GovGuam Employees Could Join Social Security Program: Senator

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Legal pathway for participation expected soon: San Nicolas

By Shawn Raymundo

HAGÅTÑA, Guam (Pacific Daily News, April 23, 2015) – After meeting with several Social Security officials in the nation's capital last week, Sen. Mike San Nicolas, D-Dededo, said that within a month, the federal government should have a legal pathway for GovGuam employees to qualify for Social Security benefits.

The Social Security Administration is assessing a path to include government of Guam employees in the federal program, San Nicolas said. He added that such a path would be a "big step forward" for reforming GovGuam's retirement system.

"The federal Social Security Administration is now on the same page as us and within one month will have a legal path for inclusion," San Nicolas said in a press release.

The SSA is looking at two different pathways to qualify GovGuam employees, San Nicolas explained. The first option would be an administrative solution, which he said would be the fastest way to implement Social Security.

Under the administrative solution, the SSA would allow Guam's lawmakers to pass legislation that extends Social Security benefits to GovGuam employees.

The second option would require a legislative solution through Congress.

Congresswoman Madeleine Bordallo last summer took up legislation in the House of Representatives to make government of Guam employees eligible for Social Security. While the measure was referred to the House Committee on Ways and Means, it never moved forward.

San Nicolas said the problem with Bordallo's measure was that it was introduced late in the term. He added that if the SSA decides to go with the legislative solution, the agency could take it through an easier route that might expedite the process.

Bordallo and her staff were instrumental in setting up the meetings with the federal officials, San Nicolas said.

Section 218

Social Security provides monthly benefits for workers when they retiree or become severely disabled, according to the SSA. It also provides assistance to families of such employees when they die.

When Social Security was first introduced in 1935, employees of state and local governments were excluded from benefits offered under the program, according to the SSA. Since then, federal laws have amended the Social Security Act specifically creating Section 218.

Local and state governments can enter into a Section 218 Agreement with the SSA, allowing government employees to qualify for Social Security benefits. All 50 states as well as Puerto Rico and the Virgin Islands currently have Section 218 Agreements with the SSA.

San Nicolas said he's trying to get prospective employees eligible for Social Security under the 218 Agreement, as well as work out a mechanism for current employees to opt in to the program.

Hybrid plan

Earlier this year, Vice Speaker Benjamin Cruz, D-Piti, introduced legislation to reform the government's retirement system. Session deliberations caused Cruz to return the legislation to committee to iron out concerns raised by lawmakers.

The bill, which would have created a hybrid plan aimed at combining elements of GovGuam's defined benefit and deferred compensation retirement plans for employees, died in committee at the end of last term. Cruz reintroduced it at the start of the current term in January.

According to Bill 2-33, the hybrid plan would provide government employees a guaranteed annuity when they retire. It would also require new government employees to participate in the plan and set their mandatory pre-tax contributions at 9.5 percent of their base salary.

A section was included in the hybrid plan to allow the implementation of Social Security, should GovGuam and the SSA reach a 218 Agreement, according to the measure.

The bill went through a roundtable discussion last January, but Cruz said he's been waiting to do anything with the bill until San Nicolas got a response from the federal government on Social Security.

Cruz noted that since San Nicolas returned from his Washington, D.C. trip, the two haven't had a sit-down discussion on the Social Security status. He said that if a 218 Agreement is struck -- extending Social Security to GovGuam employees -- the bill probably wouldn't move forward.

"If the Social Security Administration agrees to provide Social Security to GovGuam employees, the hybrid bill will probably not be able to move forward," Cruz said.

"I don't know, I haven't spoken to Sen. San Nicolas," he added. "If Social Security is willing to move forward, I imagine that will be the move for the future. I'm waiting to see."

Employees left out?

However, David John, president of the ASC Trust Corporation, said some form of a hybrid plan would still need to be worked out because there will be employees who are within 10 years of retirement and therefore won't qualify for Social Security.

"They wouldn't quality. They have to have worked for 10 years to qualify," John said. "It has to be addressed which employees of those who are currently working ... are going to be shorted. They need to be looked at."

John also pointed out that Social Security would benefit Guam in two ways. The first, he said, would make the island's workforce more efficient as an individual's retirement package wouldn't be affected if they transferred to the public sector from the private sector, and vice versa.

"If we can get all of the employees under the same system, imagine how efficient that would be to our workforce," John said. "It allows people to go back and forth between private and public sector."

The second benefit is that Social Security puts any unfunded liability risk onto the federal government, essentially preventing any additions to the $1.3 billion in unfunded liability GovGuam has to pay down by 2031.

The government closed its defined benefit plan to new members on Oct. 1, 1995, meaning the plan's only participants are government employees who enrolled in the defined benefit plan before Sept. 31, 1995. When the defined benefit was closed, it left an unfunded liability that the government has to fully pay by 2031.

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