NMIRF warns against approval of 5 House bills • Administrator says proposals will drain Fund’s resources

Northern Mariana Islands Retirement Fund Administrator Juan S. Torres has warned the House Judicial and Governmental Relations Committee to defer action on five proposed measures due to their potential impact on the agency’s financial integrity.

In a letter sent to Rep. Dino M. Jones, Mr. Torres said not one of the bills would help improve the Fund’s current financial condition, but instead put further strain on its cash position at a time when government revenues are down.

“As true government leaders, it is our fiduciary responsibility to preserve the soundness of the retirement system for now and into the future. Let’s face it, our government cannot afford to continue giving out free lunches in light of the economic difficulties we are experiencing these days,” said Mr. Torres.

The CNMI government owes the Fund $32 million in unremitted employer’s contribution for the last 20 months, $6 million unpaid “earmarked appropriation” for Fiscal Years 1998, 1999 and 2000, and $3.5 million in unreimbursed 30 percent bonus payment the Fund has paid out on behalf of the central government since 1993.

Although the Fund’s investment has been showing steady increase, the gains are subject to high volatility of the stock/bond market.

This developed as the Fund reported a $13,201.323 gain for the month ending February 29, 2000 in its off-island portfolio.

According to the NMIRF administrator, the total portfolio fund for FY 2000 covering September to February jumped 16.85 percent, or $56,133,182 compared to the same period of the previous year.

This brings to $389,270,741 the total overseas investment of the Fund handled by its various money managers.

The Fund chief said he would only support any of the proposed legislation if the Legislature will provide funding for the recommended benefits. “Failure to identify any external resources to augment the Fund’s already strained cash flow would only lead us into serious financial chaos, which I believe none of us wants to see it
happen,” he said.

According to Mr. Torres, solvency of the retirement program should be on top of the Legislature’s agenda because the CNMI government owes it to the current retirees and members who continue to pay diligently into the system in the hope of reaping the benefits in the future.

The proposed legislation in question are:

• HB 12-070 authorizing a Retirement Fund member to borrow money for emergency purposes not exceeding $5,000 or 50 percent of the total contribution in the Fund.

• HB 12-081 reclassifying all Class I members to Class II allowing them to acquire better retirement benefits which are granted to Class II members.

• HB 12-109 allowing couples who are in government service to use each other’s service credit in case one spouse would like to quit work to satisfy retirement eligibility.

• HB 12-126 giving eligible current or former CNMI government employee who are entitled to a salary adjustment the option to convert their entitlement to vesting service.

• HB 12-146 extending retirement benefits to certain former government employees who retired prior to the enactment of the Retirement Fund Act.