Puerto Rico teachers denounce liquidation of retirement system assets
SAN JUAN – The Retiree Chapter of the Puerto Rico Teachers Federation (FMPR) on Thursday denounced that a number of private banking interests would benefit from the sale of assets in the Teachers Retirement System (SRM) and the the Central Government and Judiciary Retirement Systems Administration (ASR), as required by House Bill 1163, which reforms pension systems.
That is why, and because the bill is unclear about the payment of more than 40,000 retired teachers’ pensions, that the Chapter of Retirees demanded that the Legislature address H.B. 1163, presented by the administration, in the ordinary session, which begins Aug. 21, and not in the extraordinary session that began July 31.
“There are some interests behind the assets that generate money from the Retirement System: the loan portfolio, the sale of buildings, the sale of investment portfolios,” FMPR Vice President Edwin Morales said in a press conference in the north wing of the Capitol.
The spokesperson for the Retiree Chapter, Pedro Pastrana, said the SRM’s loan portfolio generates “over $40 million annually” in profits that with the bill will no longer be available for the payment of pensions. “Getting rid of this instrument for generating assets is financial nonsense, unless you want to favor some private banking sector,” he said.
H.B. 1163 orders $390 million in retirement system liquid assets to be transferred to the general fund, from which public pensions will be paid beginning this year.
However, there is $1.3 billion in loan portfolios and other investments that would go to the banking sector and no longer produce funds to pay pensions, which, in practice, “implies a loss of income and the plunder of our savings as a system in order to finance government operations,” Pastrana said.
The bill eliminates the SRM and ASR trusts so pensions are paid from the general fund through a pay-as-you-go scheme, or depending on available funds. Public employees would then have a 401(k)-like plan to save for their retirements.
Pastrana said this new system of individual accounts, which would apply to teachers who started working as of Aug. 1, 2014, will represent a significant reduction in future pensions.
“In that bill you are going to see a fight for who manages that fund, who manages those accounts [the employee savings plan accounts] that are going to be separated, and that certainly produces some dividends” Morales added.
Among the weaknesses they pointed out were the elimination of employer contributions to public employees’ pensions; the possibility that the general fund will not have enough to pay pensions in the future; and that pension systems would no longer be autonomous, since they will disappear and be managed by the central government.
Demand a hike on CFCs
Given the SRM and ASR’s revenue shortfall to pay pensions between August and February 2018, the FMPR proposed a 2 percent increase to the excise tax on controlled foreign corporations (CFCs), which currently stands at 4 percent (Act 154 of 2010). This would generate about $3 billion annually for pension payments, they said.
The active and retired teachers demand public hearings to contribute to “improving” the bill. Some of the FMPR’s spokespeople will meet with the chairwoman of the House Retirement Systems and Veteran Affairs Committee, Lourdes Ramos, to whom they will express what they believe are the measure’s deficiencies and provide suggestions.