CNMI LEGALIZES NONPAYMENT OF RETIREMENT FUNDS

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By Gemma Q. Cassas

SAIPAN, CNMI (Marianas Variety, June 16) – By a 5-2 vote, the Commonwealth of the Northern Mariana Islands Senate yesterday passed a measure that lawmakers say will legalize what the government has been doing illegally for a decade now — deferring the payment of its employer contributions to the Retirement Fund.

Senate President Joseph Mendiola, Covenant-Tinian, said House Bill 15-137, which now goes to Gov. Benigno R. Fitial, is "nothing new."

Fitial is expected to sign the bill into law.

Mendiola said the government hasn’t been regularly paying the Retirement Fund for the past 10 years and this is why the accumulated unpaid employer contributions have ballooned to over US$123 million.

"We’re just legitimizing a practice that has been illegally done in the past — not paying the employer contributions to the Retirement Fund," said Mendiola during the session yesterday. "This rescue plan is needed…Let our actions reflect the things that we preach," he added.

The bill allows the government to defer payments to the Retirement Fund for 18 months.

The five who voted in favor of H.B. 15-137 were Mendiola, Senate Floor Leader Felix T. Mendiola, Covenat-Rota; Sens. Maria T. Pangelinan, D-Saipan; Henry H. San Nicolas, Covenant-Tinian; and Jude U. Hofschneider, R-Saipan.

Sens. Paul A. Manglona, R-Rota, and Luis P. Crisostimo, D-Saipan, voted no.

Senate Vice President Pete P. Reyes, Ind.-Saipan, and Sen. Paterno S. Hocog, were not present during yesterday’s session.

Manglona said the problem with the Legislature is that it has not passed a budget since 2002, which, he added, is a "disservice" to the retirees and has contributed to the financial woes of the Commonwealth of the Northern Mariana Islands.

"If there’s any priority that any Legislature has, it’s the budget," he said.

Crisostimo, for his part, questioned the ability of the government to ever pay the Retirement Fund.

Under the government’s current spending level of US$213 million, payments for the Retirement Fund are allotted.

However, these have not been remitted to the Fund.

The administration originally pushed for legislation to write-off the over US$123 million in unremmitted contributions to the Retirement Fund, but this was met with heavy opposition among retirees and their relatives.

Subsequently, Speaker Oscar M. Babauta, Covenant-Saipan, Vice Speaker Justo S. Quitugua, D-Saipan, Reps. Ray N. Yumul, Ind.-Saipan, and Jesus SN Lizama, Covenant-Saipan, introduced H.B. 15-137.

The measure is projected to save the government as much as US$41 million during the 18 months that it will not remit payments of at least US$1 million every month to the Retirement Fund.

But the Retirement Fund sees it as an added burden to its financial difficulties.

Fund Administrator Karl T. Reyes said the agency may be forced to tap into its investment portfolio to come up with the pension checks of retirees every pay period amounting to US$2.3 million.

As a rule, the Fund uses its remittances from the central government and autonomous agencies for the pension checks.

However, with the government’s failure to timely remit payments to the Fund, the agency has been tapping into its investment portfolio for the pension of retirees.

H.B. 15-137 allows the Retirement Fund to draw upon its investment earnings and other assets to meet its projected budget shortfall arising from the suspension of government contributions to the agency.

But Reyes said if this practice continues, it will hasten the collapse of the local pension system which is designed to be self-sustaining by 2020.

Yesterday, the Senate also passed House Bill 15-135, which seeks to extend to 2045 the year when the Retirement Fund should be fully funded.

This bill now also awaits the governor’s signature.

As of 2004, the Retirement Fund’s investment portfolio was valued at US$400 million but its unfunded liability was about US$470 million

Its portfolio value varies every month depending on developments in the international stock market.

June 16, 2006

Marianas Variety: www.mvariety.com

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