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Fund’s DC plan now has 500 members
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Posted on Apr 27 2008
The NMI Retirement Fund’s defined contribution plan now has 500 members, including about 400 new hires.
Juan T. Guerrero, chairman of the Fund board of trustees, reported Friday that 126 government employees had converted from the defined benefit plan to the new DC program.
In addition, about 400 new employees have automatically enrolled in the DC plan upon being hired.
The DC plan opened for enrolment on July 25, 2007. Eligible employees have until July 25, 2008, to convert their DB account.
A defined benefit member may convert to the DC plan if he or she has less than 10 years of credited service with the CNMI government. Once an employee has become 10 years vested with the government, he or she is no longer considered an eligible employee who can convert.
The government expects to save a substantial amount if eligible employees opt for the defined contributin plan. The new plan increases the employee’s share to 10 percent, while reducing government’s employer contribution to 4 percent.
Under the defined benefit plan, Class I members pay at a rate of 6.5 percent and Class II members-or older members-pay 9 percent of their compensation. The government’s contribution rate for the DB plan is currently at 37.4 percent.
The contribution plan offers members an option to directly manage their own contributions.
There are approximately 3,000 members who are eligible to transfer to the DC plan.
Under the regulations, conversion by a married member will not take effect unless approved by the spouse.
The amount that will be transferred is a combination of the member’s previous contributions into the benefit plan, the amount of regular interest fixed by the Fund board of trustees, and whatever amount is legislatively appropriated for the transferring member.
The Retirement Fund has approved a conversion incentive, granting transferees 7.5 percent, rather than the original rate of 3.5 percent, compounded interest on their total contribution.
