According to the report by Fund acting comptroller Pablito Amog “for the month of October, we have refunded a total of $440,176.38 to the departing government employees.”
The total amount refunded represents 0.08 percent of the total budgeted amount of $5.7 million for FY 2012, Amog’s report to the trustees stated.
Variety asked Fund board chairman Sixto K. Igisomar on his opinion with regard to withdrawals and with about 1,200 employees wanting to take out their money from the Fund, he said, “We understand that everyone wants their money out. It’s not that simple.”
Igisomar said an active member of the Fund cannot just simply withdraw the money.
“It’s something that needs to be discussed thoroughly and debated properly to make sure every angle as much as possible is taken care of,” Igisomar said.
Igisomar explained that the refund is not a simple transaction when one puts in money and whenever he or she wants to quit, he or she takes it.
For the pension system board chairman, “This is about a promise made to the retirees— promise made to the people that are working.”
Withdrawing contributions would shrink the assets that the Fund has in its investment portfolio and would further erode its ability to keep the money rolling in order to make their promises good to the retirees.
As of Oct. 31, the Fund’s total withdrawal for the fiscal year 2012 was $4.48 million.
Amog reported to the trustees, “With an average draw down of $2.2 million on each drawdown, or lesser if the CNMI [government] continues to remit their Employer Contribution, we are expecting to draw down an even lesser amount or less from last fiscal year’s $53.223 million.”
“You don’t just end it. There are consequences that will follow,” Igisomar said pertaining termination of membership to the Fund.
“Sure we allow the withdrawal, then what? What’s the next plan? Are you ready to raise taxes? Are you ready to make significant changes? It requires more debate instead of acting right away,” said Igisomar.
The Fund pays about $63 million a year in pension payouts.
The government and the agencies continue to lag behind in paying their actuarially determined contribution rate, with the central government owing $180.278 million for FY’11 alone and the agencies needing to pay $38.09 million in contributions as of Oct. 31, the Fund will be forced to withdraw from the ever shrinking investment corpus that as of Nov. 30 stood at $261 million.
Based on the Fund’s budget for fiscal year 2012, refunds of contributions has been given an allotment of six percent of the total budget with 89 percent dedicated for benefits payment and 5 percent for general and administrative expenses.
According to Amog’s latest financial report, the Fund was still within budget for the first month of the new fiscal year.
“While it is within our monthly allowable budget as authorized by P.L. 17-55 expenditures funding level, some line items that are under budgeted or not budgeted at all.
This he said necessitated a reprogramming of budget to cover shortfalls.
The Fund’s operating cash balance is $3.47 million, $1.5 million of which is reserved and invested in TCD at the Bank of Guam.
Fund’s withdrawal policy
There have been a number of active government employees who have expressed intent on withdrawing their contributions in the Fund in anticipation of the Fund’s eventual demise.
Variety had reported that about 1,200 were poised to pull out their money.
In the face of this mounting pressure, and in anticipation of the massive pullouts, the Fund has recently enforced a policy on the termination refund and reemployment.
According to 1 CMC §8356, members may upon complete separation from service before he or she has completed 15 or 20 years of contributing member service (depending on membership class) receive a refund of his or her total contributions.
The Fund, in its memo to all agencies, stated that complete separation from service as termination effective on the last day of employment and employee has withdrawn his or her contributions.
Employees who have completely separated from service and made refunds shall be deemed a new member of the Fund upon subsequent employment, said the Fund.
The Fund maintains that if a member has been reemployed prior to complete separation from service, he or she is not eligible for refunds.
The Fund also reiterates in its policy the absolute six-month prohibition on reemployment in the government following a complete separation.
The pension system also finds it improper for agencies or government departments to reemploy any former member of the defined benefit plan six months after complete separation from service.
