NMIRF: Reduce govt’s share
Describing the current retirement contribution system as “very lopsided,” a Retirement Fund official is inclined to favor reducing the government’s share, while increasing the employees’ share of retirement contributions.
“It’s wrong math. If you take the entire government’s budget of $213 million, 24 percent [$35 to $40 million] of the entire personnel costs, which is at least 70 to 75 percent [of the total budget], goes to the retirement payment. It simply means that the government is very generous. It pays a lot for members’ retirement,” said Fund administrator Karl T. Reyes.
The government shoulders 24 percent of an employee’s contribution while the employee only pays 6 percent for Class 1 members or 9 percent for Class 2 members.
“It’s very lopsided,” Reyes added.
He said it would be better if the government’s employer share is reduced to 15 percent and the member’s contribution is raised to 15 percent.
Meantime, Reyes said that the plan to sue the government was decided by the board since last year.
“But we don’t even have a lawyer to handle this. And who do we sue? The Legislature? The governor? The previous Finance secretary?” asked Reyes.
The Fund said that the central government’s arrears have reached $80.8 million as of May 15 this year. The arrears reflect unpaid contribution from December 2001. Two payments of over $800,000 each have been made so far since that time.
The Department of Finance is tasked to remit $850,000 to the Fund every payday, representing the government’s employer contribution.
Last April, Finance Secretary Fermin M. Atalig said that payments to the Fund were current until June 1998 when a series of outside events such as Asian currency crisis resulted in reduced government revenue—from nearly $250 million to $213 million or less.
The government reportedly failed to pay its retirement contributions altogether in 2000 and 2001.
Given this enormous financial responsibility, Atalig said the Babauta administration decided to pay the oldest liabilities first, covering FY 1998 to FY 2001. Right now, he said, the administration is paying for the FY 2002 liabilities.
The central government’s average annual contribution to the Fund totals $24.4 million, while the autonomous agencies’ remittances amount to $15.2 million. The Fund said that autonomous agencies pay their obligations on time.
There are some 5,000 active members of the Retirement Fund.
Even as the government struggles to settle its debts, the NMI Retirement decided last month to increase the government’s employer contribution rate from 24 percent to 36.7727 percent.
Reyes said it was a recommendation made by the Fund’s consulting agency, which conducted an actual study in 2003.
The increase, he said, “is necessary to ensure that the Fund continues to meet its current as well as future obligations.”
He said the increase is needed so that the government can catch up with its payment.
The actuarial study was done in 2003 by Bucks Consultant, which later became Mellon Financial.
Reyes said the rate hike was also needed to ensure that the Fund complies with its mandate, which is to bring the Fund’s assets to $1 billion by year 2020.
As of March this year, he said, the Fund registered only $394 million in total assets.
Finance Secretary Atalig has said that the government cannot implement the rate increase within the fiscal year because it is not covered in the continuing resolution.
He said the government may have to insert the additional cost in its revised budget submission to the Legislature on July 1.