After FY 2014, deferred pensions will rely on funds’ availability

The Settlement Fund on Friday said the fiscal year 2015 funding of 25-percent deferred pension for CNMI government retirees is subject to availability of funds and depends on several factors.

It said the sole funding vehicle for the restoration of retirees’ pension is Public Law 18-56 or the Saipan casino law.

“The media has recently reported that the 25 percent payments have been ‘restored.’ This has led to a lot of confusion among the Settlement Fund members about whether the 25 percent payments will continue to be paid after [fiscal] 2014. Based on the Settlement Fund trustee’s reading of Public Law 18-56, which is currently the sole funding vehicle for the 25 percent payments, payment after [fiscal] 2014 will depend on several factors,” the Settlement Fund said on its website (www.nmisf.com), under frequently asked questions that was also emailed to media outlets.

The four factors are the following:

• The continuous payment of the $15 million annual exclusive license fee by the licensee, Best Sunshine International Ltd.;
• Appropriation of funds by the senatorial districts;
• Identification of $15 million funding for Year 5 because this amount was paid in 2014; and
• Contribution from the CNMI government for the shortage to pay the full 25 percent payment.

“Thus, the NMI government’s ability to fund all or part of the 25 percent payment after [fiscal] 2014 is not a given, and will depend in large part on continuous funding and payment by the licensee and the NMI government to make up any shortage,” the Settlement Fund said.

Acting press secretary Ivan Blanco agreed with this interpretation of the Saipan casino law, but said the government will work with the House of Representatives and the Senate to make sure that 100 percent deferred pension will paid in a timely manner.

“Gov. [Eloy S.] Inos and the Legislature worked together to provide the 25 percent additional funding to make the benefit payments whole. And both the administration and the Legislature have committed to continue to make the payments 100 percent,” he said in an email to Saipan Tribune.

Aside from being the law that authorized the CNMI government to award an exclusive gambling license to Best Sunshine, the Saipan casino law also provided funding for payment to retirees who are members of the Settlement Fund from the annual license fee paid by the exclusive license holder.

July-September release
The Settlement Fund will release 25-percent deferred pension payments to retirees on Oct. 17, covering July, August, and September.

In an information also posted on its website, the Settlement Fund confirmed that it received $3.9 million from the CNMI government on Oct, 8, 2014, to pay the 25 percent payment for the period covering July 1, 2014, to Sept. 30, 2014.

It added that while media reports have stated that the October payment would be distributed by Oct. 10, 2014, the Settlement Fund said the Settlement Fund trustee was not consulted about the Oct. 10 distribution date prior to the announcement in the media.

Blanco also admitted that the release of quarterly payments for deferred pension to beneficiaries is a work in progress.

“There is room to improve processes at the Settlement Fund in order to expedite payments to beneficiaries.”

Questions on W-4P
The Settlement Fund also took time to answer questions regarding its controversial deduction of federal income tax on deferred pension payments covering the period of Oct.1, 2013, through June 30, 2014.

It said W-4P form is an Internal Revenue Service form, which a Settlement Fund member must submit if the member is electing not to withhold any federal income tax from the deferred pension payments. The W-4P form allows the member to elect and to instruct the Settlement Fund not to withhold taxes from deferred pension payments.

“Unless the W-4P form is properly filled out and received by the Settlement Fund by no later than Tuesday, Oct. 14, 2014, the October payment will be subject to a 10 percent tax withholding. In anticipation of the October payment, the Settlement Fund mailed the W-4P forms to all Settlement Fund members on Sept. 26, 2014, with instructions on how to fill out the form. If you have not received your form, you can obtain the form online from IRS.”

The Settlement Fund said based on the number of W-4P it received as of Oct. 9, 2014, about 93 percent of the Settlement Fund members elected not to withhold any tax.

Because of the high percentage of Settlement Fund members electing not to withhold, the Settlement Fund trustee would like to give off-island Settlement Fund members up to Oct. 14, 2014 to submit their W-4P form.

“The additional time is needed to give off-island and on-island retirees the opportunity to submit their W-4P forms to the Settlement Fund, and to ensure fair and equal treatment to on-island and off-island Settlement Fund members.”