Rep. Ray N. Yumul, R-Saipan and chairman of the Retirement Fund Working Group, told the Variety the agency may be placed under receivership if its investments continue to spiral downward in the months ahead.
“They dipped below the $300 million mark. What is sad is that the money that they are losing [is designed to sustain the living expenses of retirees and future retirees],” said Yumul.
“If they keep withdrawing…and they are not receiving funds from the administration, eventually it’s going to reach zero in the next three to five years. What happens then? They are bankrupt. What do we need to do?” he asked.
Rep. Ralph DLG Torres, R-Saipan and a member of the working group, said the $267 million is the latest report they got from the Retirement Fund.
“That is the latest and most up to date figure that we have,” he added.
The Retirement Fund’s assets amounted to $472.88 million in fiscal year 2006 based on the actuarial study of Buck Consultants released in 2008.
Late last year, the Fund’s assets stood at over $300 million.
Apart from the stock market’s volatility, the constant withdrawals to cover the shortfall in the monthly pensions of retirees are also negatively affecting the Retirement Fund’s assets.
The Fund withdraws about $5 million each month because the central government hasn’t been able to remit its employer contributions.
Yumul said the Retirement Fund’s investments were not affected by former Nasdaq stock exchange chairman Bernard Madoff’s ponzi scheme, involving $65 billion — the largest investor fraud ever committed by a single person.
“I did ask Mark Aguon [Retirement Fund’s administrator] that question. He said directly they don’t have any investments with Madoff. He also said he has not received any reports from the Fund’s [managers] that they are suffering huge losses as a direct impact from investing with Madoff.”
Madoff pleaded guilty on Thursday to an 11-count criminal complaint.
Yumul said they are not discounting the possibility that some of the Retirement Fund’s money managers may have security investments with ties to Madoff’s firms.
He said Merrill Lynch, the Retirement Fund’s chief financial consultant, should be held accountable for any misguided financial advice.
Federal authorities are conducting an investigation on Guam amid the territory’s plan to bring to court Merrill Lynch.
The Bank of America saved the bankrupt Merrill Lynch in Sept. 2008 from folding.
Yumul said their working group is now moving forward in drafting legislation that will overhaul the local pension system.
“We will come out with draft legislation that will try to retain the Fund’s financial ability,” he said.
About 3,000 retirees and their families rely on the Retirement Fund.
The agency is supposed to be self-sustaining by 2045 with assets of at least $1 billion.
