Inos to lawmakers: Pass pension reform bill ‘expeditiously’

One of the new provisions, for example, is that a member who elects to maintain his defined benefit membership must pay the required employee contribution to the DB plan “in addition to the social security program.”

Inos said the bill “will neither affect the current retirees nor impair their benefits.”

It also does not change or alter employees’ participation in the group health and life insurance programs, he added.

“The administration hopes this measure will be entertained expeditiously so as to begin the process of rehabilitating our Retirement Fund for our current retirees while transitioning our active members as needed,” Inos said in a letter sent late Thursday afternoon to Senate President Paul Manglona (Ind-Rota) and acting House speaker Felicidad Ogumoro (Cov-Saipan).

Some active members and lawmakers asked for comment yesterday said their initial reading of the bill shows that non-retired members are given “options” on what to do with their retirement contributions.

Rep. Joseph Palacios (R-Saipan) said he hopes the proposal will pass as is, given that it “takes care of active employees”-as lawmakers and the administrative have been talking about for weeks.

“The good thing about it is that it gives options-if you want to retire after 10 or 15 years, if you want to withdraw your contributions, or move to Social Security. The bottom line, those with enough contributions to the Social Security.can still supplement that with a voluntary plan,” Palacios told Saipan Tribune.

‘Highlights’

Inos said there are four highlights of the proposed measure.

One, it allows vested members-active and inactive-to retire. Members vested but have not reached 20 years of creditable service may retire at a prorated pension amount.

Two, the bill allows all other active and inactive members who are not retired to voluntarily withdraw their contributions.

Three, it transitions government employees into the Social Security program.

Four, it makes the defined contribution plan a voluntary plan to supplement the Social Security program.

“This measure effectively addresses the needs of the defined benefit active and inactive members, as well as the defined contribution members,” Inos told lawmakers.

He said the administration also urges the Legislature to pass other measures pending in both chambers that address the Fund’s needs.

A government employee for 15 years, requesting anonymity, said while there are options presented, the details are still murky at this time, especially on the payment of premium if the employee opts for a Social Security buyback.

“All along I thought the government will pay for the whole buyback but my understanding of the bill is that we will be responsible for premium payments. We have to carefully read the bill before we could say we support or do not support it,” the employee said.

Another government employee for 17 years said he hopes lawmakers will not drastically tinker with the bill as currently drafted.

“It’s good as it is now in my view. At least everyone is given a choice,” he said.

The Senate president, for his part, said senators who were on Rota yesterday distributed copies of the newly-released pension reform bill to residents while a special Senate panel was conducting a public hearing on the first bill “expressing the desire” of the CNMI to transition into the U.S. Social Security.

Manglona said the leadership cannot comment on the bill yet pending further review.

Other lawmakers, including House floor leader George Camacho (Ind-Saipan) and Rep. Ray Tebuteb (R-Saipan), said a review of the proposed eight-page bill, also known as the “CNMI Pension Recovery and Reform Act of 2012,” is ongoing.

Devil in the details

There are portions of the measure that were highlighted to direct readers’ attention.

For example, it adds the phrase “including interest earned” in this sentence on page 3: “Any employee who elects to separate from the fund shall receive his/her employee contribution ‘including interest earned’ without penalty and without separating from the government.”

The succeeding statement is also highlighted: Inactive members of the Fund as of the effective date of this Act who have not retired “may elect to retire if vested or elect a complete severance, upon separation shall receive the amount of employee contribution said inactive member contributed to the fund including interest earned without penalty.”

Section 203 of the bill is about the government ceasing the withholding and remittance of employees’ portion to the employees DB account upon extension of the Social Security.

The succeeding sentences are highlighted: “Provided however, that if an employee elects to maintain his/her defined benefit membership, the employee must pay the required employee contribution to the defined benefit plan in addition to the social security program.”

The rest of the paragraph, also highlighted, reads, “The rate to be paid to the defined benefit plan shall be the established rate or a rate established by the Retirement Fund administrator or its successor subsequent thereto. Provided further that upon termination of government obligations to withhold employee’s contributions, autonomous agencies with outstanding employer contributions due to the NMIRF on the effective date of this act shall continue payments to the NMIRF until paid in full.”

A highlighted portion on Page 5 under Section 204, reads, “For employees who have applied to retire at the effective date of this act with 20 years of creditable service, but have not begun receiving pension payments, said employees may elect to cancel their retirement application and withdraw their contributions instead.”

On page 7, Section 7 Buyback, reads: “If authorized by the Social Security program, an employee who elects to buy back quarters of service into the Social Security program will be responsible to pay any required premiums.”

Race against time

This still unnumbered bill on retirement comes barely two months before the planned Oct. 1 transition into the Social Security program.

Ogumoro said this second bill may be introduced by Speaker Eli Cabrera (R-Saipan), author of the vetoed House Bill 170-226 that allowed active members to withdraw their contributions without penalty. Cabrera is still off-island.

Moreover, the second bill is now out even as the Senate has yet to pass the first House bill “expressing the desire” of the CNMI to extend the Social Security program to the Commonwealth’s government employees.

The Senate president said yesterday that the Special Committee on Retirement Fund issues is “leaning toward” recommending passage of the first bill, although that may still be changed depending on the public hearing on Tinian on Monday. A public hearing on the first bill was conducted on Rota yesterday afternoon.

Inos, as well as Gov. Benigno R. Fitial, met several times with lawmakers to discuss Retirement Fund issues. Inos also held a meeting with Cabinet secretaries, division directors, and other officials early this week to present the administration’s pension reform plan, which received a warm response from those in attendance.

The government owes the Retirement Fund over $320 million in unpaid employer contribution plus interests.

Fitial placed the Fund under a state of emergency after a federal judge dismissed the Fund’s Chapter 11 bankruptcy petition.

The administration wants the Fund to be placed under the Department of Finance, mostly to disburse retirees’ pension, while active members are transitioned to the U.S. Social Security retirement system if they so choose.