Bill could drive the Fund to liquidation— Villagomez

The NMI Retirement Fund is opposed to a House bill that seeks to suspend employee contribution, saying the proposed legislation would “interfere” with the agency’s efforts to collect contributions and could potentially drive the Fund to liquidation.

Fund administrator Richard S. Villagomez said that House Bill 17-296 will “further degrade the Fund’s ability to emerge from the Chapter 11 proceeding with its payment obligations aligned with its funding level.”

“If the funding level is further impaired by actions such as those proposed to be inflicted under H.B. 17-296, the ultimate level of payments to beneficiaries will have to be adjusted commensurately downwards or, worse yet, the Fund will reach the point where there is no option but liquidation,” wrote Villagomez to Rep. Joseph M. Palacios, author of the bill.

Villagomez emphasized that liquidation “is not in the best interests of the CNMI or beneficiaries” as benefit payments will stop and those waiting to retire will not have a retirement system—“an outcome that would be devastating not just to current and future retirees but the entire CNMI.”

According to Villagomez, the Fund filed for Chapter 11 bankruptcy “to emerge from the process with a retirement system that is sustainable for the benefit of all members, retirees and active members alike.”

The Chapter 11 proceeding, he said, resulted in “an automatic stay of actions harmful to the Fund.”

“This protection is at the heart of the Chapter 11 process, and is intended to maximize the ability of financially distressed entities to use the tools provided under the Bankruptcy Code to reorganize for the benefit of their creditors and stakeholders,” added Villagomez.

The administrator also noted that both H.B. 17-296 and H.B. 17-226, which would allow for the withdrawal of up to 50 percent of members’ contributions to the defined benefit plan and now awaits the governor’s action, “are violations of the automatic stay” and “clearly constitute an attempt to, inter alia, exercise control over the property of the Fund.”

“We respectfully request that the Legislature cease and desist these actions, and the Fund must reserve all rights to pursue available remedies in federal court against any party whose actions constitute a violation of the automatic stay,” said Villagomez.

He also argued that Section 3 of H.B. 17-296 “is nothing more than an effort to hide the true costs and results of this ill-advised legislation while preventing the Legislature from being held accountable in the future.”