Fund Administrator Mark Aguon told Gov. Benigno R. Fitial that the pension agency had withdrawn over $29 million as of Sept. 4 to meet annuity obligations to retirees.
“For fiscal year 2009, the Fund will have already drawn down over $43,026,748.75 to meet this same obligation, with anticipated annual drawdowns of $45 million. On the date of this letter, the Fund’s market value is approximately $319 million,” Aguon told the governor.
“Simple math yields that the Fund will cease to exist on or before 2016. To make these payments, the Fund has had to liquidate its invested funds, as the central government has failed to remit its amount owing,” he added.
Contributions from different government agencies are supposed to be rolled over to finance the monthly pension checks of retirees currently estimated at over $5 million.
The CNMI government hasn’t been able to pay for its share for years, prompting the Fund to file a lawsuit in Superior Court.
The Fund won its case by default and the local court issued a judgment that the CNMI government should pay the agency over $231 million as of April this year alone.
A memorandum of agreement executed during the previous administration requires the central government to pay the Fund at least $500,000 in biweekly contributions.
Aguon said the government breached this agreement and the board of trustees should not have waited more than three years to decide to sue the government.
“The long delay in seeking legal action against the government only compounded the problem. To use the invested funds under the guise that the Fund has no choice is irresponsible management and dereliction of duty to protect the funds,” he added.
Retirement Fund statistics showed there are about 3,000 retirees getting pension checks every month. Their number is expected to rise as more public servants retire this year and the coming months.
Most of them are vested in the Defined Benefit or DB plan. The government has an estimated over $600 million in unpaid liabilities under this plan.
The new pension plan introduced in 2007 known as the Defined Contribution or DC plan is more self-sustaining and mandates the government to pay less than 10 percent of the future retirees’ benefits.
