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Pacific Islands Development Program, East-West Center

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NMI Fund Trustee: Equal Refunds Not Possible Under Law
Fund still waiting on contributions in order to refund members

By Moneth Deposa

SAIPAN, CNMI (Saipan Tribune, Nov. 28, 2012) – Northern Mariana Islands (NMI) Retirement Fund trustee ad litem Joseph C. Razzano told pension members yesterday that, with the ongoing fiscal challenges at the pension agency, the Fund cannot comply with Public Law 17-82, which authorizes members to elect to terminate their contributions to the program without separating from government service.

In a three-page letter addressed to Fund members, Razzano also clarified what he called as misleading statements made by the administration concerning the public law and the problems created by the statute.

PL 17-82 provides that Class I and Class II members of the Fund's defined benefit (DB) plan may elect to voluntarily terminate their membership with the Fund. The law also directs that any employee who elects to terminate membership shall receive a refund on his/her contributions with regular interest.

According to Razzano, the law does not direct that a terminating DB member shall only receive employee contributions that were remitted to the Fund. Rather, PL 17-82 directs that a terminating DB member shall receive all the employee contributions that were deducted from their paycheck. The Fund, he added, believes that each terminating DB member is entitled to receive all the DB contributions that were deducted from her/his paycheck.

Razzano claimed that there is a problem with PL 17-82.

"Dispensing the first group of checks revealed that all terminating DB members cannot be treated equally under PL 17-82 and that the Fund cannot comply with the law as drafted," Razzano told members.

Out of the over 1,700 members who submitted refund applications since Sept. 17, only 94 have so far received their checks. The disbursement was suspended after the issuance of this first batch of checks.

The court earlier required the Fund to keep in reserve all employee contributions. Razzano said the Fund complied with this order and, at the time the order was issued in August 2011, the employer contributions were estimated to be nearly $100 million. Under the court order, the employee contributions are the individual property of the members and cannot be used for other purposes other than for the specific benefit of that member.

Last week, the Fund disclosed that on Nov. 15 the Department of Finance remitted $63,602 in employer contributions to allow for one specific individual to retire, leaving behind 12 other individuals who are still waiting to retire and receive their pension pending remittance from Finance.

Razzano also disclosed to members that although employee contributions were remitted to the Fund in fiscal year 2012, this is only true for the Executive Branch employees but not for independent agencies such as the Public School System (PSS).

According to the Fund ad litem, PSS has not remitted $1.436 million in employees' contributions in fiscal year 2012.

"This means that PSS deducted contributions from their employees' checks but, for whatever reason, failed to turn that money over to the Fund," said Razzano.

Saipan Tribune failed to obtain a comment from Education Commissioner Rita A. Sablan, Ed. D, who is currently off-island, while associate commissioner Glenn Muña refused to issue a statement yesterday. PSS acting finance director George Palican, however, told Saipan Tribune that he needs to verify the figures before issuing any statement.

According to Razzano, PSS' failure to remit employee contributions creates a problem for the Fund to comply with PL 17-82. There are now two categories of DB members as a result of PSS' nonpayment: 1) DB members who have paid 100 percent of their employee contributions; 2) DB members who have not paid 100 percent of their employee contributions because their employer has failed to fully remit.

These categories, according to the ad litem, would not exist if PSS had paid all of its employees' contributions. In order to fully comply with PL 17-82, the Fund needs to receive all DB members' employee contributions.

Besides the $1.4 million in unremitted employee contributions, PSS also continues to refuse to remit its employer contributions, reaching approximately $34.1 million. Other agencies, it was learned, also failed to remit employer contributions to the tune of approximately $20 million.

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