Guam Bill Could Provide Third Government Retirement Option

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Lawmaker says without action, no money left for members to retire

By Jerick Sablan

HAGÅTÑA, Guam (Pacific Daily News, Aug. 15, 2012) – The Government of Guam Retirement Fund is hoping the Legislature will pass a bill that would create a third retirement plan that could support retirees and their families.

Retirement officials discussed Bill 453-31 during a hearing last night at the Legislature building in Hagåtña. The bill would address insufficient retirement benefits for current and future retirees under the defined contribution plan.

According to a Guam Office of Public Accountability report that looked at the Retirement Fund's fiscal 2011 numbers, the defined contribution plan investments went from $222.2 million to $234.3 million -- an increase of 5.4 percent or $12.1 million. Despite the increase, members of the plan have an average balance of $40,000 on which they will retire.

With the low average balance, members will not have enough saved to generate a reliable stream of retirement income to support their basic needs; allow them to maintain a comfortable standard of living; and last their lifetime, Retirement officials said. If the retirement fund continues using the retirement plan that they are currently using then it would create the need for the government to provide public assistance to retirees.

"This would create a new welfare generation," said George Santos, Retirement Fund board trustee. "If we don't do anything now there will not be enough money for members to retire."

If the bill is signed into law, employees hired in January and beyond will automatically be enrolled in the new hybrid plan. Also, employees under the current defined contribution will be given the option to enroll in the hybrid plan. There are about 8,000 active employees contributing to the defined contribution plan and officials expect about half of those employees to elect into the proposed plan.

It's unclear how much the proposed plan would cost GovGuam and employees.

Retirement benefits under the hybrid plan include a bare minimum annual benefit of $1,200, which isn't included in the current defined contribution plan, officials said.

With the current plan Retirement Fund members do not have a "safety net" to fall back on such as Social Security or a fixed annuity like GovGuam's old retirement plan, which is more generous than the defined contribution plan that was implemented in 1995.

Sen. Ben Pangelinan, chairman of the legislative committee on finance introduced the bill on behalf of the Retirement Fund. Pangelinan is running for re-election.

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