CNMI LOOKS FOR WAYS TO PAY PENSION FUND

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While court ponders, legislature wants to drop penalties

By Gemma Q. Casas

SAIPAN, CNMI (Marianas Variety, May 12, 2009) – The Legislature may pass a measure removing the 25 percent penalty on the central government’s more than $200 million arrears to the local pension program amid concerns that the court’s monetary judgment may impact the CNMI government’s bond and credit ratings in the U.S. and overseas markets.

The Superior Court will determine how much the CNMI government should pay the Retirement Fund.

A hearing was held last month and a determination of how much the Fund should be paid out of the more than $200 million unpaid government contributions is scheduled to be held next month.

Rep. Ray Yumul, R-Saipan and chairman of the CNMI Retirement Fund Working Group, said any judicial decision will have a lasting impact not only on the pension program but on the government as well.

Removing the penalty interest rate will reduce the central government’s liabilities.

Yumul will sponsor an omnibus bill — a compilation of different measures aimed at reforming the pension system.

He said such legislation will be submitted to the court for consideration before it decides on the central government’s liabilities to the Retirement Fund.

"The omnibus legislation will offer relief to the Retirement Fund and its unfunded liabilities and debts. We do want to bring the two parties [central government and the Fund] to an amicable solution," he said.

The House of Representatives is scheduled to hold a session this morning.

This fiscal year 2009, the central government operates under a $148 million budget ceiling

The budget allows the government to pay an 11 percent employer’s contribution rate to the Retirement Fund which is supposed to get over 37 percent.

"Once the court makes a judicial decision, how much would be paid to the Fund and when, is going to have a chain reaction," said Yumul in an interview yesterday.

He said the court is required to notify bond companies of its monetary judgment in favor of the Fund.

"Our bond ratings will be at risk," he added.

The government can be cited for contempt if it fails to abide by the court ruling.

"You can go to jail or be cited for contempt if you failed to follow the order," said Yumul.

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