Speaker Arnold I. Palacios, R-Saipan, said financial firm Merrill Lynch told lawmakers yesterday that the Retirement Fund also regularly withdraws from its investment portfolio to cover the shortfall of its over $5 million monthly pension obligation to government retirees.
“You don’t sell when the stock market value is low. But the Retirement Fund does monthly liquidation to meet its pension obligation to retirees,” Palacios told the Variety yesterday afternoon.
“This is the worst time to be liquidating. This is certainly a well-founded concern from the Retirement Fund,” he added.
The cash-strapped CNMI government hasn’t been timely remitting contributions to the Fund since fiscal year 2006.
It resumed payment in FY 2008 but for only a fraction of what it was supposed to pay.
Government records show that the value of the Retirement Fund’s investment portfolio as of Nov. 2007 was $473.81 million. This July, it went down to $418.75 million.
Figures for succeeding months were not immediately available but Palacios said Merrill Lynch told them it was down by 22 percent.
He said the Legislature will explore the possibility of floating a pension obligation bond for the Retirement Fund.
He said the House of Representatives may likely endorse Sen. Maria Frica T. Pangelinan’s legislative initiative that will provide funding to the Retirement Fund.
“But it needs at least three-fourths vote in both houses of the Legislature,” he said.
If lawmakers pass the legislative initiative, it has to be placed on the ballot in Nov. 2009 for ratification of the voters.
“This [legislative initiative] is the long-term solution,” the speaker said. “But there are still so many hurdles to overcome. Remember, we are trying to amend the Constitution. There are certain mechanics on how to do that.”
The Fund’s defined benefit pension plan has accumulated unfunded liabilities of over $500 million due to the government’s failure to pay its premium and the enactment of laws providing additional benefits to retirees without appropriate funding.
About 90 percent of the Funds assets are invested in the U.S. and international stock markets.
