‘Stop acting on bills that harm the retirement program’

The Commonwealth Retirees Association appealed to the Legislature to stop crafting or acting on legislation that will harm the already troubled retirement program.

In a letter Wednesday to Senate President Paul Manglona and House Speaker Eli Cabrera, association chair Lorenzo Cabrera cited the Beneficiaries Derivative Act as an example of a harmful bill that was enacted into law. He said the Act forced many of the Fund’s money managers and its investment consultant to terminate their services with the Fund.

“The recent turn of events we have witnessed was the unfortunate enactment of Public Law 17-51. The capability of the Fund to invest in the money market has been impaired. Whether this is only temporary and that the money managers will regain trust and confidence in working for the Fund, we don’t know. What we do know is that enactment of this law occurred at the most inopportune time with no assurance that the government plans or will comply with the court order,” said Cabrera.

He pointed out that for over three decades, the Fund has been subjected to all kinds of changing legislation, some of which were detrimental to the financial well-being of the Fund.

Cabrera also cautioned legislators from passing a new measure, House Bill 17-226, which he described as a “death blow” to the Fund.

The bill allows active members of the defined benefit plan, or DBP, to withdraw their contributions without any severance of employment or penalty, which means all 2,996 members will be able to avail of this exit strategy if enacted into law. The bill’s author is the House speaker.

According to the Fund, if all members withdraw their contributions, the payout will amount to $103.3 million, leaving the portfolio with only $170 million to support the accrued benefits of other members.

Cabrera asked both Manglona and Cabrera if the government will be able to find a replacement program for its employees when the current pension system collapses.

“A replacement program will cost money. Will the government make a commitment to be faithful in remitting its contribution? Will the government be able to provide workers compensation insurance at no cost to the employee? Will the government arrange for provisioning of health and life insurance coverages such as the type and amount of coverages that employees have come to enjoy?” asked Cabrera.

According to Cabrera, any jurisdiction where a government retirement program is established, the funding mechanism is put in place by requiring both the employer and employees to contribute based on rates and amounts as determined by an actuarial study and analysis. Its existence, he said, will continue as long as there are employees and the government continues to remit its share.

Based on a 2009 court judgment, the government was found owing the Fund over $231 million in unpaid employer contributions.