Pension plans are employee benefits. Because of the way CNMI government leaders have approached budget planning in the past few years these benefits are being taken away. CNMI government employees are going into the Social Security system. Since the negotiations regarding this are not transparent, it is not known how this will transpire. However, it is speculated that CNMI employees will be credited with five years of Social Security-only five years. So with this new math formula five years in the defined benefit plan = five years of Social Security. But the defined benefit plan stopped taking in new members a few years ago when the defined contribution plan came into effect. Chances are, these government workers in the defined benefit plan have worked for eight years or more. So is it still eight years government service = five years of Social Security, and 12 = five years and so on?
CNMI government workers will soon be in the Social Security system and will wait until they are at least 62 years old to receive benefits. That is if they paid in at least 40 quarters into Social Security. However they will take a 30-percent cut of their benefits at age 62. (http://www.ssa.gov/retire2/agereduction.htm)
Let’s compare Social Security with the CNMI pension that was starved to death by government leaders. If you wait until you are 62, earned $30,000 for at least three years, paid in at least 40 of your quarters and want to draw Social Security it would look like this: $767 per month or $9,204 per year. If you could draw from the CNMI defined benefit, were 52 or older, had 20 years of service, earned $30,000 for at least three years it would look like this: $1,250 per month or $15,000 per year.
So because of CNMI government leaders’ past approach toward budget planning, a CNMI employee as approximated above will have his/her retirement cut by about $483 per month or $5,796 per year. This is not even considering that the expected life span in the CNMI is 77.27 years (https://www.cia.gov/library/publications/the-world-factbook/geos/cq.html ) and the difference of enjoying retirement at 55 versus working until 62, or perhaps even 67 years old. So going over to Social Security will help ensure a stable retirement for the people of the commonwealth. However, you, the CNMI government workers, are taking a huge financial hit in your golden years.
Another point, the Social Security tax rate for employees is 4.2 percent through the end of 2012. Its usually 6.2 percent but Congress lowered it because of the current high unemployment rate in the mainland. The Social Security tax rate for employers, which would be the CNMI government, is 6.2 percent. (http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/240/~/2012-social-security-tax-rate-and-maximum-taxable-earnings) CNMI government employees are currently being deducted around 8.5 to 9.5 percent. So will they receive a refund of 2 to 3 percent for every year that they are credited for Social Security? And since it appears that they will get only five years’ credit in the Social Security plan, will the CNMI employees receive the balance of those years that they paid into their pension fund? Or will this be considered cost, the cost of past poor budget planning by CNMI government leaders?