Allowing active employees to exit crucial to long-term solution for current retirees

There is a reason Buck Consultants advised the Fund three years ago to allow active employees out of the Fund. They did the math—there was possibly enough money to fund the current retirees long term. However, when active employees were put into the equation, there was no way the Fund would have enough revenue to pay them when they eventually retire. This “unfunded liability” made long-term viability of the Fund impossible; it also meant that active employees (especially those with 15 years or less) had no future retirement in the Fund. Legislation was created to provide an escape route—under 15 years you could resign. However, how many of us can afford to resign for nine months or more?

If you are reading this and are an active member of the Fund, you have been “taken.” You have been paying into a system that never did have a chance of funding your retirement.

At some point along the line, when mistakes were made with the investment portfolio, and a lack of employer’s contributions was mounting, the active employees became the “mules” carrying the load.

As the Fund got further diminished, the liability increased to the point that we find ourselves right now—two years of funding for current retirees, zero years of funding for future retirees.

Even as an active employee, I am very aware of the importance of ensuring the long-term viability of the Fund for current retirees. What kind of government turns its back on the man’amko? Recently I researched the town of Vallejo in California. The city went bankrupt, cut back on services, closed the library, diminished the work force, but chose to continue fully funding their retirement system.

The Chapter 11 court needs to do two things in order to ensure the long-term viability of the Fund for current retirees:

Allow active employees out of the system.

Force the government to fund current retirees (after streamlining the system!)

Here is a simplified example: Reportedly the governor will be in a conference call with Social Security this week, attempting to convince them to fund the system. If he says, “I have 2,800 current retirees, with the average age of 55 (life expectancy in the CNMI is 66 for males, 69 for females). I need funding for an average of 12 years for 2,600 current retirees,” he may get some receptive response.

However, if he says, “In addition to the 2,800 current retires I have 3,200 active employees, ranging in age from 23 to 63. I need funding for an average of 30 years (estimate only, see page 33 of the actuarial report) for these 3,200 as well,” this would never work.

The same is true for any funding measure that the federal court may help impose—taxes on commercial property, taxes on gross receipts, selling government assets, etc.

The bottom line: The retirees have a fighting chance, only if the active members are let go.

Meeting at Memorial Park Amphitheater for active employees this Tuesday, May 8, 6:30pm.