Fund highly recommends hiring of actuary

If the Fitial administration’s plan to transfer active members of the pension program to the Social Security Administration pushes through by the start of the fiscal year, the service of an actuarial expert should be obtained to guide the central government in its plans.

NMI Retirement Fund administrator Richard Villagomez disclosed this to Saipan Tribune yesterday admitting that he will recommend the tapping of an actuary for this exact purpose.

“Considering the relative magnitude of the proposed transition coupled with the complexities of defined benefit retirement systems, we highly recommend the professional expertise of an actuary be obtained to fully illustrate and plan around the financial impact of the transition,” said Villagomez, admitting that the discussions with the SSA have been solely between the administration and the federal agency.

According to the administrator, one obvious need now is finding a source and establishing a mechanism for funding the post-transition defined benefit plan.

“There are some ideas out there to raise revenues to fund the payment of benefits or at least a portion of it to extend it beyond two years. Whatever ideas-whether one that we’ve discussed in the past or new-that our elected officials are thinking about to help, our recommendation would be to hurry up, time is running out,” said Villagomez yesterday.

Gov. Benigno R. Fitial issued last June 7 an executive order declaring the Fund under a state of emergency and eventually transferred its function to the executive branch’s Department of Finance. The Legislature has 60 days to decide whether to support or reject it before it takes effect.

During Wednesday’s meeting of retirees at American Memorial Park, many voted to reject the governor’s executive order and urged the Legislature to junk it. Retirees have expressed lack of confidence on the Executive Branch’s capability to effectively handle the program and its questionable intention for the $320 million plus obligation to the Fund which represent its unpaid employer contribution for many years.

With the ongoing crisis at the Fund, Villagomez confirmed that the consultants and one active manager-Richmond Capital-are very understanding about the situation and stand ready to assist the Fund in any way.

The Fund’s portfolio has been repositioned to a more conservative allocation in light of the short investment horizon of two years.

Villagomez said assets are now invested in PIMCO institutional class mutual funds, BlackRock unit trusts, and Richmond Capital. The asset mix, he said, is around 75 percent high grade bonds and 25 percent low beta equity strategies.

When asked if the ongoing crisis at the Fund negatively impact its market performance, Villagomez responded in the affirmative.

“Yes of course, this is what we’ve been saying repeatedly. With the need to withdraw $53 million each year due to deficient contributions we are forced to invest in highly liquid but lower returning assets to address this need. Also, with an extremely short investment horizon of two or less years we are further forced toward the need to be ultra conservative,” added Villagomez.