Saturday, July 20, 2019

Puerto Rico gov’t discusses pension reimbursement plans with mayors

By on July 27, 2018

SAN JUAN – The director of the Puerto Rico Office of the Chief Financial Officer, Raúl Maldonado, said Friday that he is working with the island’s mayors to find financial resources and establish payment plans to reimburse pension payments to the central government

“We have been holding meetings to address some challenges related to the payment of pensions, under the PAYGO [Pay As You Go] mechanism, which is important to guarantee the future pensions of our retirees. We will be assisting the mayors to identify resources and establish payment plans related to the debts they have with the Central Government.

“Economic stabilization is everyone’s responsibility; it is necessary to work together so as not to affect the most vulnerable and the services to the citizens that are offered from the municipalities,” Maldonado, who is also the Treasury secretary, said in a written statement.

Act 106 of 2017 eliminated employer contributions to retirement systems and replaced them with the direct payment of retirees’ pensions, or PAYGO charge, beginning July 1, 2017. Under the law, the government makes pension payments directly to retirees, with employers, including municipalities, then reimbursing the central government.

A recent Puerto Rico Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym) report indicates that from July 2017 to May 2018, $2,259,985,401 has been paid in pension benefits, of which the government paid $1,746,828,407 to retired agency workers, teachers and judges. Meanwhile, public corporation retirees were paid a combined $365,811,626, and $147,345,368 was paid to pensioners in the island’s 78 municipalities.

The PAYGO status report shows that as of May 31, 2018, public corporations owe the government $187,332,234 and municipalities $106,330,333 for the payment of their retirees’ pensions and the withholding of individual contributions of their active employees. That money is for the payment of pensions and the withholding taxes of active employees that were not sent to the government to be administered individually.

The Official Government Retirees Committee (COR by its Spanish acronym), which represents pensioners in the government’s bankruptcy process under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (Promesa), said that pensioners have been receiving their payments but expressed concerns about the report. The island’s Financial Oversight and Management Board has been recommending cuts to pensions to deal with the $70 billion public debt.

“The COR, through its professional consultants, has carefully evaluated the report and is in communications with Aafaf and the government with multiple questions on the topic. So far, the government has paid pensions to all retirees even though some employers have not paid up their PAYGO charge as required by Act 106,” the committee wrote.

COR recently submitted a proof of claim for $58 billion in the bankruptcy case.

You must be logged in to post a comment Login