Fund’s investments drop $19.9 million in FY 2010

The NMI Retirement Fund’s market investments declined by $19.9 million last fiscal year, based on the latest audit report of the agency released Friday.

From a market value of $332.308 in fiscal year 2009, the amount went down to $312.326 million in fiscal year 2010—a decrease of a total of $19.981 million or 6 percent of total market value. Despite this, investment performance showed a net gain of $24.448 million in 2010 compared to a loss of $4.5 million in fiscal year 2009.

Based on the audit report completed by J. Scott Magliari and adopted by the board of trustees Friday, the Fund made a total of $40.755 million withdrawals from the investment portfolio last fiscal year. These drawdowns were used to cover shortfalls in pension payouts to members because the CNMI government failed to pay the employer’s contributions at the required actuarial rate of 37.3909 percent.

Based on the audit report, the Fund’s assets are invested in stocks and bonds, 63 percent; fixed income, 25 percent; mutual funds and real estate, 12 percent. It was also disclosed that the actual allocation varied throughout 2010 as the market values of investments changed daily but were maintained within the ranges allowed in the investment policy statement through the Fund’s drawdown of funds.

Besides the significant drop in the Fund’s investment value, the report also indicated a decline in both employee and employer contributions to the pension program. In fiscal year 2010, employer contributions totaled $32.660 million, a slight drop compared to fiscal year 2009, which had a total of 36.329 million. The figure represents a reduction of $3.6 million or 10 percent. According to the audit, the decline was due to the Legislature’s failure to pass the fiscal year 2010 budget until several days into the fiscal year, resulting in the shutdown of non-essential government operations. It said lower government payroll equates to lower contributions to the Fund. Also, a large number of employees resigned from the government and obtained refunds on their contributions.

Employee contributions showed a slight decline of 1.4 percent—from fiscal year 2009’s $8.508 million to fiscal year 2010’s $8.390 million. The decline was a direct result of the brief shutdown of the government operations as well as the separation from government service of those employees who refunded their contributions.

The revenue sources that finance the cost of administering the pension benefits and retirement benefits include employee and employer contributions, investment income, CNMI appropriation, debt service collection, and rental income.