Fitial said the introduction of the DC Plan, which is designed to be self-sustaining with premiums generated from the members themselves, partly eased the government’s liabilities to future retirees.
In his State of the Commonwealth Address, the governor reported the Retirement Fund’s liabilities under the DB Plan grew from $809 million as of Oct. 1, 2000 to $1.007 billion as of Oct. 1, 2005.
In June of 2006, however, the DC Plan was enacted into law allowing the government to have new hires enroll in this program rather than to the DB Plan.
At the same time, some DB members switched to the new program.
He said much must be done to reform the local pension system, which, he added, generously gives out benefits without funding source.
“Over the years, benefits were increased without regard as to how much these new benefits would cost or how they were to be funded. With new benefits came an ever increasing liability. More money was needed to pay for the new benefits,” he said.
He urged the Legislature “to quickly pass an omnibus reform bill to protect the Retirement Fund.
“Representatives of the Legislature, the Fund, and my administration have been engaged in a working group to push badly needed legislation to cut the Fund’s losses.”
He added: “I urge swift action on these reforms, including the adoption of a legislative initiative to authorize a pension obligation bond with voter approval. I am ready to sign these reforms into law to protect our retirees.”
The pension obligation bond should enable the Fund to bolster its sources of revenues.
