Friday, August 7, 2020

Gov’t didn’t pay additional contribution to retirement systems

By on March 16, 2017

SAN JUAN – Since 2013, the Puerto Rican government has accumulated a $685 million debt to the central government’s retirement system and $37.2 million with the judiciary’s system, corresponding to two special laws that created an additional uniform contribution and an additional employer contribution to amend both systems’ financing problems.

This additional uniform contribution for the central government’s retirement system, established via Act 32 of 2013, was meant to keep the value of the system’s gross assets at no less than $1 billion, explained the interim administrator of both the government employees’ and judiciary’s retirement systems, Natalia Palmer Cancel, during a joint public hearing between the Senate’s Government and Treasury committees, which are investigating all three retirement systems (Senate Resolutions 12 and 93).

Natalia Palmer (left) explained that the money the governemnt owes the central government and judiciary retirement systems wouldn't have solved trusts' problems, but they would have offered relief. (Cindy Burgos/CB)

Natalia Palmer (left) explained that the money the government owes the central government and judiciary retirement systems wouldn’t have solved their problems, but could have offered relief. (Cindy Burgos/CB)

In fiscal year 2014, $140 million should have been paid on behalf of agencies, which were supposed to pay 60%; public corporations; and municipalities to ensure the assets’ value. However, the central government retirement system only received $35.4 million from agencies, $5.9 million from public corporations and $14.4 million from municipalities.

In fiscal 2015, the retirement system should have received around $120 million from the additional uniform contribution, but only received $54.4 million. By fiscal 2016, the additional uniform contribution should have been almost $600 million, but only $21.7 million was provided from public corporations, and $7.3 million from a special subsidy, which has led to the large debt, in addition to nonpayment of the contribution of various agencies and municipalities.

The system’s problem wouldn’t have been fixed with just the additional uniform contribution. What it did allow for, and is the intent of the law in effect, is to try that the assets are never lower than $1 billion, and this could, at the very least, help to continue paying pensions and benefits,” Palmer Cancel said.

More needed than cutting pensions by 10% to save Puerto Rico retirement systems

In the case of the judiciarye retirement system, an additional emp;oyer contribution was established under Act 162 of 2013, but it was never included in the budgets. With this, the government should have paid an additional $11.6 million to the system in fiscal 2015, $12.1 million in fiscal 2016, and $13.5 million in fiscal 2017.

“What the retirement system needs is capital investment. The reforms are already done and the truth is, it has to be recurrent capital investment that will allow us to invest,” added the retirement systems’ administrator, who aims to continue selling assets to make up for the lack of income.

Moreover, the executive director of the Office of Administration, Oversight & Adjudicative Affairs of the Retirement Systems’ Board of Trustees, Ana Izquierdo, said the entity expects $800 million in damages from a lawsuit against UBS.

The government alleges that the financial services firm provided uncertain or distorted information in a $3 billion bond issuance in 2008 that “never had the expected performance,” so $9 billion in interest has to be paid.

You must be logged in to post a comment Login