When Buck Consultants presented its report on May 12, it projected that the Retirement Fund’s lifespan would be “at best — five years.” Now the projected collapse may happen in three years.
Wilshire Associates managing director Maggie Ralbovsky, in an interview, said: “There is no comparison to this Fund. This fund is off the charts.”
She said in the U.S., pension funds are backed by state governments. In the CNMI, she noted, “the government has not been making contribution.”
She added, “We are so far beyond the point of recovery that we should be talking about restructuring the retiree benefits.”
Cutting benefits is not unprecedented, she said, as other states have already done the same.
In Rhode Island, the Central Falls city pension fund, which is now under a state-appointed receiver, mulls imposing a 50 percent cut on the pensions of police and firefighter retirees.
Several states have also cut benefits for new employees either by altering the pension formula or raising the retirement age.
Kentucky, Nevada, New Jersey, New York, Rhode Island, and Texas reduced benefits in 2008 and 2009.
Four states reduced healthcare and non-pension benefits in 2008 and seven states did so in 2009.
In California, there were proposals to reduce benefits for public sector employees from 25 to 40 percent.
The California Foundation for Fiscal Responsibility, a non-profit organization, had warned that the state’s five biggest pension programs are in precarious financial conditions. It said these programs should reduce pension payouts by about 40 percent on the state payroll and by one-fourth for people hired after 2011.
Other than cutting benefits, Ralbovsky told CNMI lawmakers during Tuesday’s presentation that the commonwealth could either raise taxes or sell off assets to raise revenues to fund the pension program.
