Delegate’s Bill Would Include GovGuam Employees In Social Security

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Delegate’s Bill Would Include GovGuam Employees In Social Security Bordallo hopes congress will extend benefits to territory

By Shawn Raymundo

HAGÅTÑA, Guam (Pacific Daily News, Oct. 1, 2015) – Guam Del. Madeleine Bordallo on Wednesday introduced a Congressional measure meant to give local lawmakers the authority to decide which government employees can participate in Social Security when GovGuam adopts the federal program.

"I believe that the proposal to extend Social Security to GovGuam employees … would be the best course of action moving forward and would provide thousands of GovGuam employees with the resources needed to have a comfortable quality of life during their retirement," Bordallo wrote to the speaker of the House of Representatives.

The bill would amend a federal statute that requires all government employees to be enrolled into Social Security regardless of when a person was hired or how many years of service the person has contributed.

To qualify for Social Security benefits, an employee must have contributed 40 calendar quarters, or 10 years of work, to the system, according to the Social Security Administration.

Such a law, Bordallo said, poses a problem to the class of employees who are under the government of Guam's old defined benefit plan, which closed enrollment to new hires back on Oct. 1, 1995. The defined benefit plan was replaced with the current defined contribution system.

Employees in the defined benefit plan are ineligible for full Social Security because their annuity benefits disqualify them from fully benefiting from the program. Although they’d be required to pay into Social Security, they wouldn’t receive any benefits upon retiring.

Local lawmakers "are concerned that if GovGuam exercised this option, thousands of GovGuam employees who already have years of government service, would not be able to contribute enough calendar quarters to qualify for Social Security," she wrote.

The measure allows the Guam Legislature to set the parameters of who can participate in the Social Security program.

"The bill that I introduced today would solve this problem by leaving it to Guam lawmakers to decide how the term ‘initially hired’ is defined," she wrote.

Bordallo wrote the measure after months of collaborating with Sen. Mike San Nicolas, D-Dededo, and Social Security Administration officials.

Citing a 2011 report from the Office of Public Accountability, Bordallo noted that the average government employee under the new retirement plan has only $40,000 in their retirement account.

The Congressional bill is one in a series of recent efforts by local government officials to reform GovGuam’s retirement system, which Bordallo called "unsustainable."

"The retirement option currently provided to GovGuam employees is unsustainable and will leave many without sufficient means to care for themselves when they retire," Bordallo wrote.

Sen. San Nicolas and Vice Speaker Benjamin Cruz, D-Piti, have spent the past few months drafting a measure to reform the government’s retirement system. The bill would be similar to reform legislation Cruz inherited from the late Sen. Ben Pangelinan last year.

The initial bill, commonly referred to as the hybrid plan because it combined elements of the defined benefit and deferred compensation retirement plans, died last term as senators raised too many concerns. Cruz reintroduced the bill at the start of the current term in January, but never moved it forward.

San Nicolas said the new reform bill includes the necessary mechanisms to adopt Social Security while still implementing an alternate version of the hybrid plan.

The draft of the local measure makes the contribution rates of the hybrid plan comparable to the contribution rates employees can expect to pay into Social Security, he said.

San Nicolas also said the Social Security contribution rate for employees and the government would each be 6.2 percent. The current draft, he added, has employees paying 6.2 percent into the hybrid plan while the government rate would be 4.6 percent.

Those in enrolled in the defined contribution system could either stay in that plan or opt in to the hybrid plan, San Nicolas said. After Social Security has been adopted and implemented, all new government hires would automatically enroll into the federal program.

San Nicolas said he doesn’t foresee any upfront costs to the local government when Social Security is adopted because the program would only applied to new employees.

"There shouldn’t be any direct upfront costs because all participation would be perspective to when Social Security becomes active," he said.

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