Fund to set aside over $100M for DB plan members

The NMI Retirement Fund disclosed Friday that it needs to set aside an approximate amount for all its defined benefit plan members, an order announced by Judge Kenneth Govendo during last week’s hearing.

Due to the “oral judgment” from the court, an emergency meeting was called Friday noon by the Fund trustees to immediately discuss the new order, which they believe would severely affect the Fund’s already shaky fiscal state.

Viola Alepuyo, counsel for the board trustees, revealed that the Fund—based on the updated DB plan members’ contribution—needs to set aside more than $100 million to comply with Govendo’s order.

She explained that the court order aims “to protect those who contributed into the pension system” by setting aside funding that cannot be used for other purposes.

Alepuyo said the Fund actually doesn’t need to create a “separate account” for the purpose and added that the oral judgment didn’t cite a specific amount the Fund should set aside.

The over $100 million was an amount based on the Fund’s record.

Alepuyo reported to the board that the “set aside amount” not only covers current employees of the government—or DB plan members—but retirees who have yet to get all their contributions from the Fund.

Board chair Sixto Igisomar disclosed that from $320 million in May 31, the Fund only has $305 million in total assets as of Friday following the continuous drawdown of pension payouts every month.

He disclosed that the Fund needs $600 million more to pay all its obligation to members, which represents the unfunded liability of the pension system.

Saipan Tribune learned that because of the $100 million it needs to set aside, the Fund will only have about $200 million left to invest and pay for the pension of members.

Fund officials described the agency’s current situation as an “emergency” and if no solution is identified will result in more chaos.

“The fiscal condition of the Fund didn’t change before and after the hearing. It is the position of the legal team that things remain the same. We’ve been screaming across the street for help and assistance for monies to come here [from the government]. We even sat down with the negotiating team [from the administration] to identify a solution,” said Alepuyo, adding that the Fund even identified and suggested that allocation for some “pet projects” be given to the Fund but to no avail.

Pursuant to the court judgment in 2009, the government owes the Fund over $231 million in unpaid employer contribution. Due to this delinquency, the agency was forced to withdraw from its investments to cover the expenses amounting between $50 million and $75 million annually.

“We need to do something. The Fund needs cash and we need to make decisions,” said Igisomar, adding that the court order would create “a lot of imbalance” on the pension program.

Marja Lee Taitano and Donna Cruz, retirees who appeared in Friday’s emergency Fund meeting, called on the board to make a wise decision.

They expressed their disappointment on the decision made by Govendo, and reported to the board that many retirees were also upset on the judgment.

Taitano also asked the board to look into the “legality” of the decision made by Govendo, whom she believes may have some conflict of interest.