Fund, consultant: 61 percent actuarial rate unrealistic

NMI Retirement Fund board of trustees and its actuarial adviser, Buck Consultants, views the existing 61 percent actuarial contribution rate as not realistic anymore in these times of financial challenges and with an accrued unfunded liability that is already about $1 billion.

At the same time, board chair Sixto K. Igisomar conceded Monday that government departments and agencies are not complying with the rate anyway, citing other obligations such as utility costs.

Buck Consultant principal Dylan Porter agreed that the 61 percent is no longer feasible and expressed willingness to come up with a new calculation if the board wishes him to do so.

“I don’t believe this actuarial rate [61 percent] is significant anymore considering that we are manipulating all the variables. We all know that we are deficient, we all know that we need $1 billion…but we don’t have it. So we need to start discussing this with our actuary to seek expert advice whether this actuarial rate is something we may need to change by statute,” Igisomar told the board during nearly two hours of deliberation Monday.

Dylan told the board that Buck continues calculating the actuarial rate in the method it has because of Public Law 6-17, which directs the step-by-step procedure on how it will be done. That law created the NMI Retirement Fund and its board of trustees.

Porter said the present actuarial rate doesn’t have a connection to reality anymore and may need to be changed. However, he emphasized that any decision to adopt a new contribution rate still depends on the board.

He pointed out, however, that even if the actuarial rate is changed, the Fund still needs to lessen its payouts by cutting members’ benefits.

“If the answer is 80 percent, we will come back to the board with 80 percent [actuarial rate] but we still need the benefit cuts and that, in fact, is more important,” said Porter.

Previous actuarial rates were 24 percent and 37 percent. The Fund began implementing the 61 percent employer contribution rate in October 2011. Since then, the board disclosed that government department and agencies are not complying with the new rate.

Some autonomous agencies even joined the pending lawsuit between the central government and the Fund in a bid to address their delinquency with the pension agency.

Besides the central government, many agencies are also delinquent in their employer contributions for many years. Autonomous agencies and the central government accumulated a total of $221.054 million in unpaid employer contributions to the Fund as of Nov. 30 last year. Of the amount, $181.042 million is owed by the CNMI government to the pension agency while $40.012 million represents the unpaid obligation of autonomous departments.