‘Court in no position to order cut on Fund members’ benefits’

Superior Court Associate Judge Kenneth L. Govendo ruled yesterday that he will not order a reduction on the NMI Retirement Fund members’ benefits because he believes the court is not in a position to do so.

He added that the authority to cut pension benefits lies on the Fund’s board of trustees and perhaps on the Legislature through constitutional amendments.

Govendo called a two-day forum of all parties involved in the Fund situation last week where hundreds of attendees were recorded.

In a two-page order issued yesterday, Govendo said if the court were to cut benefits, judicial review would not be available. Therefore, the court itself, will not order the reduction in the benefit of retirees.

Instead, the associate judge recommended 14 possible solutions on how the life of the pension program can be extended.

These include formation of a task force that includes people from the Fund, the executive branch, and the retirees to come up with a concrete solution within 120 days; float a bond and reduce pensions by 10 percent to pay the bond; use 100 percent of the tax rebate to pay into the Fund; and eliminate gross receipts tax, implement a sales tax, and remit 100 percent of the sales tax to the Fund.

Govendo also recommended the implementation of a value-added tax and the establishment of a maximum threshold for pension benefits.

A cap of $50,000 will be put on all benefits with a sliding scale percentage reduction of benefits under $50,000. Moreover, benefits below a certain level will not be reduced.

A cap on all future pensions at $40,000 per year was also suggested including the assessment of interest in over and under payments of pension benefits as well as implementation of a pension excise tax on off-island retirees’ benefits. A plan is also recommended to be formulated so that retirees will still be able to keep their life and health insurance if pension payment cease.

The associate judge also recommended the termination of funds for scholarship programs to save the Fund and move away from percentage employer contributions and have dollar contributions instead.

He also recommended a constitutional amendment to allow 25 percent of the annual budget to be set aside and remitted to the Fund before the rest of the budget is allocated.

Govendo also suggested that the CNMI allow golf courses and prime land to be leased up to 99 years or higher for $50 million or the appraised value of the land. These lands will be under the management of the Department of Public Lands but the lease payments will be for the Fund.

One last recommendation of the associate judge is to appoint a receiver for the Fund.

According to Govendo, many pensioners are not aware of the true condition of the pension program despite numerous presentation of the actuarial consultant. He ordered the Fund to explain the various scenarios to the pensioners and obtain feedback about whether pensioners will accept reduced benefits and, if so, by how much. Fund was ordered to submit this on June 29, 2012.

“The court believes sound suggestions for the solution of the Fund’s crisis was made on March 13 and 14. However, the demise of the Fund is imminent and steps to save the Fund must be taken immediately,” said Govendo.

He set June 15, 2012 as deadline for the parties to come up with a solution and any legislative initiative that will save the Fund.

“If the court believes that the actions of the board of trustees, the executive branch, and/or the legislative branch are unsatisfactory, it will allow petitions for receivership to be filed,” said Govendo, adding that the court will hear arguments on June 29.