The cash-strapped CNMI government owes $549 million or $83,753 each of the 6,555 members of the Retirement Fund vested in the defined benefit plan.
Yumul, R-Saipan, assured public hearings will be held before the Legislature acts on his measure.
Yumul, the chairman of the House Ways and Means Committee, is also the chairman of the Retirement Fund Working Group whose members include Senate Floor Leader Jude U. Hofschneider, R-Tinian; Sen. Joseph M. Mendiola, Covenant-Tinian; the Fund’s board of trustees; Senate legal counsel Michael Ernest; special legal counsel to the lt. governor Teresa Kim; Fund board counsel Viola Alepuyo; Fund Administrator Mark Aguon; Fund investments director Richard S. Villagomez; Lillian M. Pangelinan, active government employee; Kelly Butcher of the Public School System; retirees Rose Igitol and Ron Barrineau; and David Igitol of the Commonwealth Association of Retired Persons.
Yumul did not introduce the still unnumbered omnibus bill — a compilation of different measures about the pension program — during their session yesterday.
He said he prefers to have the draft reviewed first by the legal counsels of the Fund, the administration and the House before it is formally introduced on the floor.
He added that a committee report will be released to accompany the bill to explain the changes.
He also clarified that the removal of the 25 percent penalty rate on late payments is not in the omnibus bill and added that it has already been factored in the computation of the administration’s arrears to the Fund.
“That is a moot issue,” the lawmaker said. “The 25 percent penalty charge for late payments is already incorporated in the judgment.”
The Superior Court is scheduled to decide next month how much the central government should pay the Fund.
The government currently pays the Fund an 11 percent employer’s contribution rate instead of the 37 percent actuarial rate.
Unfunded liability
Yumul said the omnibus bill seeks to help the Fund at a time when the government continues to reel from a lingering economic crisis.
“The commonwealth lacks the financial resources to pay off a $549 million unfunded government liability to the Retirement Fund and that a rescue and reform plan is necessary to restore the Fund to a more sound financial footing,” he said.
The unfunded liability also precludes the commonwealth from entering the bond market without facing a high interest rate.
“The bond rating agencies may treat the government’s unfunded liability as public indebtedness. Until this issue is addressed, the commonwealth may be unable to secure additional credit at reasonable rates from private sources,” he said.
The omnibus bill will remove certain government liabilities to retirees and future ones.
Yumul said these include a provision making the cost-of-living-allowance to be made only by appropriations subject to the Fund board’s approval.
Current formula sets the COLA at 2 percent every year.
Additionally, the bill caps at $70,000 life insurance benefits of members and that by Jan. 2010, they must pay the premium to continue this program.
“We want to slowdown the bleeding. A lot of these benefits are unfunded,” said Yumul.
The disability annuity benefit is also capped at just 30 percent of the salary of the concerned member at the time of the accident.
Further, the occupational disability benefit will no longer be available for lifetime but would stop at age 62.
The “bad boy legislation” that will empower the Fund to either diminish or totally withhold retirement benefits for members convicted of any felony was also inserted in the bill.
Yumul said this is a potential issue among members who stand to lose a significant portion of their retirement contributions in case of a conviction.
He said he expects the community to share their thoughts with lawmakers regarding this measure.
