For retirees and beneficiaries, you would continue to receive your pension checks from the Retirement Fund; for active employees who are members of the Defined Benefit Plan, you will also be receiving pension checks once you retire from the government.
What would happen if H.L.I. 17-1 is not passed this election? There were several recommendations submitted recently by the Retirement Fund to the Legislature. These recommendations are indicated below:
1. Provide annual fixed line item appropriation to the Retirement Fund to be determined by the actuarial valuation report.
2. Hard freeze on the pension plan members who are younger than a specified age and/or have less than a specified number of years of service.
3. Phase out the Retirement Fund to a reputable insurance company or bank to guarantee annuities; transfer all assets of the Fund to the commonwealth government; and
4. Other legislative amendments
The Retirement Fund submitted ten pieces of proposed legislation that have yet to become law. These bills will cut the costs and benefits to retirees.
Recently, a joint meeting was held between the staff of the Retirement Fund and members of the Senate and the House to discuss how to save the Retirement Fund.
One of the presentations to the Legislature was about the actuarial valuation done by Buck Consultants LLC regarding the Retirement Fund. One of the document presented was how much savings (cuts) should be made to the benefits and programs for the Retirement Fund so it can be 75 percent FUNDED. It requires cuts of $440 million in benefits, such as:
• Alternative No. 1. Eliminate COLAs, death and disability, and reduce all benefits by 45 percent.
• Alternative No. 2. Eliminate COLAs, death and disability and reduce benefits above $500 by 63 percent
• Alternative No. 3. Eliminate COLAs, death and disability and reduce benefits above $1,000 by 10 percent
How much savings with specific cuts?
a. Eliminating COLA for retirees and beneficiaries – $84 million
b. Eliminating death and disability benefits – $6 million
c. 10 percent cut for all actives and terminees – $18 million
d. 10 percent cut for all retirees and beneficiaries – $61 million
e. 10 percent cut for everyone, but first $500 protected – $55 million
f. 10 percent cut for everyone, but first $1000 protected – $36 million
One of the other ideas was to issue promissory notes in lieu of benefits (pension checks).
All of the above recommendations, eliminating completely COLA, death and disability benefits, reducing pension payments to retirees, beneficiaries and future retirees or issuing promissory notes in lieu of benefits (pension checks) will have substantial negative financial effects to members of the Retirement Fund.
Therefore, in a financial and also common sense, the most prudent approach to increase the money available to the Retirement Fund is for the government to issue a pension obligation bond. The bond proceeds will increase the Retirement Fund assets. The recommendations made above to eliminate COLA, death and disability benefits and cut benefits would not be necessary.
I hope you make good decision on election day for you and your families. Vote YES to House Legislative Initiatives 17-1 and 16-13.
Thank you for reading my message.
JUAN M. SABLAN
Chairman
Commonwealth Retirement
Association
