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Benefit skyrocket while collections stagnate

By Giff Johnson MAJURO, Marshall Islands (Marianas Variety, March. 15, 2011) - The Marshall Islands social security program is being forced to use up all of its domestic investments to meet payments to retirees in 2011, the fund administrator said on Thursday. This development puts it on track for bankruptcy by 2023, said Marshall Islands Social Security Administration administrator Saane Aho.

Benefits for Marshall Islands retirees are skyrocketing while tax collections are stagnant putting the retirement fund in jeopardy, she said on Thursday.

The Marshall Islands cabinet appointed a committee earlier this year to come up with plans to reform the social security system, and it is expected to report to the cabinet next month with recommendations for fixing the system.

In 2011, benefit payments are expected to rise to US$15.6 million, while tax revenue is remaining flat at US$12 million, said Aho. The retirement agency will be forced to withdraw at least US$3.6 million to cover the shortfall, essentially wiping out its domestic investments at Bank of Marshall Islands. In 2010 for the first time in 10 years, social security had to dip into local cash reserves to meet its deficit, and the problem is worsening.

Without government action to change the system, the gap between tax revenue and benefits payments will continue to widen, she said.

"At this rate, if we don’t do anything, the social security trust fund will be fully exhausted by 2023, said Aho. Our benefit payments are growing, but revenue is not. Or economy cannot support the system we have," she added.

Social Security projects that annual benefit payments will continue to go up, while tax revenue will remain stagnant.

Marshall Islands social security has offshore investments worth US$56.5 million only about one-quarter of its total benefits liability.

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