By Gemma Q. Casas
Variety News Staff

ABOUT 3,000 government employees currently belonging to the old pension program, the defined benefit or DB plan, are eligible to transfer to the newly dopted defined contribution, or DC plan, according to Retirement Fund Administrator Mark Aguon.
The CNMI government signed on Monday the contract of the Guam-based ASC Trust Corp. as the DC plan’s third-party administrator.
The DC plan will automatically enroll as members new government hires from this month.
Aguon said there are a few already on board the DC plan and based on their estimate about 3,000 more who are under the DB plan can switch if they so desire.
“This question is probably better asked to the (Office of Personnel Management),” said Aguon when asked how many government workers are under the DC plan. “I know they are compiling a list.”
“I would say 3,000, plus or minus, are eligible to convert (to DC plan). However, I don’t anticipate all of them to convert,” he added.
The Retirement Fund administrator said converting from DB to DC plan is a matter of personal choice.
However, he said from a business standpoint, government workers who have been vested in the DB plan for 10 years will find it preferable to stay on the program.
Those who plan to relocate elsewhere with less than 10 years in government service should convert to maximize the benefits of their pension plan.
“It’s a personal decision but from my perspective, if I’m already 10 years, which is the vesting period, and I anticipate that I am going to be here for the next 10 years, I might as well stay in the DB plan,” said Aguon.
“However, if I’m under 10 years and I anticipate going to another place, I would like the advantages of the portability offered by the DC plan because you can take your 401-K contributions from the government and transfer it to a 401-K plan of a private sector or any other government that has a defined contribution plan,” he added.
The DC plan is the government’s counterpart for the private sector’s 401-K program
The CNMI government’s 401-K program is categorized in the U.S. Internal Revenue Service as 401-A category.
“We are 401-A category,” said Aguon.
He said the Retirement Fund will also introduce another category, 457, which would allow DB members to invest in the DC plan without leaving their current plan.
“We are going to offer the 457 to the current DB members. We will be offering it to anybody who want the advantages of a DC plan but who don’t want to abandon their DB plan. One of the advantages is that you create your own plan. You can choose whatever contribution rate you want,” he said.
One of the drawbacks of the 457 plan is that the future retiree is left alone to pay for his or her premium because the government is already subsidizing his or her existing plan.
“Because you are already in the qualified DB plan, the government is not required to contribute to your share,” said Aguon.
The Retirement Fund’s total assets are not enough to fully pay the future lifetime pensions of all government retirees due to its huge accumulated unfunded liabilities.
The DC plan, a creation of Public Law 15-13 or the Defined Contribution Plan Act of 2006, is designed to reduce the government’s liability to the pension program of its future hires.