Retirement Fund Board Chairman Sixto Igisomar confirmed to Variety Monday that “rules and regs for COLA, we adopted that.”
With no comments received on the amendments to the proposed regulations, the board moved to adopt the amendments that pursuant to the Administrative Procedure Act, 1 CMC 1CMC § 8315 (f), will become permanent in 10 days after compliance with the APA, 1 CMC § 91402 and 9104(a) or 10 days after publication in the Commonwealth Register.
According to the newly adopted regulations, eligible Class I and Class II retirees and surviving spouses receiving retirement or disability annuity from the Fund may have the annuity adjusted for COLA as determined by the Retirement Fund board.
The board will determine whether to approve or not a COLA for a particular year at or about its first regular board meeting following the passage into law of each fiscal year’s budget. It will be based on factors consistent with the fiduciary obligations of the board and shall include, but not limited to, the availability of funds specifically appropriated for the purpose.
The regulations further state that in the event that the board determines a COLA adjustment, eligible retirees or surviving spouse is entitled to the adjustment beginning on January 1 subsequent to the anniversary of the member’s retirement date upon reaching the following ages: 55 years, Class I; 62 years, Class I surviving spouses with eligible surviving children; 55 years, Class I surviving spouse without children; 55 years for Class II retirees and their surviving spouses; and 62 years for disability annuitants upon conversion to retirement annuity.
The regulations also set that the COLA rate shall be set by the board of trustees each year using the U.S. Social Security Administration rate for its beneficiaries as guideline. It stated that the rate shall be applied only to the first $30,000 of each beneficiary’s annuity account.
Variety learned that once the Retirement Fund board of trustees has set the COLA rate, it will be the same rate applied throughout the calendar year.
The regulations also state that the Fund board of trustees may, by a two-thirds vote of its members, authorize to grant an annual retirement bonus or ARB instead of a COLA— as permitted by P.L. 17-32—and shall be based “in large part” upon the Fund’s present funding level.
However, the regulations state that “the Board shall not approve a COLA for any year until such time as an actuary determines that the Retirement Fund is at full funding level and projected to pay all accrued liabilities as they become due.”
It was clarified as well that the ARB will not be compounded or otherwise operate to increase the annuity amount of a retiree, disability annuitant or survivor spouse from year to year.
“No COLA or ARB actually paid shall exceed the amount appropriated by the Legislature and will only be paid to members once the funding has been transmitted to the Retirement Fund by the Treasurer of the Commonwealth,” stated the newly adopted regulations.
Gov. Benigno R. Fitial signed into law Senate Bill 17-34, SD1 on Feb. 16, 2011 which amended 1 CMC § 8358 to allow the Retirement Fund board to vote on providing a non-compounding annual retirement bonus instead of a cost of living allowance.
Fitial, in his letter to Senate President Paul A. Manglona, said the bill was one of the measures recommended by the actuary, Buck Consultants, with the intent to stabilize the pension system to allow the Fund to continue paying pensions further into the future.
The bill that he signed into law (P.L. 17-32), Fitial said, eliminates the compounding effect of COLA that will result in the reduction of approximately $84 million in actuarially accrued liabilities of the Fund.
He said the Fund will cease COLA allotments totaling $33,745.05 in monthly payments for the remainder of the year with the approval of the law.
As of May 31, the Fund’s portfolio value was $320,440,309 with fiscal year return of 14.26 percent and monthly return of -1.28 percent.
In April, the portfolio value stood at $329 million.
Moreover, the drawdowns for the fiscal year through June 10, 2011 totaled $37,413,000.
The Fund’s budgeted annual drawdown for FY ’11 was $54.2 million.
