Deadline for conversion to DCP nears

Eligible government employees have three weeks left to convert to the NMI Retirement Fund’s defined contribution plan.

The deadline for enrollment to the DC program is Friday, July 25, 2008. After that, only new employees will be allowed into the program.

Fund administrator Mark A. Aguon said yesterday that the DC program had 630 members as of May 31, 2008. This number includes nearly 160 members who have converted from the defined benefit plan and 470 new hires.

Those eligible to convert to the DC plan are government employees who have less than 10 years of credited service with the CNMI government. Once an employee has become 10 years vested with the government, he or she is no longer considered an eligible employee who can convert.

Aguon urged those eligible to transfer to the new program. “This is their last chance to convert. We don’t foresee the program opening up anytime soon after July 25th,” he said.

“The DC plan has a lot of benefits. You can take it with you when you move. You are in charge of your retirement. So it’s not dependent on whether the government makes contributions or not,” said Aguon.

There are approximately 3,000 members who are eligible to transfer to the DC plan.

The government expects to save a substantial amount if eligible employees opt for the defined contributin plan. The new plan increases the employee’s share to 10 percent, while reducing government’s employer contribution to 4 percent.

Under the defined benefit plan, Class I members pay at a rate of 6.5 percent and Class II members-or older members-pay 9 percent of their compensation. The government’s contribution rate for the DB plan is currently at 37.4 percent.

The contribution plan offers members an option to directly manage their own contributions.

Under the regulations, conversion by a married member will not take effect unless approved by the spouse. The amount that will be transferred is a combination of the member’s previous contributions into the benefit plan, the amount of regular interest fixed by the Fund board of trustees, and whatever amount is legislatively appropriated for the transferring member.

The Retirement Fund has approved a conversion incentive, granting transferees 7.5 percent, rather than the original rate of 3.5 percent, compounded interest on their total contribution.