a law requiring us to pay that out but they never refunded us,” said Reyes.

The Fund also lists $780,000 in unpaid obligations for employees under the Trust Territory and some $8 million for health and insurance coverage of retirees, as provided in P.L.11-41.

The Fund’s latest actuarial valuation report showed that its unfunded accrued liability has reached some $517 million, with a large portion of it owed to its Class II retirees and beneficiaries.

Daniel McLellan, associate principal of Mellon Financial, reported that the total accrued liability of the Fund as of Oct. 1, 2003 totaled $902.6 million but its valuation assets only reached $385.7 million.

Accrued liabilities refer to obligations for active members, inactive members including contributions held for non-vested terminated employees, and retired and beneficiaries.

Liabilities for Class II members—those who became members before 1989—totaled $651.2 million and $251.5 million for Class 1 members—those who became members after 1989.

The Fund has nearly 8,000 members.