CNMI Governor Approves Social Security Transition

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Fitial claims ‘problematic’ law will unbalance 2013 budget

By Emmanuel T. Erediano

SAIPAN, CNMI (Marianas Variety, Sept. 12, 2012) – Governor Benigno R. Fitial yesterday approved with reservations the second measure that moves government employees from the dying Northern Mariana Islands (NMI) Retirement Fund to U.S. Social Security.

In his transmittal message to the Legislature, Fitial described House Bill 17-315, which is now Public Law 17-82, as problematic.

The new law requires the CNMI government to remit 4 percent employer contribution to active members who will choose to roll over portions of their retirement money to the defined contribution (DC) plan.

It also allows members to leave the defined benefit (DB) plan and get their contributions back without penalty and without being required to quit their government job.

Moreover, it requires the government to remit its employer share for those who will decide to keep portions of their money with the defined benefit plan.

The amount of the employer contribution to the DB plan will be determined by the secretary of Finance.

Fitial said continuing the 4 percent employer contribution for the DC plan members makes the conversion to U.S. Social Security "less fair" because employees who will stay with the DC plan are maintaining an individual plan, and "thereby [are] the sole beneficiaries of the employer contribution."

In contrast, he added, the employer contribution for those who will stay with the DB plan benefits all members of the plan.

Aside from this "unfairness" the governor said the new law will also make the fiscal year 2013 budget bill unbalanced. He said the budget measure does not take into account the additional obligation of paying the 4 percent employer contribution for the DC plan members.

Fitial said he is now urging Legislature to amend the measure and remove the additional requirement of paying the 4 percent employer contribution to the DC plan, or to identify new funding resources to make the FY ’13 budget bill balanced.

Another problem with the new law, the governor said, is that the transition to the federal pension program is more disadvantageous to the defined benefit plan members.

In a telephone interview, Senate President Paul A. Manglona, Ind.-Rota said the purpose of allowing the roll over to the DC plan is actually to make it fair.

He noted that some private sector employers remit 4 percent in employer contribution to their workers’ DC plan. He said it is just fair that government employees who will move to the DC plan will get the same treatment from their employer.

Manglona said the Senate’s amendment is basically to retain the status quo in the government’s DC plan.

The new law, he added, addresses the many issues facing government employees.

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