No social security ‘safety net’ for many government retirees as the Legislature ‘opted out’ of the US system in favor of NMIRF

[B]First of a two-part series
[/B] [I]Editors note:[/I] In the absence of publicly released, in-depth analyses on many issues related to the NMI’s retirement fund—the author advances his personal opinions for consideration by interested retirees from the perspective of “one of their own” who is also an economist, a retiree and 35-year resident of the NMI and was, as they say, “present at the beginning.”

It certainly would be nice if the Board of Trustees informed the members of the Retirement Fund of the results of the meeting between the Fund’s investment consultant, Merrill Lynch, and the Legislature which took place on Oct. 14. I guess they forgot to keep the members informed of the most serious challenge to their financial security since the inception of the locally administered retirement fund.

As things now stand with the Retirement Fund continuing to deteriorate under a two-pronged assault resulting from the country’s current economic “meltdown” brought about by rapacious stock manipulators; incompetent federal regulators, and extortionate financiers all resulting in massive market losses and the Fund’s diminishment of its investment portfolio. Add to that the central government’s continued failure to honor its legal contractual obligation to the Fund’s members.

Result—the defined benefit retirement program will be broke in a few years and many members will not even have Social Security benefits to fall back on to provide income support.

The U.S. Social Security system is not without its problems—but you can bet the U.S. Congress is aware of the issue and will address the matter. In 2004 the average monthly Social Security benefit was $1,076 for men and $826 for women. Compare that with “zero” from a bankrupt NMI Retirement Fund.

When the Fund runs out of money to pay pensions, those retired government employees who did not have the option of contributing to the Social Security “safety net” will either be without income—or if they have other sources—will possibly suffer by experiencing much reduced income. This occurring at a time when inflation will likely be rampant and more severe in the future.

Section 606 of the Covenant addressed the application of the U.S. Social Security system to the NMI but the government elected to opt out in favor of its own retirement plan. For those who haven’t paid into Social Security—they will not be eligible for monthly payments. One must have participated with payment deductions for 40 quarters to be eligible for reduced pension payments at age 62 or full pension at later ages. Because of the time period involved I suspect this was another reason the Legislature decided to create the NMI’s own system.

At the time the decision was made not to participate in the U.S. Social Security System the reasoning (I was told) was primarily because of the duplication of benefits provided by Social Security and the Medicare program and the NMI’s Retirement Fund which would have cost the employee and the NMI government as the “contributing” employer substantial amounts of money for participating involvement in each of the two programs. More on this subject tomorrow.

Such an important decision as made by the Legislature would have far reaching and long-term consequences on the financial security of many government employees. In my opinion, the decision should have been put to the employees to decide and not their elected representatives who (it must be said) were subject to the temptation of a possible conflict of interest since they could establish their own rules for the NMI’s retirement program—but not the U.S. Social Security System. Dare I suggest that at the time they saw an opportunity to maneuver the NMI’s program to benefit the retirement pensions of certain elected officials.

If you are in a position to set up the rules and regulations to control the distribution of money not only for others but also for yourself—well, go figure! As a “regular” government civil service retiree, past or present, what do you think?

It is my understanding that Section 606 of the Covenant did, at the time, provide for that portion of the former Trust Territory Social Security Retirement Fund to be accredited to the NMI, which if it had occurred could have been designated to be held in trust in a separate NMI Social Security Retirement Fund.

It would therefore seem that subsection (b) presumably anticipated the eventual application of the federal Social Security laws in full to the NMI, including the excise and self-employment taxes which would support system once the Trusteeship Agreement was terminated. So the possibility for participation in the U.S. Social Security System was there at the beginning—but, of course, is no longer an option.

This is not to state that the Social Security System does not apply in the NMI. It certainly does for many in the private sector. Social Security Administration records for the NMI for the year 2006 indicate there were 781 recipients of which 121 were aged; 12 blind and 648 disabled with a total of $394,000 paid monthly. Many thousands more in the private sector are now paying into Social Security—but government civil service employees do not.

Considering the NMI’s Retirement Fund is now on a slippery slope toward becoming broke in a few years I can’t help but believe that many will view the recent failure of the central government to adhere to its financial and moral obligations to its retired employees and families, widows and widowers as—(1) failure to live up to the terms of the Covenant with the United States with reckless abandonment with regard to maintaining a financially sound, long-term retirement program; (2) inexcusable neglect; (3) abridgement of contractual entitlements by arbitrary administrative and legislative fiat; (4) gross fiduciary irresponsibility and (5) callous disregard for the future health and welfare of the elderly.

I’m certain there will be those, past and present, in the government who will not appreciate my sentiments—let them explain their reasoning in a public media.

I was told that the Merrill Lynch consultant together with the Retirement Fund officials had a gloomy outlook as a result of Fund losses in the stock market and the fact that the central government is forcing the Fund to sell off its investments at the worst possible time and at lower value in order to raise money to pay pensions. This is because the government is not meeting its financial obligation to the Fund.

Nor is it realistic to consider issuing pension obligation bonds to raise money which I discussed in my last op-ed article on Friday, Oct. 24. So don’t be fooled by false hopes. [I][B]To be continued.[/B][/I]