Fund board cuts interest rate for withdrawn contributions

The NMI Retirement Fund’s board of trustees approved changes to its regulations Friday that, among others, reduced the interest rates received by members who will withdraw their contributions and imposes a new $25 fee for retirees who habitually ask for changes in their information.

These and other policy changes will be published in the Commonwealth Register for public comments. The results will then be brought back to the board for consideration prior to formal adoption. The target effectivity of these policy changes is April 2012.

From the existing 3.5 percent interest rate on employee contributions, the board voted that the amount be reduced to the prevailing rates offered by banks. The board cited the Fund’s financial status as the reason for this, saying that it is only earning a little interest of about 1 to 1.2 percent annually. The new rate will apply to those who will withdraw their contribution after the formal adoption of the changes. The Fund administrator will determine the bank’s prevailing rates for regular savings accounts each year.

During the discussion, Fund administrator Richard Villagomez even recommended providing zero interest rates on contributions paid to members, citing the dwindling financial status of the pension program. Commonwealth Retirees Association Larry Cabrera echoed Villagomez, saying perhaps it is time the board thinks about not giving any interest on refunded contributions because he believes that those who paid their contributions to the Fund while working were not doing it as a form of investment but for their future retirement.

Due to the increasing number of requests to change details or information on the retirees’ or beneficiaries records, the board also voted to impose a $25 fee for each change requested by retirees.

Under existing regulations, members are allowed to make changes once every year, free of charge. However, Villagomez said that the agency has been getting more requests, ranging from changes in their address to information and details about their records.

Villagomez pointed out that even minor changes in the members’ records require a lot of adjustments in the agency’s accounting department. He said the new fee will reduce the unnecessary workload and administrative cost.

The board also wants to move forward on the paperless system and approved the issuance of pensions only by direct bank deposits or automated clearinghouse deposit, ACH. The board estimates that there are about 75 percent of retirees who also get Social Security, which also requires direct bank deposit.

Villagomez said that eliminating the mailing out of more than 400 checks twice a month would save the Fund about $5,000 in stamps each year, plus the savings from administrative cost. ACH is estimated to save the Fund about $13,000 a year. The board also stopped the “emergency” issuance of checks after the agency reported an increasing number of requests for the emergency release of pension checks, either for funerals, airline tickets, and medical needs. Under existing rules, a pensioner could ask for the early release of checks five days prior to the issuance date.

Meantime, Fund chair Sixto Igisomar instructed the Fund management to work with the retirees’ association to get the word out about the new changes. “I want to make sure that all defined benefit members are well aware of these changes in advance,” he said, adding that all changes will soon be posted in the agency’s website.