Unless huge gains will be made between now and FY 2011, the Fund’s total assets could further shrink to $270 million with the projected further withdrawals of $40 million this FY 2010 and another $43 million in succeeding fiscal year to cover the estimated over $5 million monthly pension of retirees and their dependents.
The Fund’s average annual investment return is pegged at just 3.7 percent within a span of five years and 2.3 percent at 10 years.
The Fund began making withdrawals from its investment portfolio in 2005 at $5 million. But its withdrawals grew every year as the CNMI government deferred payments to the pension agency.
In their joint presentation to the Legislature yesterday afternoon, the negotiation teams from the Fitial administration and the Fund asked the members of the Senate and the House of Representatives to use their legislative power to help replenish the dwindling assets of the pension agency.
They are asking the Legislature to float a pension obligation bond, the proceeds of which will go to the Fund for reinvestment.
“The Legislature plays a critical role in whatever decision is made,” said Viola Alepuyo, counsel to the Fund’s board of trustees.
A legislative initiative, House Legislative Initiative 17-1, has been introduced by Rep. Joseph P. Deleon Guerrero, R-Saipan, to float a pension obligation bond.
The initiative needs the three-fourths vote of both houses of the Legislature so it can be placed on the 2012 general election ballot.
The Fund, in its presentation paper entitled “Recommendation to Ensure the Fiscal Solvency and Viability of the CNMI Retirement System,” wants the initiative to be included on the ballot for this year’s congressional delegate election.
This FY 2011, the Fund projects to spend over $78 million. Of the amount, $54.115 million will go to pensions, the rest will be spent for personnel and operations costs and benefits of public sector employees.
Part of the agency’s long-term plan includes the privatization of its operations.
“Issue an RFP for a reputable insurance company or bank to guarantee annuities to all current retirees and active Defined Benefit members; subcontract administrative functions of the Fund; transfer all assets of the Fund to the government,” the Fund’s presentation paper reads.
Commonwealth Retirees Association president Juan Sablan declined to comment on the recommendations.
He said they will meet this Friday to discuss the Fund’s plans before making any public statement.
