Fund board thumbs down moving $24M to FICA

Members of the NMI Retirement Fund board of trustees have turned down a recommendation to move a large portion of retirees’ monies to the Federally Insured Cash Account, or FICA, despite its offer of a higher interest rate.

Fund administrator Richard Villagomez had sought the board’s go-signal for his recommendation to transfer $24 million of the Fund’s assets to FICA, but the board rejected this move after an executive session on Friday.

“We disapproved the recommendation because the board did not find it comforting to make such a decision at the moment. We already made the decision to go to CDARS and the board is not ready to entertain any further allocation of assets. With the current status [of our portfolio], we are not comfortable about making such a decision,” Igisomar told Saipan Tribune yesterday.

Since the departure of the Fund’s investment consultant in middle of last year, the board has been liquidating the Fund’s assets and putting the cash under the certificate of deposit account registry service, or CDARS program. As of Dec. 27, 2011, some $90 million of the agency’s $256.7 million assets have already been transferred to the program. The board’s goal is to put all of its funds in the program until a new investment consultant is hired.

Since the law does not allow the Fund board to make investment decisions without an expert’s advice, Igisomar said they intend to follow the former consultant’s recommendation to go into cash to protect the retirees’ monies.

In his prior report to the board, Villagomez said that the Fund would earn a higher return from FICA, which offers a .25-percent annual interest rate compared to CDARS, which has an interest rate of only .02 percent.

Compared to CDARS, which has maturity date of liquidity, FICA offers daily liquidation, according to Villagomez. He said FICA has also been part of the Fund’s discussion with its former consultant.

He said FICA is a program similar to CDARS. It has the same goal of protecting large sums within limits set by the Federal Deposit Insurance Commission. Unlike CDARS, FICA has $24 million cap on the amount that can be placed by a holder.

“The incentive in participating in FICA is the slightly higher rate of returns. We want to be in there. There are still monies that are transitioning from Glidepath 2013 asset allocation into the CDARS program, so we can set aside whatever FICA would accept,” Villagomez told the board Friday.