House Committee Looks Into Bill to Solve Retirement System’s Insolvency
SAN JUAN—The House Labor and Retirement Systems Committee on Wednesday evaluated a bill that seeks to help the Commonwealth Retirement System (CRS) deal with fiscal problems that are pushing it to the brink of insolvency in 2019.
The panel analyzed House Bill 2857, which would create a corporation capable of handling all of the CRS loans to participants and retirees in an effort to use said loans as collateral for financing that could bring much-needed capital, CRS Administrator Pedro Ortiz said.
Act 447 of 1951 allows the retirement system to use 25% of total system resources to grant home mortgages and personal loans. However, as of last January, it had used 24% of the income.
Committee Chairman Jesús Santa Rodriguez asked CRS’s Ortiz if the purpose of the proposed entity is to operate it as a commercial bank. The CRS head replied, “The system is using its own assets to provide the services and we are close to achieving the maximum origination authorized by law. This measure seeks to provide liquidity to the system so that it can continue to offer the personal loans program.”
Santa asked if the bill would create a parallel institution to perform the same functions as the CRS and duplicate costs. “On the contrary, the proposal seeks a reduction in operating expenses,” Ortiz said, adding that the system is empowered by law to create additional entities.
The bill, however, is slated for further amendments to ensure it does not increase government-operating costs, observers noted.