Fund beneficiaries up 20 percent in 5 years

The number of NMI Retirement Fund beneficiaries increased by 20 percent over the past five years while the ratio of its paying members to pensioners showed a declining trend, the Office of Public Auditor said.

In a single audit report of the Fund covering Fiscal Year 2005, OPA said the number of members receiving benefits from the Fund has steadily grown each year.

From 2,046 recipients in FY 2001, the number increased to 2,161 in FY 2005—a 20-percent increase over the five-year period.

In FY 2005, this group of recipients was paid a total of $51.7 million or about $21,000 per person a year, OPA said.

This is a 3.7-percent increase over FY 2004, which posted a total of $48.4 million in benefits or $20,000 per person.

“The benefits paid over the five years increased steadily,” said OPA.

Conversely, the ratio of total contributing members of the defined benefit plan to the total number of pensioners has declined over the years, it said. In FY 2001, the ratio was 2.60 workers for every beneficiary; in FY 2005, it went down to 2.24.

Overall, the OPA said that the Fund, based on the financial audit performed by independent auditing firm J.Scott Magliari & Company, “received an unqualified opinion or ‘clean’ opinion, indicating that the data…can be relied on.”

OPA, which reviewed the firm’s audit of the Fund, reported that in FY 2005, the Fund’s net assets increased by $60 million or 15 percent up from the prior year.

OPA said the Fund’s net assets grew from $399.8 million in FY 2004 to $460 million in FY 2005. This growth was attributed to “significant upturns in investments of equity and government securities.”

Overall investments also increased from $373 million to $433 million or 16.2 percent up compared to the previous year.

Total liabilities had also improved in FY 2005, said OPA. It said that liabilities decreased from $7.7 million in FY 2004 to $6.5 million in FY 2005, or a 16-percent reduction. This was due to “reductions in payables and on the judicial building trust fund loan.”

In the report, OPA cited the Fund’s $125 million receivables from the government, which it described as “possible loss of revenues due to bad debts not expected to be collected.”

OPA said these collectibles include employer contributions from “various CNMI government agencies,” government appropriations, benefits receivables, and member loan program, among others.

“The allowance for uncollectible receivables has continually risen each successive year, ballooning to $125 million by the end of FY 2005. The bulk of the increase is attributed to non-collection of employer contributions and associated penalties,” said the OPA.

The Fund imposes a penalty rate of 10 to 25 percent for employers that fail to pay contributions on time.

In the report, OPA said the Fund’s total unfunded pension liability totals $552 million, or 6.8 percent up from the prior year’s $516 million.

Total unfunded pension liability refers to an actuarially accrued future liability of the agency based on estimates and assumptions calculated of future funding needs.

These take into considerations such factors as longevity of members, future earnings, future inflation rates, average retirement age, future administrative costs, future survivors of members, and future turnover of non-vested government employees.