The NMI Retirement Fund financial crisis

Dear retirees and beneficiaries: Like all of you, the Senate has been extremely concerned about the critical condition of the NMI Retirement Fund today. Currently, the Fund has approximately 2,940 retirees or beneficiaries and 2,996 active employees. These retirees, beneficiaries, and active employees are all affected by the solvency of the Fund, which has a lifespan of approximately two years. The Fund draws down over $50 million every year to pay retirees’ and beneficiaries’ pension benefits, and requires $400 million today to carry it though the next 10 years. Therefore, drastic actions must be taken today to prevent the Retirement Fund from collapsing.

The Fund is in a financial crisis mainly due to the central government’s failure to remit the actuarially determined employer contributions of active employees. This forces the Fund to draw down or liquidate its assets to pay out pensions, thereby diminishing the Fund’s corpus and investments. In 2006, the Retirement Fund filed a lawsuit against the central government for failure to remit employer contributions, to fund unfunded liabilities, and to declare unconstitutional Public Law 15-15, among other things. In 2009, the court ordered the CNMI government to pay $231 million (now $317 million) to the Fund. Moreover, each year the Legislature appropriates money to the Retirement Fund but only a fraction of the funds is remitted to the Fund.

In the past several years, the Fund repeatedly warned the governor and legislators of the impending demise of the Fund if money is not infused into the retirement system. The Fund transmitted numerous letters and notices to the governor and legislators regarding the dire situation at the Fund. Moreover, the Fund administrator, legal team, trustees, and consultants have marched to the governor’s office and the Legislature to express in person the critical nature of the retirement fund system. In response to the Fund’s warning and requests for assistance, I created a Special Committee on Retirement Issues to collaborate and offer recommendations on how to resolve the Fund’s issues. The special committee is chaired by Sen. Jovita M. Taimanao and composed of other senators, the Fund administrator, the Fund’s legal counsel, and chairman of the board of trustees, as well as a representative from the Commonwealth Retirement Association. The special committee held meetings at the Lgislature on Nov. 16, 2011, Nov. 29, 2011, Dec. 7, 2011, Dec. 14, 2011, Dec. 21, 2011, Dec. 28, 2011, Jan. 4, 2012, and Jan. 19, 2012, to address the issues. The special committee held a public hearing on Rota on Feb. 2, 2012, Tinian on Feb. 8 and Saipan Feb. 28 and March 6 to give retirees an opportunity to express their concerns and offer solutions to the problems at the Fund. The special committee continues to meet to discuss issues regarding the Fund.

Additionally, the members of the Senate introduced and passed several bills aimed at improving the financial situation of the Fund. These bills include, 1. SLI 17-13 (transfer public land golf courses to Fund); 2. SLI 17-14 (MPLT interest to Fund); 3. SLI 17-15 (set aside $25 percent of the annual budget for Fund; 4. SLI 17-16 (transfer life/health insurance to DOF); 5. SB 17-35 (transfer special benefits of gov./lt. gov to DOF); 6. SB17-36 (no new adopted children); 7. SB 17-96 (transfer prime government properties to Fund); and 8. SB 17-99 (transfer life/health insurance to DOF). The Senate awaits the passage of several other Fund supported legislation from the House of Representatives including: 1. HLI 17-05 (pension obligation bond); 2. HB 17-100 (RF reorganization); and 3. HB 17-217 (percentage of rebate to Fund). The House of Representative must act swiftly and pass all Fund supported legislation. The aforementioned legislation is intended to rehabilitate and infuse more cash into the Fund.

On March 13-14, 2012, the Superior Court in the Retirement Fund vs. CNMI case invited the government and interested parties to testify regarding the Fund’s issues and problems. The only government body that attended and spoke at the hearing was the Senate, represented by Sen. Ralph DLG. Torres, Sen. Pete P. Reyes, and myself. There were no representatives from the governor’s office. Although a few members of the House of Representatives were present, no one contributed to the discussion at the hearing. After listening to the concerns and possible solutions to the Fund’s crisis, the court set a deadline of June 15, 2012, for the government and the Fund to find an “agreed upon solution” to the Fund fiasco. A hearing is set for June 29, 2012, to discuss solutions, if any. If not, the court will accept petitions for receivership of the Fund. That means that the receiver, through court approval, will decide on how to prolong the Fund’s life, which will include but not limited to, significantly reducing pension benefits.

I write this to urge all retirees and beneficiaries to march up to the governor’s office and the Legislature and demand immediate attention to the Fund’s emergency. The Senate created a special committee, passed bills, held public hearings, attended court hearings, and urged its colleagues in the House of Representatives and the governor to act now and address the Fund’s critical status, but to no avail. Time is of the essence! We don’t have time to waste on this issue. The Fund’s lifespan of two years in unacceptable, and the government official’s inaction and indifference to the emergency at hand is disturbing and alarming.

The Senate stands ready to assist the Fund. The Senate has always been ready to participate in a round-table discussion to save the Fund. The Senate Special Committee on Retirement Fund Issues has done its due diligence to address the matter and offer recommendations. Additionally, the Senate passed important bills that would reduce the Fund’s expenditures and increase its funding capacity. However, the Senate cannot save the Fund alone. The Senate cannot single-handedly assist the Fund. We need the House of Representatives and especially the governor to prioritize and act on the Fund’s issues to prevent the taking away of money from you, the retirees, through the reduction of your pension benefits.

Once again, the Senate urges the retirees and beneficiaries to take a stand and demand action from their elected leaders. We were elected to lead the people, to protect the people, and to provide for the people. We were elected to protect and preserve the Fund. With this, we ask for your indulgence and support to engage the House of Representatives and the governor in saving and rehabilitating the NMI Retirement Fund for the benefit of the people of the Commonwealth.