Fund conducts survey to gauge retirees’ view on pension cuts

The NMI Retirement Fund board of trustees has approved the conduct of a survey among pensioners and members to gauge their views on proposed cuts to their benefits as a way to save the pension program.

Acting Fund administrator Esther Ada disclosed to Saipan Tribune the board’s approval of the survey, which should be sent out shortly to all members of the defined benefit plan or DB plan.

At last week’s board meeting, Commonwealth Retirees Association director Oscar Camacho said that members are split on issues about the Fund, specifically the proposed reduction of benefits.

Fund legal counsel Viola Alepuyo also reported that the Fund has difficulty in getting a clear picture of the retirees’ opinion as meetings and public hearings for members yielded only a few attendees on three islands.

The Fund has a little over 6,000 retirees and active members on record, Alepuyo said.

Based on a recent court order issued by Associate Judge Kenneth Govendo, the Fund must explain to retirees and members the several scenarios recommended for the reduction of benefits of members. Govendo wants to know by June 29 the retirees’ feedback and, if they agree to the cuts, how much they would prefer the cuts to be.

The survey, according to Fund officials, aims to gather the members’ input and the results will be submitted to the court.

According to Ada, the survey form consists of two parts: the first part explains the court order issued last month and the recommended percentage of reduction of benefits as presented by Fund actuary Buck Consultants.

The second part asks the respondent if he or she agrees to the proposed cuts and if favorable, what percentage they prefer. The question is answerable by yes or no, according to Ada as she discussed it with the board.

Ada said the survey forms will be sent out to each department for active employees and retirees. They will have 15 days to provide their responses to the Fund. Failure to receive responses on time will be considered a “no” response.

In order to prolong the life of the pension program, board and Fund officials agreed that implementation of both reduction in payouts and increase in cash flow is the key to the problem.

As of February this year, the estimated value of the Fund’s portfolio was at $253 million while it has an accrued unfunded liability of over $900 million. Based on this figures, the program is expected to last less than three years.

Based on the estimated current value of the pension agency’s portfolio, the program is only at 28 percent funding level, which means that if it is terminated now, it will not have enough money to pay its entire obligations to members.

A healthy and viable pension plan has to have $800 million in its portfolio.

Experts said if the Fund will implement a 50-percent cut in members’ benefits with the same projected $13 million annual contribution, the program’s lifespan will last until 2028. For a 10-percent cut in benefits with the same asset value and contribution, this will only buy some two months and extend the 2014 lifespan of the program.