Official Retirees Committee, Fiscal Board Agreement Creates Pension Reserve
Would Ensure Payments to Retirees for Decades; Will be Submitted for Vote, Court Approval
The Official Retirees Committee (COR by its Spanish acronym) is urging pensioners to support a term-sheet agreement with the Financial Oversight & Management Board (FOMB) that would avoid the worst pension cuts that had been pushed by the board for most of the current 167,500 government pensioners while creating a reserve fund to ensure payments to future retirees.
The nine-member COR—a committee named by a U.S. Department of Justice trustee to represent retirees as creditors in Title III bankruptcy proceedings under the Puerto Rico Oversight, Management & Economic Stability Act (Promesa)—managed to get FOMB to back an 8.5 percent cut in monthly pensions of more than $1,200 a month, instead of the 25 percent cut originally proposed by the board.
The proposal, to be included in FOMB’s fiscal-adjustment plan to be filed in federal bankruptcy court this week, would be submitted next year to a vote by retirees affected by FOMB, after the federal court completes a review of the plan, which includes disclosure statement hearings and an appeals process, the COR leadership said in an interview with Caribbean Business.
COR Chairman Miguel J. Fabre said the committee is on a mission to get approval for what it says is the best possible deal given Puerto Rico’s difficult and contentious bankruptcy and debt-restructuring process.
“We started from the premise that there should be no pension cuts. But then we were confronted with the reality that there was no money to cover current obligations or future obligations. We realized that all creditors, including retirees, were going to have to suffer in some way. So, we set out to have any measures to have the least possible effects on retirees,” Fabre, a retired superior court judge, told Caribbean Business during a roundtable with the COR leadership. COR represents retirees from commonwealth agencies, teachers and the judiciary branch.
The proposed Pension Reserve Fund would replace the collapsed commonwealth Pension Fund, which was governed by La Fortaleza appointees, and will be run by an independent panel of representatives elected by the government retirees, said Francisco Del Castillo, a COR legal consultant. The reserve fund would ensure pension payments to government retirees for decades out into the future in the event the commonwealth government cannot make such payments, he said.
Government retirees continue to receive their monthly checks thanks to Act 106-2017, which established that commonwealth agencies would cover pensions on a pay-as-you-go basis (PayGo), the attorney said. The commonwealth employees, teachers and judicial retirement trust funds ran out of money in 2018, he said.