CNMI Employees To Join Social Security Next Month

admin's picture

Employees to have more retirement plan options

By Haidee V. Eugenio

SAIPAN, CNMI (Saipan Tribune, Sept. 17, 2012) – Government employees will start seeing U.S. Social Security tax deductions with their first paycheck in fiscal year 2013, Gov. Benigno R. Fitial and outgoing acting Fund administrator Esther S. Ada said in a Sept. 14 memo just a few weeks after the Aug. 30 signing of Public Law 17-79 expressing the CNMI's interest in joining the Social Security program.

Fiscal year 2013 begins on Oct. 1.

Government employees will see a tax deduction of 4.2 percent of their gross salary for Social Security. The 4.2 percent is the current employee rate under the Social Security program.

Beginning in calendar year 2013, the employee rate will increase to 6.2 percent unless U.S. Congress extends the lower rate of 4.2 percent.

The employer contribution is 6.2 percent of the employee's salary, paid on the employee's behalf.

Upon completing enough quarters of service and reaching the required age for retirement, government employees may become eligible for Social Security benefits.

The three-page memo said the enactment of PL 17-82, government employees now have options with respect to their CNMI government retirement plan, whether they are a member of the defined benefit plan or defined contribution plan.

Fitial, in revising his fiscal year 2013 budget from $102 to $114 million, said the "positive effect" of the transition to U.S. Social Security will trigger an increase of 6.3 percent in take-home wages for all DB members; thus more disposal income will be spent in the local economy resulting from the planned implementation.

He said it will also save the government 31.19 percent in employer contribution and seals the unfunded liability from growing further.

The government owes the Fund over $320 million in unpaid employer contribution plus interests.

With PL 17-82 also gives active government employees options on what to do with the money they have already contributed to the financially troubled NMI Retirement Fund.

Those options include allowing government employees to withdraw their contributions without being penalized, continue working and transition into the U.S. Social Security system, remain with the NMI Retirement Fund in hopes that the beleaguered pension program will shape up, or roll over their defined benefit plan contributions to a defined contribution plan, among others.

Rate this article: 
No votes yet

Add new comment