Marianas Variety

Last updateWed, 20 Jun 2018 12am







    Monday, June 18, 2018-11:10:58P.M.






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Fund has $89.9M for retirees

THE march to depletion continues as the Retirement Fund’s invested assets for retirees have dipped below the $90 million level.

In her declaration in District Court for the NMI in support of its response to Betty Johnson’s emergency motion filed last March 25, acting Fund Administrator Lilian Pangelinan said, “As of the end of February 2013, Tranche B contained only about $89,900,000.”

Tranche B contains the funds that the Fund uses to pay benefits to retirees and all administrative and operating costs of the Fund.

Pangelinan said Tranche A, the account that the Fund reserves for active members of the Defined Benefit Plan, had $103,600,000 as of the end of February 2013.

A Superior Court decision in 2011 led to the division of the Fund’s investment corpus into two categories as Associate Judge Kenneth L. Govendo ordered approximately $100 million to be put in reserve.

As the Fund rehired investment consultant Wilshire Associates in Feb. 2012, it adopted two investment strategies: Tranche A for active members and Tranche B for retirees.

Tranche A investments are in a portfolio of federally guaranteed mortgage-backed securities that pay about 2.5 percent a year.

Tranche B follows a Glidepath Transitional Policy that allocates 12 percent in global stocks, and 88 percent in total fixed income.

In her latest declaration in court, Pangelinan said Tranche A contains “sufficient” monies to return the employee contributions of all current employees and inactive Defined Benefit Plan members — those who are not retired.

As of the end of February 2013, Pangelinan said the investment corpus was $193.6 million.

Pangelinan also declared the pension agency receives “outside revenue” from the government coming from three sources: employee contributions, employer contributions and legislatively appropriated tax income.

In fiscal year 2012, the Fund acknowledged receiving $2,754,756 in employee contributions, $6,176,498 in employer contributions, and $1,569,522 in legislatively appropriated tax income.

In the current fiscal year, Pangelinan said the Fund has received $239,841 in employee contributions, $2,436,028 in employer contributions, and $1,484,703 in tax income appropriated by the legislature.

She also relayed to the court through her declaration that in February 2013, there were approximately 2,200 active DB Plan members.

“As of today, more than 1,800 members of the DB Plan have submitted applications to withdraw their contributions under Public Law 17-82 as amended by Public Law 18-02, effective March 11, 2013,” said Pangelinan.

Pangelinan said the employee contributions of the withdrawing active DB Plan members have ceased pursuant to Section 2 of Public Law 18-2.

Section 2 of the recently enacted withdrawal law calls for the disbursement of “50 percent of the total employee contributions with interest calculated based on applicable statutory provisions for Class I and Class II.”

It mandates remittance of the balance within 90 days.

Pangelinan’s declaration states the Fund expects a majority of the employer contributions to cease along with the employee contributions.

Expecting revenues will decrease significantly, the Fund will most likely spend more from the investment corpus to cover the shortfall.

In fiscal year 2013, the Fund expects to pay out $73 million in annual pension benefits.

Fund’s depletion will be hastened

“Using more of the corpus to meet pension obligations instead of using employer contributions from the government will bring about the end of the Fund earlier than expected,” said Pangelinan.

The Fund experts, the actuary and the investment consultant, calculate the Fund’s depletion date to be March 1, 2014 — less than one year from now.

Pangelinan said that the Fund expected to receive $14 million in employer contributions in the fiscal year 2013 budget and draw down $57.5 million from the investment corpus.

“Since the beginning of Fiscal Year 2013 on Oct. 1, 2012, the Fund has had to draw down more than $33,500,000 from the corpus,” said Pangelinan.

She also said that the processing of withdrawals takes several steps and the most consuming step is determining the total amount of employee contributions received.

Pangelinan acknowledged that the Fund has an “antiquated” pension computer system that tends to generate “extemporaneous errors.”

She raised the issue of recalculating amounts due to withdrawal applicants that under P.L. 17-82, were to be disbursed at 25 percent. With the newly enacted P.L. 18-2 that amends P.L. 17-82, the Fund will have to recalculate the amounts so as to disburse 50 percent of contributions.

“It is very important that the Public Law 17-82 withdrawal applications are processed accurately because in the event of an overpayment, the money will be disbursed from funds that belong to non-withdrawing members. Once the money is fully disbursed the only means available to the Fund for recovering overpayments is to request the return of the overpaid funds and, if that request is rebuffed, commence litigation,” said Pangelinan.