We are very pleased to report that all the four candidates for U.S. delegate supported amending the Constitution for the government to be able to issue a pension obligation bond to pay the millions of dollars of government obligations to the Retirement Fund.
If all the four candidates with their extensive experiences and educational backgrounds approved the changes to the Constitution to authorize the pension obligation bond, we can simply say YES, we will follow the desires of the four candidates for the U.S. Congress.
The proceeds from the pension obligation bond will be invested by the Retirement Fund to ensure that retirees and future retirees get their pension checks. The proceeds from the bond will be able to prolong the life of and provide better liquidity to the Retirement Fund. Presently, the Retirement Fund is eating its investments to pay pensions to the retirees. If this situation continues, the principal portfolios (investments) will decrease and eventually the retirees and future retirees will not receive their pension checks. There are over 6,000 retirees and active employees who are members of the Defined Benefit Plan with the Retirement Fund.
To underwrite a pension obligation bond requires financial and legal analysis to determine what amount is feasible, what are the underwriting cost, and its timing. These studies and analysis will take some time to perform and may or may not be the best for the government to undertake. But should the government have the authorization and if the timing is favorable to underwrite the pension obligation bond, then the government could proceed and underwrite the bond. Again, the government will not underwrite the bond immediately; it would take some time to underwrite a pension obligation bond.
How is the government going to pay the bond? The government will pay with the employer’s contribution and certain taxes assigned to the Retirement Fund. Instead of paying the Retirement Fund, the government will use this money to pay the bond. In other words, the government is refinancing its obligations; making its obligations with the Retirement Fund more affordable by borrowing from the bondholders and paying the proceeds (pension obligation bond) to the Retirement Fund. The government cannot pay one time its obligations with the Retirement Fund. This approach in securing a pension obligation bond and updating its obligations with the Retirement Fund is the most favorable approach for the government and the Retirement Fund.
Should you have any questions regarding the pension obligation bond, you may contact Mr. Richard Villagomez, administrator for the Retirement Fund at 322-3863/4/5/6/7.
On behalf of the Commonwealth Retirement Association, retirees and active employees of the Defined Benefit Plan, we would like to extend our greatest thank you for supporting the pension obligation bond (House Legislative Initiative 17-1) and H.L.I. 16-13: “the Legislature shall not increase benefits until all government obligations to the Retirement Fund system have been satisfied or the system is fully funded. Provided, further that no law shall be enacted by the Legislature that will create an unfunded liability to the retirement system.”
JUAN M. SABLAN
Chairman
Commonwealth Retirement Association
