Underpayment to settlement fund shrinks to $178K

Based on the latest court filings by settlement trustee Joyce C.H. Tang, the CNMI government’s underpayment to the settlement fund for the period from Oct. 5, 2013, through Jan. 11, 2014, is actually only $178,027.

That is significantly lower than the original total of $968,407. The drop was due to new payments made on the government’s employer contribution and the up-to-date records provided to the settlement trustee.

Tang explained that the early computation that resulted in underpayments reaching $968,407 included underpayments of employer contributions by autonomous agencies.

The underpayment of employer’s contributions represents the CNMI government and autonomous agencies’ portion of employer contributions for active employees who are members of the settlement fund. These payments, which are due each pay period, fluctuate based on a variety of factors, which are information within the government’s control, according to Tang.

“Since the settlement fund does not have the actual earnings for a current pay period, it can only estimate the amount of the employer’s contribution. Until the government makes a payment for a particular pay period, which payment is delivered with a report showing the exact amount the government is paying for each employee, the settlement fund cannot calculate exactly the amount due for employer’s contribution,” said Tang in her filing dated Feb. 24.

She said the settlement fund is not usually provided the gross earnings for computing employer’s contribution until a check and report is received. Tang said the calculations are “further complicated” because the settlement fund has to determine if an employee is a Class 1 or Class II employee, and after it determines the class an employee falls into, the total employee’s earnings for each class are divided by a percentage. It is only after deriving this number, Tang said, that the applicable rate is applied.

She explained that the reported $968,407 underpayment was derived by applying the actuarial rate of 62.15 percent rather than the 37.39 percent actuarial rate applied as of June 26, 2013.
Tang admitted in her filing that “the incorrect rate applied by the settlement fund based on estimated gross earnings resulted in a much higher underpayment.”

Due to concerns over the high underpayments that were earlier reported to the court, Tang and the government worked to resolve the issue and updated earnings information were provided to the trustee.

Additionally, the government has made payments, about $143,000, on Feb. 14.

As of pay period ending Jan. 25, 2014, Tang said that underpayment is much less than previously stated, now amounting to only $178,027. This amount is composed of the following underpayments from autonomous agencies: Commonwealth Healthcare Corp., $43,468; Northern Marianas College, $24,373; Public School System-local, $104,457; PSS-federal, $103.

The underpayment of employer contribution from the NMI government totals $5,625 as of Jan. 25, 2014.