Introduced by Speaker Eli D. Cabrera, the bill as amended by the Senate “allows any defined benefit plan member to refund their employee contributions, regardless of class or years or contribution, by rolling it over into an account within the defined contribution plan.”
The bill allows the employees to do so without a complete separation from service, which means they can continue to work for the government.
Of the eight senators, only House Floor Leader Pete P. Reyes, R-Saipan, voted no while Sen. Henry H. San Nicolas, Covenant-Tinian, voted “yes with reservation.”
The bill now returns to the House.
The original version of H.B. 17-226 would have allowed active members to withdraw their money from the Fund without having to retire or resign from government service.
Cabrera came up with the bill after over 1,000 government employees expressed fear that nothing would be left for them once the Fund dies, as projected, in less than three years.
Retirees strongly opposed the idea but the Fund said lawmakers should also create a funding mechanism to keep the pension agency afloat.
The funding mechanism, according to Cabrera, is the Saipan casino proposal.
But in the Senate substitute bill, rolling over the members’ money to the defined contribution plan instead of allowing them to take their money back is in itself a funding mechanism, according to Senate President Paul A. Manglona, Ind.-Rota.
Another funding mechanism in the Senate version of the bill is the “Retirement Fund Special Rebate Account.” The employees’ contributions and regular interest transferred to the DC plan “shall be paid out from the Retirement Fund Special Rebate Account.”
This will be done through the reduction of the rebate rates — in other words, higher taxes:
If the rebate base is not over $20,000, the rebate amount will be reduced from 90 to 70 percent.
If over $20,000 but not over $100,000 the rebate amount will be $14,000 (no longer $18,000) plus 50 (down from 70) percent of the rebate base over $20,000.
If over $100,000 the rebate amount will be cut from $74,000 to $54,000 plus 30 (no longer 50) percent of the rebate base over $100,000.
The Senate substitute likewise proposed “hardship loans” which Manglona said will give the active members access to their money in the DC plan.
The active members, he added, can “borrow” from their contributions.
Office of Personnel Management employees development and staffing chief Joe Pangelinan, who was in the Senate gallery during the session, reiterated his support for the bill as originally passed by the House.
That version will allow active members to get 50 percent of their money, he said.
Former Board of Education member Marja Lee Taitano, a retiree, opposed the bill. She asked the senators: “If we pull out the money have we thought about 5,000 other people?” referring to retirees.
“We are going to destroy the Fund soon,” she said adding that if there is fear among active members there is also fear among retirees.
