A bill allowing non-retired members of the NMI Retirement Fund’s defined benefit plan to withdraw up to 50 percent of their contributions regardless of years of service and without penalty or the need for them to quit their job is now with Gov. Benigno R. Fitial. There’s no telling yet whether the governor would immediately sign the bill in light of the Fund’s filing of a Chapter 11 bankruptcy after the House of Representatives passed the measure yesterday.
Under the bill, the rest of the employee contributions to the Fund will be rolled over to the defined contribution plan.
By a vote of 13-6, the House passed the compromise version of House Bill 17-226 a day after the Senate passed the same measure.
Less than two hours later, the Fund board of trustees led by chair Bernadita C. Palacios, counsel Viola Alepuyo, and other officials met with lawmakers in the House chamber to announce the Fund’s filing of Chapter 11 bankruptcy.
Fund officials also met with the governor. At 3pm, the Fund also held a news briefing on the bankruptcy filing.
Fund officials said the Chapter 11 bankruptcy is meant to restructure the pension agency’s financial obligations, but the surprise announcement didn’t sit well with some lawmakers. They told lawmakers that restructuring is a lot better than receivership and liquidation of assets, so that the pension agency can still exist. (See related stories on front page)
Press secretary Angel Demapan, when asked for comment whether the governor would sign the bill, said that HB 17-226 “was just passed by the Legislature and is currently under legal review.”
During the House session, members debated at length again the merits of the final version of Speaker Eli Cabrera’s (R-Saipan) HB 17-226, which already spent almost seven months bouncing between the two chambers.
Rep. Frank Dela Cruz (R-Saipan) reiterated his concern that enacting this bill would accelerate the Fund’s demise, and asked whether this is even considered in Fitial’s proposed fiscal year 2013 budget.
House minority leader Joseph Deleon Guerrero (R-Saipan) echoed Dela Cruz’s concerns, and cited three possible ways to help prolong the Fund’s life expectancy beyond three years.
“We all know the casino bill is dead but there are initiatives that still need to get the required number of signatures [to be placed on the ballot]. Second, there’s the pension obligation bond legislative initiative [which has yet to be passed]. Even if we have that in the November ballot, it would still take time [to float a bond]. Our credit rating…is not very good,” he said.
Deleon Guerrero said one of the easiest ways to help the Fund is to reduce the tax rebates and earmark the difference to the Fund but only “to buy us time to come up with a more permanent solution… but time is not in our favor.”
He added that it would be “foolish” for the House to think that the Senate will pass a casino bill.
Rep. Ray Yumul (R-Saipan) said if the bill is signed into law, it falls on the Legislature to make some adjustments in the fiscal year 2013 budget since the governor already submitted his spending plan.
Commonwealth Ports Authority Police Chief Jordon Lee I. Kosam, who attended the House session and is a current member of the Fund, said he has not decided yet whether to withdraw his contributions or not but he is thankful that at least those like him have that “option.”
“It’s not going to force them to withdraw, but they now have that option,” he told Saipan Tribune.
A retiree who attended the House session said she doesn’t agree with the Legislature’s passage of the bill, adding that it’s going to “kill” the defined benefit plan.
“Especially the older folks, they’re going to suffer if the Fund is killed,” she said.
The 13 House members who voted “yes” to the compromise version of HB 17-226 were Speaker Eli Cabrera (R-Saipan), Vice Speaker Felicidad Ogumoro (Cov-Saipan), floor leader George Camacho (Ind-Saipan), Reps. Ray Basa (Cov-Saipan), Fred Deleon Guerrero (Ind-Saipan), Sylvester Iguel (Cov-Saipan), Joseph Palacios (R-Saipan), Ray Palacios (Cov-Saipan), Teresita Santos (Ind-Rota), Froilan Tenorio (Cov-Saipan), Edmund Villagomez (Cov-Saipan), Trenton Conner (R-Tinian), and Stanley Torres (Ind-Saipan).
The six who opposed the compromise bill were Reps. Frank Dela Cruz (R-Saipan), Joseph Deleon Guerrero (R-Saipan), Ralph Demapan (Cov-Saipan), Tony Sablan (R-Saipan), Ray Tebuteb (R-Saipan), and Ray Yumul (R-Saipan).
Rep. Janet Maratita (Ind-Saipan) was absent.
What the bill does
The original bill intended 100 percent contribution withdrawal, but the Senate opposed it and instead offered a rollover to the DC plan.
The six-member conference committee co-chaired by Vice Speaker Felicidad Ogumoro (Cov-Saipan) and Sen. Jovita Taimanao (Ind-Rota) worked on the bill and recommended passage of HB 17-226, House Draft 1, Senate Substitute 1, Senate Draft 2, Conference Committee Substitute 1.
They reached a compromise wherein non-retired members of the DB plan will be allowed to withdraw their employee contributions regardless of years of service, without penalty, and without the requirement of severance of employment by rollover of the contributions to the DC plan.
The compromise bill also extends by three years or up to June 13, 2015, the period for Class I members to elect early retirement. That will give active members more time to pay their lump sum contribution to the Fund.
The conference committee stated that the enactment of the bill “will lessen the government’s financial liabilities as it authorizes qualified government employees to withdraw their contributions from the Retirement Fund, thus decreasing the government’s financial obligations to the pension fund.”
“The potential adverse effect of this measure, however, is that it lessens the NMI Retirement Fund’s lifespan, which will create an immediate financial obligation of the Commonwealth government retirees’ pensions,” the report said.
Currently, DB plan members who contributed to the Fund for 15 years or more are prohibited from refunding their employee contributions, despite indications that the Fund will be fiscally exhausted long before they can retire.
There are also unemployed active members of the DB plan with more than 15 years of service that cannot withdraw their retirement contributions.
Another group of active members are those with more than 15 years of service and employed in the private sector in and outside the CNMI.
“These active members will have to wait until they are 62 years old to retire and begin receiving their pensions. However, as stated above, the Retirement Fund may not last more than three or four years. Through this measure, all active members of the DB plan, regardless of their class or years of service, will be allowed to apply for a refund of their employee contributions from the DB plan, without penalty and without severing of their government employment for a period if 180 days,” the joint panel said.