By Gemma Q. Casas
Variety News Staff

THE financially troubled Retirement Fund had to withdraw $17.97 million from its investment portfolio for fiscal year 2006 because of the government’s failure to remit its employer contributions.
The agency anticipates more withdrawals due to the islands’ worsening economic condition.
“During the fiscal year, the Fund withdrew $17.97 million from investments to augment payments of pension benefits. Withdrawals will continue indefinitely due to an insufficient cash flow, and until payment from the CNMI government is received by the Fund,” Fund Administrator Mark Aguon said in a letter to Gov. Benigno R. Fitial and the Legislature’s presiding officers.
According to Aguon, the Fund had $472.688 million in net assets at the end of FY 2006, but its future unfunded liabilities outweigh its total assets.
In a separate letter to the governor, Fund Board Chairman Juan T. Guerrero said the local pension program has been saddled with financial problems for the last 20 years.
“The CNMI retirement system has been, from inception, overly generous and never adequately funded. We can no longer afford to ignore this reality and must move quickly and decisively to address this issue,” said Guerrero.
He said although the net assets of the Fund grew at 14.3 percent compounded annually, its future liabilities are more than what it has.
“The unfunded actuarial accrued liability, which in 1987 was $119.62 million, has increased 11.2 percent per year to $547.20 million, as of Oct. 1, 2005. In order to attain full funding, payment of over a half-billion dollars of unfunded accrued liability must be addressed,” he said.
He noted that of the $130.88 million total receivables due from the CNMI government to the Fund as of end-FY 2006, nearly $98 million is for unpaid employer contributions.
“This amount cannot be written off. The majority of the government receivables are accounted for as an allowance for uncollectible receivables, due to the recognition that collection of the entire amount is determined to be doubtful, at least in the current period,” Guerrero said.
“This cannot be written off from the financial statements; to do so would be a breach of the board’s fiduciary responsibilities.”