Benefits for Marshall Islands retirees are skyrocketing while tax collections are stagnant putting the retirement fund in jeopardy, she said on Thursday.
The Marshall Islands cabinet appointed a committee earlier this year to come up with plans to reform the social security system, and it is expected to report to the cabinet next month with recommendations for fixing the system.
In 2011, benefit payments are expected to rise to $15.6 million, while tax revenue is remaining flat at $12 million, said Aho. The retirement agency will be forced to withdraw at least $3.6 million to cover the shortfall, essentially wiping out its domestic investments at Bank of Marshall Islands. In 2010 for the first time in 10 years, social security had to dip into local cash reserves to meet its deficit, and the problem is worsening.
Without government action to change the system, the gap between tax revenue and benefits payments will continue to widen, she said. “At this rate, if we don’t do anything, the social security trust fund will be fully exhausted by 2023,” said Aho. “Our benefit payments are growing, but revenue is not.”
“Or economy cannot support the system we have,” she added. Social Security projects that annual benefit payments will continue to go up, while tax revenue will remain stagnant.
Marshall Islands social security has offshore investments worth $56.5 million — only about one-quarter of its total benefits liability.
