Fund proposes to reduce govt contribution

The NMI Retirement Fund is proposing to reduce the existing government employer contribution rate of 36.7 percent to 10 to 12 percent, saying that continuing with the present rate is “killing” the government.

“My objective is to lower it to 10 to 12 percent. This is more feasible for the government,” NMI Retirement Fund board chair Joseph Reyes said in an interview yesterday.

The existing rate, he said, is “killing the government.”

“Even in a private organization, if you give away 36 percent of your budget, you’d go broke,” said Reyes.

This explains, he said, why the financially struggling CNMI government is in arrears of some $80 million in employer’s contribution.

Reyes said, though, that exempting one agency such as the Public School System from the rate increase—from 24 percent to 36.7 percent—is “unfair.”

The Fund increased this year its employer contribution rate by 12 percent following the recommendation of its actuarial consultant.

Reyes said yesterday that as of now, the Fund’s unfunded liability totals nearly $400 million.

Its assets total $534 million, which is way far from its goal of $1 billion assets by 2020.

Earlier, Fund administrator Karl T. Reyes said that the government’s current retirement contribution system is “very lopsided.”

“It’s wrong math. If you take the entire government’s budget of $213 million, 24 percent ($35 to $40 million) of the entire personnel costs, which is at least 70 to 75 percent, go to the retirement payment. It simply means that the government is very generous. It pays a lot for members’ retirement,” said the Fund administrator.

Effective this fiscal year, the government’s contribution rate is set at 36.7 percent.

Employees only pay 6 percent for class 1 and 9 percent for class 2.

Meantime, the Fund said that the $80 million debt reflects the government’s unpaid employer contribution from December 2001. The Fund said that by 2002, the debt was at $50 million.

It said that the Babauta administration regularly pays its obligations but these were credited to the oldest accounts, covering fiscal years 1998 to FY 2001.

Finance Secretary Fermin M. Atalig said that payments to the Fund were current until June 1998 when a series of outside events such as Asian currency crisis resulted in reduced government revenues. The Fund said that the government ceased payments from August 1999 until October 2001.

Reyes, the Fund administrator, said that the employer contribution paid from October 2001 to September 2005 amounts to $56.3 million.

The Fund said that autonomous agencies pay their obligations on time.

There are some 5,000 active members of the Retirement Fund.