admin's picture

Kemesong says fund could be bankrupt in 18-20 years

By Aurea Gerundio-Dizon KOROR, Palau (Island Times, Oct. 17, 2011) – In Palau, Del. Noah Kemesong introduced a bill to impose fiscal reforms on the Civil Service Pension Fund (CSPF).

Kemesong explained in House Bill 8-155-12 that CSPF is in dire financial situation. Each year, he said, Pension Plan pays out millions more than it takes in. With the current levels of funding and membership, it is reportedly expected to become bankrupt and unable to provide any retirement benefits to its members in 18-20 years.

Kemesaong proposed that steps be taken to preserve the fund from financial collapse by limiting the benefits provided and increasing contributions.

The bill states that no amendment may become law without the following: a report from the Fund Actuary on the financial impact of the proposed changes; a dedicated and permanent source of funding for any additional expenses; and an appropriation of funds which defrays the cost to the Trust Fund of the actuarial report or study.

The bill eliminates double participation. For instance, once this bill becomes law, employees and employers contributing to the Trust Fund shall be exempt from making contributions to the Social Security Retirement Fund.

Employees contributing to the Trust Fund who not are yet fully insured in the SS Retirement Fund, as of one year from the effective date of this act, shall be ineligible to receive Old Age Insurance Benefit from SS Retirement Fund.

The SS Board shall commission an actuarial report on the financial implications of this act on the Retirement Fund.

On contributions, the minimum employee contribution to the Trust Fund will be increased from six to eight percent over four years, at a rate of increase of one-half of a percent per year, with the first increase one year from the effective date of this act.

The government (national or state) shall make regular contributions in the amount of 12 percent of the gross pay of each of their employees.

The bill also states that all employees who are 63 years old or have 30 years or more of total service shall retire, except for those in employment positions exempted by the board. An exempted employee may serve two additional years or more at the discretion of the employer.

The bill states that no individual shall receive annuity benefits under the plan in excess of US$30,000 per year.

For survivor benefits, a member or former member of the plan eligible to receive benefits in the form of a lifetime annuity may opt to receive the amount of benefits earned paid out in one of two ways: as a single-life annuity, payable only over the course of the member’s life; or as a joint and survivor annuity, payable over the lives of both the member and the designated beneficiary.

The bill states that if the member opts for a joint and survivor annuity, the monthly payments will be adjusted to reflect the longer payout period of the designated beneficiary’s life span, based on actuarial calculations.

A married member must obtain the signed consent of his or her spouse before opting for a single life annuity, as opposed to a joint and survivor annuity.

The bill states that a member may change designation of a beneficiary at any time prior to retirement.

The bill states that a member who is re-employed by an entity participating in the plan after retiring under the plan is not eligible for recalculation of benefits based on post-retirement employment. Instead, the retired member shall continue to be entitled to the level of benefit calculated at the time of retirement.

Island Times © 2011 Island Times. All rights reserved

Rate this article: 
No votes yet

Add new comment