Fund: Employers must still remit contributions

NMI Retirement Fund administrator Richard S. Villagomez told government department heads, autonomous agencies, and government instrumentalities to “continue to remit all contributions until otherwise ordered” in the Chapter 11 bankruptcy proceedings.

Villagomez issued a May 7 memo in response to a number of questions that have arisen regarding the continued requirement to pay employer contributions.

“Please be advised that this requirement is part of the contract with the Retirement Fund that is within the protection of the United States Bankruptcy Court,” Villagomez said in his two-page memo.

Press secretary Angel Demapan said Wednesday that the fiscal year 2012 budget law sets aside $10 million for the government’s employer contribution to the Fund and continues to remit such. The Fund earlier asked that this allocation be increased to at least $25 million.

The U.S. Bankruptcy Code brought into effect an automatic stay of actions that are harmful to the Fund.

“This protection is at the heart of the Chapter 11 process, and is intended to maximize the ability of financially-distressed entities to use the tools provided under the Bankruptcy Code to reorganize for the benefit of creditors and stakeholders,” Villagomez said in his two-page memo.

Among the actions now forbidden by federal law absent prior permission of the bankruptcy court are (a) the commencement or continuation of actions of proceedings against a debtor that were, or could have been, commenced prior to initiation of the Chapter 11 proceeding; and (b) any act to obtain possession of property of or from the Fund or to exercise control over property of the Fund.

Since the Fund is statutorily and contractually entitled to receive employer and employee benefits, Villagomez said that “any attempt by the Commonwealth’s departments or agencies to withhold such contributions from the Fund would constitute a violation of the automatic stay, as an attempt to ‘exercise control over property of the estate.’”

The Fund administrator said government departments, autonomous agencies, and instrumentalities “must bring contributions current for all retiring employees before their applications to retire will be processed.”

He cited Board Resolution BR08-001, where eligibility for retirement processing is conditioned on payment of employer and employee contributions to the retirement date.

Villagomez said the Fund board has, on behalf of all Fund members, sought and obtained a ruling that these contracts of employment were breached by the failure to make these required employer contributions.

He added that Public Law 16-36 provides that the Commonwealth government, its departments, divisions, municipalities, public corporations, autonomous agencies and offices shall prioritize and pay the full employer contributions of government employees who are eligible to retire from government service; and that the administrator shall “upon receipt” of such employer contribution, accept and provide full pension to government employees who are eligible to retire.

“Accordingly, prior to final processing of any retirement application, all employer contributions for the affected employee must be remitted in full,” he added.

The NMI Retirement Fund is the first public pension agency on U.S. soil to seek bankruptcy protection, serving as a litmus test to other troubled agencies not only in the U.S. but other parts of the globe as well.