The action was filed in Puerto Rico’s Title III bankruptcy case under the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa). It seeks declaratory and injunctive relief for the workers, “based on the commonwealth’s admission that it failed to implement the provisions of Puerto Rico Law 106 of 2017, a law that was supposed to create and protect individual defined-contribution retirement accounts for thousands of union-represented workers,” according to an AFT release.
“By the commonwealth’s own admission, it—along with the Retirement Board of the Government of Puerto Rico, the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF), and their responsible officials—has failed to create and administer Law 106’s promised defined-contribution accounts, and instead has taken hundreds of millions of dollars of employee pension contributions and stashed more than $300 million in government accounts at Banco Popular that earn virtually zero interest,” the release reads.
Puerto Rico’s government, the AFT said, “has been aided and abetted in this violation of statutory and fiduciary duties” by the Financial Oversight and Management Board and Banco Popular. “As a result, thousands of public servants have been deprived of untold millions of dollars in interest and investment income that they should have been earning over the past year.”
Defendants include the commonwealth; its governor; its chief financial officer and secretary of the treasury; the retirement system and its voting members; AAFAF and its executive director; the oversight board; and Banco Popular.
“A year after Hurricane Maria hit and devastated Puerto Rico, educators have made countless sacrifices to protect their kids and their classrooms. During that year, investors, bankers and bondholders have had much of their interests protected. Meanwhile, teachers thought their retirement money was also being protected and invested fairly, the way the retirement law promised. They were mistaken. We have learned that educator retirement funds have been sitting in Banco Popular bank accounts, collecting little or no interest, despite a statute that called for the money to be invested.
“These dedicated educators were promised that their pension contributions would be protected and wisely invested. That trust was betrayed.
“This lawsuit…asks the court to compel the commonwealth to do what it was required by law to do last year: to set up teachers’ individualized retirement accounts and provide restitution for damages they’ve suffered as their money sat dormant at Banco Popular,” said Randi Weingarten, president of the American Federation of Teachers.
“It is unconscionable that the oversight board turned a blind eye to the commonwealth’s failure to implement its July 1, 2017, mandate while the bank was unjustly enriched at the expense of hardworking Puerto Ricans,” added Lee Saunders, president of the American Federation of State, County and Municipal Employees.
“Those new teachers that entered the system after 2014 only have a defined contribution plan for their retirement. And once again, the government violates the law, affecting the rights of those teachers. The government’s inaction with Act 106-2017 prevents teachers from receiving the interests that such contributions can generate. It is a huge damage to our members.
“Also, we urge the government to start paying Social Security for teachers and to stop the intentions of the Financial Oversight Board to move active teachers to these defined contribution plans, since their retirement is protected by the 2014 Supreme Court ruling,” said Dr. Aida Díaz, president of the Association of Teachers of Puerto Rico.
“These accounts, in accordance with the statute and the mandates of all of the Oversight Board’s fiscal plans, are exclusively funded through deductions from public employees’ own wages, and the accounts’ owners should be able to invest to accumulate the necessary retirement savings for their future financial support,” said Annette González, president of Servidores Públicos Unidos.