The Government Employee Retirement System will cough up about $1.5 million in retroactive employee contributions to more than 4,000 retirees, with checks averaging $328, thanks to legislation Gov. John deJongh Jr. signed into law late Monday.
Senator Alicia “Chucky” Hansen was the prime sponsor of the legislation, Bill 30-0318 – now Act 7585.
In his letter to Senate President Shawn-Michael Malone advising him of the bill’s signing, deJongh said it was "altogether fitting and proper" that the erroneous withholding by GERS should be rectified promptly and by payment of a reasonable amount of interest on the monies withheld.
In 2010, the government borrowed $45 million from the Insurance Guaranty Fund to pay $36 million to about 10,000 current and former government employees. That sum accounts for roughly 16 percent of the retroactive pay contractually due each government employee.
The cost of the loan and other expenses account for the difference in what was paid out and what was borrowed.
Taxes and employer and employee pension contributions were taken out of that total, enabling those GERS members who are currently employed by the government to increase their potential annuities. But V.I. law does not allow pensions to be increased after retirement, nor is GERS allowed to return employee contributions for retirees who are receiving pensions. So those employees who were already retired received retroactive salary payments that were reduced by employee GERS deductions even though the employee contributions will not affect their annuities.
According to GERS Administrator Austin Nibbs, who testified in support of the measure, GERS received a total of $7.1 million for employer and employee pension contributions. Of that, about $1.5 million has been identified as the retroactive employee pension contributions for 4,618 retirees who had left government service at the time of the retroactive payments. Sums range from a low of 30 cents to a high of around $3,000, with an average of around $328.
In his letter to Senate President Shawn Michael Malone advising him of the bills’ signing, deJongh said it was "altogether fitting and proper" that the erroneous withholding by GERS should be rectified promptly, and by payment of a reasonable amount of interest on the monies withheld.
However, he continued, given its annual deficit GERS should pay no more than the regular rate of interest the law requires to be applied to other refunds, between two percent and four percent, the governor said
He also noted that the bill’s requirement that the refunds be processed within 90 days would require "significant" overtime costs.
He urged the Senate to consider making those changes at the earliest possible date, perhaps when the Senate considers the pension reform legislation, which was submitted to the Senate March 13.
“I applaud Senator Hansen for her commitment and dedication in seeking the administration’s support for its passage," deJongh said. "It is this type of dedication and commitment that will be required to address both pension reform and the current unfunded liability that puts the system’s solvency at risk."
Editor’s note: This story has been updated to add background.
