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By Gemma Q. Cassas

SAIPAN, CNMI (Marianas Variety, Jan. 4) – The Commonwealth of the Northern Mariana Islands government’s retirement system is in a "scary" situation which, if not addressed immediately, will create huge financial problems, according to Mario Taitano, the Retirement Fund’s director for member benefits.

He said the problem is compounded by laws that generously reward retirees despite the lack of funds.

Moreover, previous and present administrations have consistently failed to remit contributions to the system in a timely fashion.

As of last month, the government’s unpaid employer contributions stood at about US$85 million.

[PIR editor’s note: In February 2005 the estimated that the CNMI government’s unpaid contributions was US$72 million (read the story).]

"It’s scary for the retirement program (which may now be forced to) liquidate some of its investments — it’s very scary," Taitano said. "What has compounded the problem is our inability — but I don’t want to put the blame totally on the Legislature — to fully comprehend the basic principle of what a retirement system or a pension program is supposed to be," he added.

He said the 179 new retirees on the list of pensioners will mean that the Fund has to come up with an additional US$500,000 every month for their benefits.

The Fund will have to pay a total of US$2.4 million for all pensioners — which will now reach 2,500 — every pay period.

"It’s really sad because despite the pension experts brought in by the Retirement Fund, (lawmakers) won’t listen (probably) because the word ‘retirement’ doesn’t exist in the Chamorro and Carolinian vocabularies," Taitano said.

He added, "The island way of life is what you provide for today and not tomorrow. We do not forecast 15 to 20 years down the road which is the basic principle of what a retirement system does and unfortunately, our (Legislature) passed the 30 percent early retirement bonus, the vesting credit service for education, credit for overtime, sick leave — we have the most generous retirement system in the world."

The Retirement Fund has already used part of the agency’s principal investment money to finance the pension checks of retirees on at least two occasions.

This practice is not allowed by the Fund’s rules, but the board of trustees argued that there was no other alternative.

Fund officials now fear that if the board is forced anew to tap into the agency’s more than US$390 million investment portfolio, it may not be able to reach its goal of becoming self-sustaining by 2020.

In 1998, the pension benefits of retirees totaled US$26.5 million.

By 2004, the figure reached $45.3 million.

The average life expectancy for females is 73 years old and 78 for males.

The longer life expectancy of the retirees is another factor that wasn’t thoroughly considered when the government retirement system was created, according to authorities.

[PIR editor’s note: The unfunded liability of the CNMI Retirement Fund amounts to US$400 million according to an article published after Saipan Governor Juan Babauta declared October as "Retirement Fund Month" in the CNMI (read the story).]

January 4, 2006

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