Fund posts $575 million in unfunded liability

The NMI Retirement Fund’s unfunded liability currently stands at $575 million, according to comptroller David Demapan.

In a special board meeting yesterday, Demapan reported that the Fund’s total liability totals $879 million against net assets of $303 million.

“We arrive at an unfunded liability of $575 million,” he told the board.

This means, he said, that for every dollar the Fund owes the beneficiaries, only 34 cents is funded and 66 cents is unfunded.

Meantime, he said the Fund did fairly well in April when it recorded total revenue of $4 million exceeding revenue estimates of $2.6 million by $1.3 million or 50 percent.

Demapan said the collection of $2 million from the central government on its unpaid employer contributions resulted in the 50 percent increase.

Through the seven months ending in April 2009, the total revenue of $15.4 million is behind by 17 percent from revenue estimates of $18.6 million.

“The shortfall of 17 percent is mainly from unpaid employer contributions from the CNMI government and the autonomous agencies,” Demapan said.

He said the passage of Public Law 16-32 caused revenue estimates to increase from $31.2 million to $32 million due to the addition of CNMI appropriations for safety annuity and cost of living allowance totaling $811,000.

Board of trustees chair Juan T. Guerrero said yesterday that a significant amount of the Fund’s unfunded liability was supposed to be partly addressed by the collectibles from the central government, which he said owes the Fund $215 million.

“When your assets decline, your unfunded liability increases and this is what’s happening to the Retirement Fund. The monthly employer contribution was supposed to play a significant role in addressing this unfunded liability,” he told Saipan Tribune.

‘Investment status’

As of March 2009, 58 percent of the Fund’s investment portfolio are in equities while 33 percent are in fixed income.

Demapan said the holdings have declined by 25 percent, with equities and money market investments sustaining the biggest hits due to market contractions.

‘Increased cash flow’

Cash flow for the month ending April showed an increase of $546,000 in cash and cash equivalents that are available for operation. Total cash inflows of $6.2 million also exceeded the total cash outflows of $5.7 million.

He disclosed that the statement of cash flows can predict the longevity of the Retirement Fund.

In the seven months of FY 2009, the Fund also recorded a reduction in its operating budget. Its total expenses of $41 million were 3 percent below the budget of $43.2 million—a savings of $1.4 million.