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Pacific Islands Development Program, East-West Center

With Support From Center for Pacific Islands Studies, University of Hawai‘i

Court Considers Settlement In NMI Retirement Fund Class Action
Plaintiff hopes agreement will ensure benefits for retirees

By Ferdie de la Torre

SAIPAN, CNMI (Saipan Tribune, August 5, 2013) – The lawyers representing Betty Johnson filed Friday in federal court a motion for preliminary approval of the settlement agreement in her class action against the NMI Retirement Fund and the CNMI government.

The parties also submitted in the U.S. District Court for the NMI on Friday a stipulation and agreement of settlement entered by Johnson as representative of the settlement class and her and class lawyers Margery S. Bronster, Robert M. Hatch, Bruce Jorgensen, and Stephen Woodruff, and Gov. Eloy S. Inos.

Also included as signatories in the agreement are Attorney General Joey P. San Nicolas, Fund trustee ad litem representative Joseph C. Razzano, Finance Secretary Larrisa Larson, Commonwealth Health Corp. acting chief operating officer Esther Muña, Northern Marianas College president Dr. Sharon Hart, and Fund trustees.

U.S. District Court for the NMI designated judge Frances Tydingco-Gatewood will hear the motion for preliminary approval tomorrow, Tuesday.

According to Johnson’s counsels, the primary purpose of the agreement is to ensure that retirees who are in the class will receive at least 75 percent of their benefits in the future.

The agreement will allow the CNMI to let Fund members who are not yet receiving benefits to withdraw from the Fund and get their contributions back; and provide a mechanism for the retirees who are class members to enforce their rights under the settlement.

Members of the settlement class are defined as those who on Aug. 6, 2013, are members of the Fund’s defined benefit plan or persons who are entitled to survivor’s benefits of such members; provided the person did not execute and deliver to the Fund a timely election to terminate.

The key provisions of the proposed settlement include the following:

  • The CNMI will make minimum annual payments to the settlement fund that are sufficient to allow the Fund to pay the settlement class members 75 percent of their retirement benefits.
  • The CNMI agrees to entry of a consent judgment in the amount of the actuarial present value of accrued benefits of the settlement class, which can be enforced if the CNMI does not make its annual payments (the current value of this judgment is $779 million).
  • If the CNMI’s fiscal condition improves, the settlement provides that the CNMI can pay greater annual payments and the settlement class members’ benefits will be increased accordingly.
  • The Fund will pay the CNMI $10 million on entry of the preliminary approval order so the CNMI can pay a portion of the refunds of contributions of those members of the Fund who are not yet receiving benefits and who have elected to withdraw from the Fund.
  • The Fund will pay another approximately $42 million to the CNMI when the settlement is finally approved, so the CNMI can pay the balance of the refunds.
  • Settlement class members will be given notice and an opportunity to choose to opt-out of the settlement.
  • If the CNMI chooses to pay more than 75 percent of the benefits owed to any retirees who opt-out, the CNMI will have to increase its annual payments to the settlement fund so that class members can be paid just as much.
  • The CNMI has agreed to pay Johnson’s lawyers’ attorneys fees and costs. The CNMI has agreed to pay these fees and costs in addition to and separate from the other money it will pay under the settlement. The class members shall not have to pay any attorneys fees or costs and no part of the money the CNMI has agreed to pay the settlement fund for the benefit of the class members will be used to pay Johnson’s lawyers’ attorneys fees and costs.
  • The CNMI has agreed to pay Johnson $7,500 as a service award in recognition of her time and effort in bringing and prosecuting this matter as class representative.

Johnson proposed a hearing for Sept. 30, 2013, on a motion for final approval and motion for attorneys fees, costs, and incentive award.

Johnson filed the lawsuit in June 2009. Last June 26, the parties informed Judge Tydingco-Gatewood that a tentative settlement agreement has been reached.

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