Marianas Variety

WITH $3 million less appropriation for fiscal year 2013, coupled with the passage of P.L. 17-82 that allows the active defined benefit plan members to withdraw their contributions, and a short investment horizon, the Retirement Fund’s new depletion date has been recalculated to last until March 2014.

Maggie Ralbovsky

Fund investment consultant Maggie Ralbovsky said based on the assumptions that the Fund pays “$70 million a year in benefit payments, $10 million a year for health insurance premiums — the running rate, $10 million a year in government contributions, and a beginning portfolio value of $100 million, and following the Glidepath strategy, the depletion date is expected in March 2014.

Variety learned that this is four months sooner than the previously calculated July 2014.

The Fund had $223 million in total invested assets as of Sept. 14: $113 million of which is invested in Tranche A investments for the active DB Plan members while the $110 million in Tranche B investments is left for the retirees.

Back in February, Ralbovsky and Buck Consultants consulting actuary Dylan Porter stated that the Fund could only last until July 14 given then contribution level, benefit payouts level and earnings in the market.

Ralbovsky, in her previous report to the board and to the lawmakers, said that investment is not the “silver bullet” to the Fund’s crisis adding that if it had a longer investment horizon, it could take on a more aggressive investments with better total rate of returns.

The Fund had been vocal about the need for more contributions to at least buy time for the Fund.

However, the Fund’s plea for the Legislature to appropriate more fell on deaf ears as it managed to appropriate only $10 million for fiscal year 2013.

With less money coming in, the Fund is expected to draw down more from the investments as it expects to spend about $69,570,976 in pension payouts this fiscal year.

In fiscal year 2014, pension payouts will rise to $71,009,821.

Ralbovsky said if the Fund has $100 million today, “holding all other assumptions constant, depletion is expected in January 2016.”

But if the Fund were to have $200 million today, “holding all other assumptions constant, depletion is expected in December 2017.”

Later this month, Buck Consultants’ Dylan Porter will be providing a clearer picture of the Fund’s status as he submits the actuarial valuation report.

In his previous report, Porter presented scenarios in prolonging the Fund’s viability but the scenarios called for both additional contributions and corresponding pension cuts.

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