Below is a copy of a letter from the Commonwealth Retirement Association Chairman. The recommendations contained in this letter were voted on and approved by a majority of those CRA members present at the 5/8/12 CRA meeting. For those of you who want a copy of the document which was sent to me, that is attached. The two motions aproved at the CRA meeting are:
Motion #1: The. CRA general membership present support the dismissal of the bankruptcy filing in the federal court.
Motion #2: The CRA general membership present support the CRA board of directors' 3 recommendations outlined in their letter dated April 16, 2012 to the Governor, Senate President, and House Speaker.
COMMONWEALTH RETIREMENT ASSOCIATION
16 April 2012
The Hon. Benigno R. Fitial, Governor
Commonwealth of the Northern Mariana Is.
Saipan, MP 96950
The Hon. Paul A. Manglona, President
Senate, Seventeenth CNMI Legislature
Saipan, MP 96950
The Hon. Eliceo D. Cabrera, Speaker
House of Representatives
Seventeenth CNMI Legislature
Saipan, MP 96950
Governments of major developed countries around the world have seen fit to establish programs that cater to the needs of their citizens. Chief among these are health, education and welfare. A wide range of services under welfare are organized and extended especially to the indigent and the aged. This is the category where the retirement program falls under. The old age insurance program, which we now know as the Social Security Administration (SSA) came into being in 1935. The principal intent of the program, as it was then and now, is to provide financial assistance to employees when they attain the age at which they can no longer be productive. This was determined initially to be 65 years old. Upon attaining the age of 65, a person can arrange to leave the workforce and begin to receive retirement benefits from the SSA. It is important to note that the SSA uses age as the only criterium for eligibility for retirement. If any employee becomes disabled, he or she will be eligible to receive disability benefits under a different program.
The CNMI Retirement Fund under its enabling legislation adapted a different set of eligibility criteria: Creditable years of service or by age. Eligibility to retire after any number of years of creditable service has proven to be too costly, a heavy financial burden to a program that was still at its fledgling stage. Thus, when droves of employees meet the criterium of creditable years of service began to retire without infusion of new money to stabilize the added costs the unfunded liability began its up-scale swing. This amount is only a few thousand dollars shy of one billion; a hefty amount for a retirement pension program that is considered relatively small by U.S. standards. The government’s sporadic failure to pay its employer contribution (as mandated by law) and refusal to comply with the order of the CNMI Superior Court, has compounded the problem, thus putting the retirement program in a crisis so severe that we might witness its demise in two and a half years, if not sooner. This means that there won’t be money to pay retirees their benefits and, consequently the need to close the Retirement Fund Office. While all of this may sound frightening because of the magnitude of its adverse effect to the retirees, their families and the economic well-being of the entire CNMI community there is consolation in the fact that the CNMI Government is constitutionally mandated to continue paying benefits of retirees and those members of the Fund who will be retiring. Given the economic condition that the CNMI is in now, it is hard to see how the government can meet its constitutional mandate. But this is a problem that the government has seemingly been putting on itself; operating beyond its means. We hope that the hardships that we have all begun to experience prove to be an effective wake-up call, not just for the governor, the legislature of the Judiciary, but for everyone. We just can’t demand what our elected officials can’t provide. We must all learn to live within our means.
With no firm plans on how the Retirement Fund crisis is to be dealt with, the financial chaos at CHC, and the constant clamor for more money by PSS as it deals with its increasing student population, the CNMI is on the threshold of an economic abyss. The CNMI can avoid falling into such an abyss by getting our elected leaders to hone a solution that will ensure the continued existence of a retirement pension program that is true to its intent and purpose; a program that adapts the eligibility criteria of the U.S. Social Security Administration. And so that we may embark on a rather sensitive but arguably the most costly program in the CNMI, we strongly recommend as follows:
2. Review every piece of legislation that had been enacted during the last 30 years for the purpose of drafting a comprehensive amendment legislation that would, once and for all, ensure the existence of a retirement program for as long as there is a CNMI Government and employees who rightfully deserve to be paid a pension and receive other benefits when they qualify to retire.
3. Draft a special revenue-generating legislation, which would create a special account within the Retirement Fund into which all monies received by levying a ten percent (10%) dedicated tax paid to retirees, survivors and disabled. This account is necessary to guarantee the repayment of the pension obligation bond should the CNMI be in default. Otherwise, the funds are to be invested under a closely scrutinized investment program.
Lorenzo LG. Cabrera, Chairman