Fund drawdowns seen to reach $122M by September

The NMI Retirement Fund has liquidated nearly $70 million in assets to pay retiree benefits as of February 2008.

By Sept. 30, 2008, the pension program will have withdrawn $122 million of assets. This includes $45 million for fiscal year 2008 alone.

Oscar Camacho, vice chairman of the Fund board of trustees, said the retirement agency was “forced” to liquidate the assets from its investments in order to meet monthly pension obligations.

The CNMI government has not remitted any contribution to the Fund since March 2006.

“These drawdowns of the Fund’s investment does not just diminish the Fund’s assets held in trust on behalf of Fund members, current retirees as well as current government employees, it will significantly impair the Fund’s ability to ensure the last person who retires under the Defined Benefit Plan will be paid accordingly,” Camacho told the Legislature.

He also sounded the alarm about the Fund’s looming bankruptcy. Citing a 2006 actuarial report by Buck Consultants, Camacho noted that the suspension of employer contribution from March 2006 through September 2007 has shortened the Fund’s lifetime by five years.

He also recalled other scenarios provided in the actuarial report:

If contributions are made according to the actuary’s recommendations (39.7 percent of payroll), the Fund’s assets will remain positive through 2033, and perhaps longer.

If contributions are made according to recent practice (24 percent of payroll), the Fund’s assets will last until 2024.

If “uncollectible” receivables to the plan of $125 million are repaid, the Fund’s lifetime will be extended from 2024 to 2030 (at the 24-percent contribution rate).

If no new benefits are earned under the plan, and contributions continue according to recent practice (24 percent of payroll), the Fund’s lifetime will be extended from 2024 until 2032.

If no new benefits are under the plan, and contributions stop entirely, the Fund’s lifetime will be shortened from 2024 to 2016.

Camacho pointed out that the Fund’s lifetime may be even less than the eight years projected by the actuary.

The projections do not take into account the nonpayment of contributions beyond fiscal year 2007. Since the contribution suspension law expired on Sept. 30, 2007, the Fund has not received contribution from the CNMI government.

The projections also do not contemplate employer contributions at the 18-percent rate.

As of Dec. 31, 2007, the Fund is owed over $193 million in employer contributions for the three branches of government.

Autonomous agencies are also in debt by approximately $4.56 million: Marianas Visitors Authority ($34,684.03), Department of Public Lands ($123.557.78), Northern Marianas College ($2.84 million), Commonwealth Ports Authority ($1.05 million), and the Tinian Municipal Treasury ($517,764.30).