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Fund directed to establish a $100M reserve for retirees
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Posted on Aug 19 2011
To protect retirees from the possible collapse of the Commonwealth pension program, the court ordered the NMI Retirement Fund to keep a reserve fund of $100 million that will cover those presently employed defined benefit members and retired members who have not received as much as they have contributed.
Fund legal counsel Viola Alepuyo said the agency received the order from Superior Court associate judge Kenneth Govendo on Tuesday.
The order said the reserve shall not be used to pay the benefits of other members, other than each contributing member with respect to his or her own employee contributions. It shall also not be used for expenditures such as administrative expenses, consultant fees, money managers’ fees, and attorney’s fees.
Each month the board of trustees shall also update the current amount held in reserve so that they know how much should be set aside if the Fund fails.
The Fund has total net assets of only $311 million as of June 30, 2011.
According to the order, the reserve sum may be invested along with other funds handled by the Fund.
A court judgment in 2009 determined that the government owes the Fund over $231 million in unpaid employer contribution; the amount continues to increase. Due to this delinquency, the agency is forced to withdraw from its investments $50 million to $75 million annually to cover its expenses.
In the order issued Tuesday, the court also mandated the Finance secretary to pay the Fund all employer contributions of federally funded employees within three days of the receipt of the order, after the Fund disclosed in a previous hearing that a certain amount was never remitted to the agency.
The court also ordered both parties—the Fund and central government—to reconcile records of the un-remitted employer contributions. This is on top of the amount determined in 2009.
