No Social Security ‘safety net’ for many govt retirees

[I]Editor’s Note: 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.”[/I] [B][I]Last of a two-part series[/I][/B]

There are all sorts of unpleasant consequences that can be expected to occur sometime in the future if the NMI Retirement Fund can’t fulfill its obligation to those who depend on receiving their bimonthly pension and if the government doesn’t fulfill its financial obligation to the Fund. One unfortunate result being the possibility of bankruptcy for those whose only source of income is their retirement check and who have debts they won’t be able to repay. For them bankruptcy may be the only way out. If and when that were to occur people would lose not only their pension but possibly much more through the court’s liquidation process. Your mother may love you but the auto dealer and the bank do not.

Perhaps there is some wishful thinking within the central government that the U.S. government will step in and bail the Commonwealth government out of the financial hole it has dug. I wouldn’t count on it. Why should the U.S. clean up a mess it had no part in creating? Besides, the U.S. government is broke and has a financial mess of its own making to clean up.

I would imagine that the Commonwealth’s financial requirements for “bail-out” money for an abused retirement system would receive little sympathy in congressional appropriation committees. Indeed, a request for funds for such a purpose, if it were to be eventually made, might shine a spotlight on other issues that some in the islands might wish could be avoided.

Thus, when not receiving favorable results from their appeal to Congress for direct financial assistance from the U.S. Treasury, the U.S. government and the Department of the Interior, along with the appropriation committees of Congress, should not be surprised when the day arrives when Commonwealth politicos go to Washington with hat in hand, requesting an increase in food stamp allowances; expanded subsidized rental housing and increased funding to provide for free medical services at CHC, to mention only a few charitable programs.

If my memory serves me correctly I believe it was legislation passed by the 5th Legislature “opting out” of the U.S. Social Security system for government direct hire civil service employees in favor of a locally operated NMI Retirement Fund. This occurred around the beginning of the “economic boom,” with every sector of the economy growing at 16 percent per year across the board. As usual, government employees were not given a voice in the matter of selecting their retirement program. I think I’m correct in the NMI’s relinquishing of the possibility of Social Security coverage was retroactive to January 1986 or 1987 and those Social Security taxes that had been withheld were refunded to government employees.

The primary reason being that the many duplicate benefits provided by Social Security and the Federal Medicare program would have cost the employee and the NMI government’s employer contributions substantial amounts of money. So, in an act of self-government, the CNMI chose to create its own program that, as it turns out, can be easily manipulated by the Legislature.

Because the NMI government decided not to participate in the U.S. Social Security system and instead formed its own retirement system, Commonwealth retirees are now particularly vulnerable if conditions in their own retirement program aren’t straightened out—and soon. Under it’s own system, CNMI financial contributions which should have made to the employee’s retirement program—but haven’t been—must obviously have been used for other purposes to the detriment of the long-term interests of retirees, present and future. Perhaps the court can determine what the diversions might have been.

So, where does it leave the retirees? Those of retirement age who have worked for the NMI government should not have to contend with the aggravation of an indifferent central government that won’t pay is debt, now approaching $200 million. It just isn’t right and people deserve better from past and present administrations.

For those participating in the defined contribution plan, I won’t even get into the requirement for the central government to pay 7.65 percent on the gross income of each employee’s salary to Social Security as a FICA tax (26 USC 6051). If I understand correctly, this is in addition to the 4 percent government contribution to an employee’s individual 401K or IRA retirement plan. But check it out if it affects you.

I am well aware that there will be those who criticize my observation as being pessimistic and they will be right. The retirees’ pensions are in serious jeopardy, make no mistake about it. In my judgment people should be made aware of the situation so they could plan accordingly as best as they can. While there is still time. Anticipate the possible personal family difficulties that may lie ahead and plan for them. Have a contingency plan if possible—that’s all I’m saying.

If you think the above is a grim outlook, wait until it comes to pass and the bottom falls out, which it will in due time unless something isn’t done to correct the situation.

You might wonder what one person can do? Recognize that there is strength in numbers and associate as a force for change by applying pressure. Contact your elected officials and Fund trustees. Let them know what you would like done—it’s very much the America way. They are your servants, you are not their’s.

As for the Fund’s lawsuit against the central government which has been pending unresolved for almost 13 months, my dear ol’ granny would say, “Billy, justice delayed is justice denied. Thirteen months is about the length of the gestation period of a cow, my goodness!”