CNMI PENSION FUND CONSULTANTS CALL FOR RESTRUCTURING

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50% benefit cut suggested for fund to survive till 2028

By Moneth Deposa

SAIPAN, CNMI (Saipan Tribune, Feb. 28, 2012) – The estimated value of the NMI Retirement Fund's portfolio translates to a funding level of just 28 percent, which means if the pension agency is closed down now, it won't have enough cash to pay for its total obligation to members, according to the Fund's actuarial adviser, Buck Consultants, yesterday.

The Fund's portfolio was valued at $253.4 million as of Feb. 17 this year. It is spread out in fixed income ($143.8 million); CDARS and CDARS bonds ($107.9 million); alternative investments ($1.4 million); and cash and cash equivalent ($164,022).

In yesterday's board meeting, Fund chair Sixto K. Igisomar disclosed that the pension agency's accrued unfunded liability is at about or over $1 billion, representing the amount the government will owe retirees and beneficiaries if the program is terminated today.

Last year, Buck Consultants presented current and projected data that reflect the depleting position of the pension program and the possible ways its lifespan could be extended by some more years. But to do this, Buck Consultants emphasized the need to enforce a combination of increasing contributions and reducing benefits.

Dylan Porter, Buck Consultants' principal and consulting actuary, did almost the same presentation to the board yesterday. Using graphs and numbers, Porter told Saipan Tribune that there are "more similarities than differences" in the two presentations.

In his presentation early last year, Porter presented different scenarios relating to the impact of reducing and restructuring members' benefits. The board took no action after that first presentation.

Porter reiterated to the board yesterday that if members' benefits are not reduced soon and the Fund continues to collect just $13 million in annual contributions, the $250 million left in its investment portfolio will be depleted in two years.

However, if the Fund will implement a 50-percent cut in members' benefits with the same $13 million annual contribution, the program's lifespan will last until at least 2028, he said.

A 10-percent cut in benefits with the same asset value and contribution will only buy some two months to extend the 2014 lifespan of the program, he said.

Porter said a healthy and viable pension plan has to have $800 million in its portfolio.

After almost two hours of presentation, Commonwealth Retirees Association chair Lorenzo Leon Guerrero-Cabrera urged the board to focus on "solutions" for the Fund rather than arguing over "data and numbers" that he believes are not realistic at all.

"These figures are nice, but are they realistic?" he asked the board, adding that the agency is running out of time to prevent the near-collapse of the program.

Cabrera said many retirees are willing to sacrifice as they see this as the only option to save the Fund. However, he said the association opposes a 50-percent cut in benefits.

Igisomar pointed out that Porter's presentation is key to justifying any step the board may take and answers the need to present concrete numbers to back up their position with the Legislature.

Igisomar stressed that the board cannot unilaterally decide to cut benefits because it involves constitutional issues. He tasked the board's committees to review Buck Consultants' recommendations and what options to take.

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