Retirement Fund’s actuary consultant quits

A day after its investment consultant terminated its contract with the NMI Retirement Fund, yesterday was Buck Consultants’ turn to sever its relationship with the government pension program.

And like Wilshire Associates, the actuary adviser also said the reason why it’s terminating its services with the Fund is because of the recently signed Beneficiaries Derivatives Act, or Public Law 17-51.

The Fund received Buck Consultants’ resignation letter yesterday and the move now brings to four the total number of resignations by its contractors in the aftermath of the law’s signing.

Buck Consultants’ resignation may also not be the last, as Fund officials admitted that some service providers may follow suit because of disagreement with P.L. 17-51.

“We have reviewed P.L. 17-51 and have concluded that it makes a significant change to the working relationship between Buck Consultants and the NMI Retirement Fund. The law is out of step with our industry, as other Fund service providers have observed,” Buck Consultants indicated in its letter to Fund administrator Richard Villagomez yesterday.

Saipan Tribune learned that Buck Consultants’ parent organization—Affiliated Computer Services and Xerox Corporation—has reviewed the law and was concerned that lawsuits could arise under the law which would require large unpredictable amounts of time and expense to defend. Accordingly, Buck Consultants intends to cease providing actuarial services to the Fund until the law is changed or repealed.

According to Villagomez, “actuaries are a very conservative bunch” and their role is to audit the health of the pension fund. He said the law was viewed by the consultant as a material adverse event like war and terrorism.

“As it stands right now, Wilshire Associates, the Fund’s investment consultant; Buck Consultants, the Fund’s actuary; and at least two money managers have terminated their contracts with the Fund.

This makes the Fund unable to manage its assets in order to provide benefits to beneficiaries,” the Fund’s statement read yesterday.

Buck Consultants has been doing business with the Fund for several years and just last May, its principal and consulting actuary, Dylan Porter, presented to the Fund and the Legislature “snapshots” that can help save the Commonwealth’s beleaguered pension program.

These snapshots centered on the proposed cuts of benefits paid to pension members and the streamlining of the Fund’s assets.

Wilshire Associates earlier revealed that based on the present asset value of the plan, which was $271.2 million as of Aug. 16, the program may only last up to three years if no immediate actions are taken to remedy the situation.

A day after the signing of P.L. 17-51, which allows retirees and other Fund beneficiaries to take legal action on behalf of the Fund when trustees who manage them refuse to bring action, Stralem & Company and BlackRock Inc. immediately terminated their contracts citing the bad effects it will bring to their business transaction with the Fund.

Just last Monday, Wilshire Associates also terminated its contract with the Fund citing the same reasons.

Gov. Benigno R. Fitial has expressed his dismay on the law’s passage and indicated his support to repeal the law right away.

Rep. George N. Camacho (Cov-Saipan) today is expected to introduce House Bill 17-220, which seeks to repeal the derivative lawsuit act of 2011.

A copy of the draft bill, which was obtained by Saipan Tribune, was circulated among retirees who are encouraged to show their support.

“We urge everyone affected by this to attend the session and show their support to repeal this law,” added the Fund’s statement sent to retirees yesterday.

According to the draft of H.B. 17-220, P.L. 17-51 adversely affects the ability of the Fund to fulfill its statutory mandate and it will expands the liability of risk for any person or entity dealing with the Fund. The bill intends to repeal the law in its entirety.

“Additionally, the Legislature finds that in order to replace these critical service providers, including investment consultants, money managers, actuaries and others, the Fund will be required to pay higher fees to compensate for the increased exposure to potential baseless lawsuits that the service providers will have to factor into their fees, assuming there are service providers willing to assume such risk,” the bill stated.