Introduced by Speaker Eli D. Cabrera, R-Saipan, House Bill 17-226 will allow non-retirees to continue working in the government even if they wish to withdraw their retirement contributions.
Cabrera tried to introduce a substitute bill, which will allow Fund members to roll over their money to the defined contribution plan instead of taking it back, but government employees in the gallery expressed strong support for his original proposal.
Jose Pangelinan, who is with the Office of Personnel Management, brought with him the signatures of over 800 executive branch employees from Saipan, Tinian and Rota expressing support for Cabrera’s bill.
He said he expects to receive 400 more from Public School System employees, mostly teachers.
In his testimony, Pangelinan said they have lost confidence in the Retirement Fund and now believe it will never recover. The members, he said, believe that the Fund is no longer viable.
“We cannot rely on Retirement Fund to serve us when we decide to retire. All indications are showing that the Retirement Fund will run out of money in less than three years,” he said.
The Fund, he added, will eventually collapse.
“Right now we have nothing to look forward to except to have this bill passed and signed into law. Once the bill becomes law, we will have the option either to withdraw, smartly invest our money to continue working in the government or leave our money in hope the Fund survives. It is likely the most of us will never get to experience the good life of a retired person, like those who have already retired for more than 10 years now,” Pangelinan said.
Fund Administrator Richard Villagomez said they don’t oppose the idea of allowing the active members to withdraw their money or roll it over to the defined contribution plan because it will reduce the growth in future payoffs.
Last year, he said they paid $63 million and in 20 years this will grow to $90 million.
So the advantage of giving members such options is that “it will eliminate the Fund’s future obligations.”
The Fund’s only concern, Villagomez said, is that the measure will “destroy the funding mechanism” of the pension agency.
Villagomez asked the speaker to amend the bill to include a funding mechanism before allowing the members to get their money back. It will be either a transitional funding mechanism or a permanent funding mechanism, he added.
A transitional funding mechanism will require that employer contribution amounts “shall continue to be paid based on the amount of payroll of active defined benefit plan members prior to refunds.”
The contribution rate in effect is 60 percent as of Oct. 1, 2011.
The permanent funding mechanism will pay the benefits of current and future retirees in the defined benefit plan.
“The dollar amount will still be calculated by an actuary but the amount each employer has to pay can be determined either of weighted dollar average of budgeted payroll, or weighted dollar average of service years,” Villagomez said.
House Minority Leader Joseph P. Deleon Guerrero, R-Saipan, said the issue should not be between retirees and active members.
He said “we should take care of both.”
But the way he looks at it, H.B. 17-226 will take care only of the active members and will hurt the retirees, he added.
Also, he said Fund will lose over $100 million to active members when they decide to get their money back. That, he added, is 40 percent of the money the Fund has right now.
By a vote of 11 to 7, House Bill 17-226 was approved and now goes to the Senate.
Those who voted no were Deleon Guerrero, R-Saipan; Reps. Francisco S. Dela Cruz, R-Saipan; Janet U. Maratita, R-Saipan; Tony P. Sablan, R-Saipan; Ray N. Yumul, R-Saipan; Ray A. Tebuteb, R-Saipan; and Ralph S. Demapan, Covenant-Saipan.
Those who voted yes were Cabrera, Vice Speaker Felicidad T. Ogumoro, Covenant-Saipan; House Floor Leader George N. Camacho, Ind.-Saipan; Reps. Joseph M. Palacios, R-Saipan; Sylvestre I. Iguel, Covenant-Saipan; Raymond D. Palacios, Covenant-Saipan; Edmund S. Villagomez, Covenant-Saipan; Stanley T. Torrres, Ind.-Saipan; Fredrick P. Deleon Guerrero, Ind.-Saipan; Trenton B. Conner, R-Tinian; and Teresita A. Santos, Ind.-Rota.
