4-month-old derivative act repealed

Gov. Benigno R. Fitial signed into law yesterday a bill that repeals a contentious four-month-old law allowing NMI Retirement Fund beneficiaries to sue on behalf of the pension agency, two days after the House of Representatives passed the Senate bill.

Public Law 17-67 not only repeals P.L. 17-51 or the Beneficiary Derivative Lawsuit Act, but also suspends the NMI Retirement Fund’s procurement restrictions for 90 days.

Fitial, surrounded by members of the House and Senate leadership and Fund officials, said the new law will help prolong the Fund’s lifespan.

“This will turn on the light, a very bright light at the end of the tunnel for the Retirement Fund program, moving forward,” Fitial said during the signing in the House chamber. “I want to congratulate all the members of the Legislature.for standing up and doing the right thing.”

Sixto Igisomar, Fund board of trustees chair, said the lifting of procurement restrictions for 90 days will allow the Fund to immediately negotiate with its former investment consultant, Wilshire Associates, and some money managers that severed ties with the pension agency when P.L. 17-51 was enacted because of liability issues, among other things.

The new law lifts competitive bidding requirements, among other things, “in order to restore the Retirement Fund’s relationships with service providers and contractors who terminated or suspended their relationships with the Retirement Fund between Sept. 5, 2011” and the effective date of the new law.

Besides helping bring back Wilshire Associates and some money managers, Igisomar said the new law will help the Fund invest its assets again in profitable investments and “suppress the crisis” that added to the Fund’s existing problems.

Under law, the Fund is not authorized to invest its assets and portfolio without the advice of an investment expert or consultant.

“Now that [P.L. 17-51] is repealed, it’s highly favorable that money managers will come back, it’s highly favorable that Wilshire will come back but I cannot guarantee until they’ll actually get in,” Igisomar told Saipan Tribune.

Around 1:30pm yesterday, Fitial went to the nearby legislative building on Capital Hill to sign the repealer law in front of lawmakers and Fund officials.

Rep. Froilan Tenorio (Cov-Saipan), the only House member who voted “no” to the repealer bill on Tuesday, left the House chamber shortly before the governor was to sign the measure.

“Because I voted ‘no’ I shouldn’t be here,” Tenorio told Saipan Tribune.

Some Capital Hill observers said the timing of Fitial’s signing of the repealer came at a time when Lt. Gov. Eloy S. Inos-who signed P.L. 17-51 in September as acting governor-is currently off-island on medical leave. Others said that even if Inos is on-island, the repealer law would still be signed because the administration now sees the impact of P.L. 17-51 on the Fund.

The repealer bill, Senate Bill 17-94, Senate Draft 1, was offered by Senate Vice President Jude Hofschneider (R-Tinian), Sen. Juan Ayuyu (Ind-Rota), and Sen. Henry San Nicolas (Cov-Tinian).

House Floor Leader George Camacho (Ind-Saipan) also introduced a House repealer bill but an agreement between the House and Senate paved the way for the Senate bill to be passed and sent to the governor.

The new law says P.L. 17-51 “expands the liability risk for any person or entity dealing with the Fund to such an extent that service providers that were under contract prior to the enactment of Public Law No. 17-51 are terminating their agreements with the Fund.”

At the brief signing ceremony, Fitial said his administration will be working with the Legislature to come up with initiatives “that we believe will help strengthen the sustainability of the Retirement Fund.”

“This repealer, according to my understanding, will enable the existing Retirement Fund program to move forward without any problem. In other words, without this, I can see that there will problem with the Retirement Fund. With this repealer, [it will] remove the issue of uncertainties with money managers and consultants that we need to help the Fund move forward. This will place the Retirement Fund in its proper perspective and the right path moving forward,” the governor said.

After the signing, Fitial joined the House and Senate in their closed-door joint leadership meeting in the House chamber.

Since the Fund’s investment consultant terminated its contract with the pension agency 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.

Igisomar said the money in this program only earns between 0.02 percent and 0.04 percent, much less than what the money could have earned had it been invested elsewhere. He said the lost opportunity may have cost the Fund millions of dollars, but the Fund has yet to determine the exact amount.

As of Dec. 27, 2011, some $90 million of the agency’s $256.7 million assets has already been transferred to the CDARS program. The board’s goal is to put all of its funds in the program until a new investment consultant is hired.