Two consultants hired to aid govt with its pension system reforms

The Fitial administration has hired two Massachusetts-based companies for $40,000 each to provide consulting services relating to the government’s pension system.

Clark Consulting will review laws intended to reform the CNMI’s defined benefit plan and to reduce its $470-million unfunded actuarial accrued liability as of Oct. 1, 2004.

The actuarial team is expected to propose changes in certain provisions such as employee contribution rates, retirement age, eligibility requirements, benefit formulas, and cost of living allowance determination. The group will also help the government in educating the public about the pension reforms.

Clark Consulting’s 182-day contract will end May 31, 2007.

Meanwhile, the Wagner Law Group will serve as consulting pension counsel to CNMI attorneys tasked to review, develop and analyze legal and fiscal reforms relating to the government retirement system.

The law firm’s scope of work also includes helping government attorneys with regard to possible rollover options to the new defined contribution plan for vested and non-vested members of the CNMI defined benefit plan, as well as possible rollout restrictions and annuitization requirements under the new defined contribution plan.

Each company may be paid up to $40,000, covering fees and expenses. Reprogrammed federal funds will be used to pay the contracts, press secretary Charles P. Reyes Jr. said yesterday.

The CNMI’s defined benefit plan provides benefits to 8,029 government employees. As of Oct. 1, 2004, the defined benefit plan was 46 percent funded, with an unfunded actuarial accrued liability of $470 million. To date, the plan remains underfunded due to several amendments that increased benefits, and the government’s inability to contribute its required contributions.

In June 2006, the CNMI passed a law suspending employer contributions for a portion of fiscal year 2006 and all of FY2007. Legislation was also passed to extend the deadline for the full funding of the plan to Oct. 1, 2045.

Furthermore, Gov. Benigno R. Fitial signed a law adopting a defined contribution plan effective Jan. 1, 2007, for employees hired on or after that date. Certain participants in the defined benefit plan may transfer to the defined contribution plan, but enrollment in both plans is prohibited.