Govt to save $40M from new retirement law

The NMI Retirement Fund said that the government would be able to save up to $40 million from the new retirement law that stops various benefits to employees.

“Altogether, it is projected that the government can save as high as $40 million. That is, if you penalize everybody who violates [the provisions],” said Fund administrator Karl T. Reyes on the implementation of Public Law 13-60 or the Retirement Integrity Assurance Act.

Reyes said that, based on an actuarial study, the government would save $4 million alone by stopping the vesting of education and military credits.

The Fund just finished the law’s rules and regulations last month. The proposed regulations are now up for public comments.

Reyes earlier disclosed that some employees petitioned for exemption from the non-vesting of education, saying that they were already pursuing a degree when the law was enacted in 2003.

Fund board chairman Joseph Reyes had said that, based on the legal opinion of the Attorney General’s Office, this petition may not be granted.

He said the Fund intends to comply with the new retirement law, which, he said, provides that it would stop vesting credits for education service effective 2003.

“The law is the law. Regulations are put in place to put teeth [in the law], but not to change [it],” he said.

Besides education, the new law also stops vesting military credits.

Further, it merges Class I and Class II retirement categories to ensure a uniform rate, discourages early withdrawal of contributions, repeals the 3-percent bonus for certain elected officials and benefits for board and commission members.

It also stops vesting credits for compensatory time, used sick leave, and prior service.

The law imposes penalties on early withdrawal of contributions and restricts re-employment for a period of six months unless the contributions are returned to the Fund.

Further, the law calls for the restructuring of the early retirement provision for Class I members to encourage them to retire before reaching 62 years.

Government authorities believe that these changes would reduce government payroll costs and free up additional funds for remittance as employer contribution to the Retirement Fund.

Currently, the government is required to shoulder 36.7 percent of employees’ retirement contribution. But most government offices could only remit 24 percent.

Last month, the government even struggled to meet this obligation, creating alarm among retirees who get paid using the contribution of active members.

The central government owes the Fund $85 million in employer contribution. This forms part of the over $526 million in Fund’s unfunded liability.