Admin backs slashing pension benefits

The Fitial administration supports temporarily slashing the benefits being paid to pension beneficiaries in order to prolong the life of the NMI Retirement Fund, according to acting governor Eloy S. Inos yesterday.

At the same time, Inos described as impractical the Fund’s desire to get more than the $10 million the government wants to allocate the Fund in fiscal year 2012, which starts on Oct. 1. The administration’s spending plan for the new fiscal year allots a budget of just $10 million for its employer share.

According to Inos, appropriating more than $10 million for the Fund will result in even more severe cuts elsewhere in government operations. He likened the situation to weighing the “current essential services that need to be provided versus benefits to be paid [to pension members] in the future.”

Inos expressed hope that other ways can be identified to solve the pension plan’s problems. Declining government resources, he said, is the sole reason for its delinquency to the Fund. He denied that the government “abandoned” the pension plan.

“There’s really one practical issue here: does the central government have the money [to pay the Fund]? We’re not putting money into the Fund because we don’t have the resources, but we are working closely with the Fund to make sure the required monthly pensions are met,” he said, adding that the government will not allow a situation where pensions will not be issued to members at all.

Inos said he understand the concerns of retirees and assured that the government, despite its cash-flow problems, is committed to fulfilling its obligation to members.

The Fund’s investment portfolio is now at a critical level, valued at just $271.2 million as of Aug. 16. The Fund’s investment consultant, Wilshire Associates, blamed this state on the government’s continued nonpayment of employer contributions, forcing the Fund to withdraw from its investment fund to meet its pension obligations to retirees. Latest data indicate that the plan has only three years of life left if no new money is added to the investment portfolio.

The Superior Court determined last year that the government’s unpaid obligation to the Fund has already reached over $231 million. This continues to increase.

The Fund sought permission from the court last week to allow it to cut the pension benefits of retirees in order to prolong the life of the pension plan. It wants to implement this by Jan. 1, 2012.

The Fund insists that temporarily cutting the benefits paid to members would not affect the total amount the government owes retirees because the accrued benefits would not be adjusted.

The Fund also asked the court to allow the immediate turnover of Marianas House in Washington, D.C. to the Fund as partial satisfaction of the court judgment.

It also asked the court to reconsider an earlier ruling that mandated setting aside a $100 million reserve fund to protect the contributions of active government employees and retirees who have yet to collect their pension benefits.