CNMI RETIREMENT FUND HEADS FOR $8 MILLION

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SHORTFALL
Unpaid employer contributions draining
government resources

By Moneth Deposa SAIPAN, CNMI (Saipan Tribune, March. 30, 2011) - Based on current trends, the Northern Mariana Islands Retirement Fund projects an US$8 million shortfall in its pension payouts by the time the fiscal year ends six months from now, according to administrator Richard Villagomez.

To cover the shortfall, Villagomez said he will ask to the board to allow the Fund to go beyond the amount it is authorized to withdraw from its investments this fiscal year.

The board of trustees had capped at US$54 million the amount the Fund may liquidate from its investments. The amount is supposed to cover pension obligations to members from October 2010 to September 2011.

Based on their latest projection, Villagomez said that the drawdown is expected to reach US$62 million by Sept. 30, 2011, due to the government's unpaid employer contributions.

"The amount is for the projected shortfall in pension payouts. Between now and the end of fiscal year, we have to monitor the trend of cash flow and most likely we will increase the drawdown," said Villagomez yesterday.

The drawdown is used to pay for the pension benefits of members and other obligations. Last fiscal year, the Fund's total drawdown-also capped at US$54 million-amounted to just US$40 million due to increased government contributions and the remittance of taxes pursuant to a court judgment. This meant the Fund "saved" by some US$14 million.

Due to dwindling government revenue this year, however, "it doesn't look like it's going to happen," said Villagomez.

The Fund draws down an average of US$2.4 million each month this fiscal year.

On Tuesday, Fund board chair, Sixto Igisomar told Saipan Tribune that, although the government is court-mandated to increase its contributions to 30 percent in fiscal year 2011, this hasn't happened yet.

The court had determined in June 2009 that the central government owes the Fund over US$231 million in unpaid employer's contributions. This has now increased to over US$317 million.

The board of trustees began interviewing yesterday about 20 finalists for the Fund's money managers' positions. A total of 76 firms had applied for the posts.

In a special meeting at 1pm yesterday, applicants were interviewed via video-conference during a closed-door session.

Wilshire Associates Managing Director and Principal, Maggie Ralbovsky helped conduct the interviews. Wilshire is the Fund's new investment consultant.

The Fund has nine money managers that handle its portfolio, currently valued at US$318 million and invested in stock and money market funds, government bonds, corporate bonds, common stocks, and hedge funds.

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