Puerto Rico gov presents measure to set aside $1.4B for retirement funds
Fiscal board says funds had been included for debt adjustment plan
SAN JUAN — Gov. Ricardo Rosselló has submitted a resolution to Puerto Rico’s legislature that would set aside $1.4 billion to replace missing retirement funds from the Reforma 2000 retirement system accounts and the defined-contribution hybrid program between 2000 and 2017.
In 1999, the government enacted Act 305, which amended the 1951 pension system law to create a savings program to finance the retirement of workers who joined the government starting Jan. 1, 2000.
Employees were required at the time contribute 8.275% and 10% of their paychecks for their retirement in funds that were sent to the Employees Retirement System to put in accounts.
“However, because of poor fiscal practices, that process did not happen and the funds were used to cover other obligations of the Retirement System,” said Rosselló, providing the first clue by an official as to what happened with the missing funds.
In a statement, Puerto Rico’s Financial Oversight and Management Board said that although, it welcomes the governor’s acknowledgment that “past governments’ mismanagement of employee contributions to System 2000 deserves to be fixed,” it regrets that the governor “has proposed more than two years into his term an ad hoc approach outside of Title III [of the Puerto Rico Oversight, Management, and Economic Stability Act] to resolve these prepetition claims,” rather than support the recent agreement between the board and the American Federation of State, County and Municipal Employees (AFSCME) and Servidores Públicos Unidos (SPU, United Public Service Workers), “which included a full refunding of employee contributions to System 2000 in the amount of $1.4 billion as part of the Commonwealth Title III plan of adjustment….”
The board further said that Puerto Rico’s unfunded pension obligations and bonded debt “must be restructured and resolved comprehensively as part of a Title III plan of adjustment. The Court provides the best and only opportunity to provide protection to current and future retirees given past governments’ irresponsible practices with regard to pensions.”
Caribbean Business recently reported that the retirement savings of at least some 25,000 employees who began to work for the government some 20 years ago had disappeared.
The Service Employees International Union (SEIU), which represents two local unions, said the discovery of the missing funds was made after Employees Retirement System began the process to implement Act 106 of 2017, of the Act to Guarantee Payments to Our Retired Workers & Establish a New Defined-Contribution Plan for Public Servants.
SEIU counsel Alvin Velázquez and Roberto Pagán, the president of the Sindicato Puertorriqueno de Trabajadores (Puerto Rican Workers Syndicate), which is part of the SEIU, said no one really knew the whereabouts of the funds.
“That is the $36 billion question,” Velázquez said. “We are still investigating that.”
The SEIU is a member of the Official Committee of Unsecured Creditors (UCC), which represents its claims against the government, including those involving unpaid grievances as part of the government’s bankruptcy process under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa).
UCC’s counsel, Luc Despins, revealed the data about the ERS missing funds during an omnibus hearing May 16. The UCC represents active public employees with respect to their retirement benefits, while another committee represents retirees.
“There are tons of these people. These are janitors in schools and all that are represented by the SEIU that have put millions of dollars of their own money pursuant to a law that was adopted in 2000 where they were forced to fund their own pension,” Despins said. “They put that money in ERS. That money is gone. This is not the same thing as having an entitlement to a pension. This was their own money they were putting in. That money is gone. These employees are still employees because this happened in 2000,” he added.