The Government Employee Retirement System is ready to begin disbursing $1.5 million in retroactive employee pension contributions that were sitting in limbo since 2010, but GERS Administrator Austin Nibbs told GERS trustees on Thursday that legislation charging 9 percent interest is unfair and worsens the pension shortfall.
In 2010, the government borrowed money to pay $36 million in retroactive pay for promised government pay raises that never materialized due to lack of funds for the raises. That sum accounts for roughly 16 percent of the retroactive pay contractually due each government employee.
Taxes, as well as 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 the 4,618 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.
GERS noted the problem at the time and submitted legislation three years ago to change the law to allow the system to refund the employee contribution amounts. That legislation died in the 29th Legislature.
Earlier this March, Sen. Alicia "Chucky" Hansen successfully forced an emergency session of the Legislature to again take up the measure. During that session, Hansen offered an amendment, which the Senate approved, to charge GERS 9 percent interest on the money, although GERS did not borrow or choose to take it to begin with and did not control the timeline of the legislation enabling it to be paid back. (See related links below)
Nibbs testified at the GERS Board’s regular meeting Thursday that GERS kept the money in escrow in a regular bank account, in anticipation of paying it out, so it earned far less than 9 percent interest. Charging the interest simply forces GERS to use up its trust fund and move toward insolvency a little faster, Nibbs said.
Nibbs has testified to the Legislature the interest would pull about $136,000 out of the GERS trust fund. But he told the GERS trustees Thursday that figure was a mistake. He said 9 percent of the sum would be a single year’s interest, adding "the distribution was in 2010, so that means we have three and a half years, and that is more than 27 percent interest." Nibbs said it amounts to around half a million dollars.
"Where are we going to get that from?” he asked. “It was not the fault of the board. The bill was sent to the Legislature several years ago but it did not act on it."
Nibbs said he had hoped the governor would veto the measure, citing the interest provision. If GERS had 120 days instead of the 90 days in the bill, it would not have to rush as much and could save on overtime, he said.
Gov. John deJongh Jr. signed the act on March 18, however.
Nibbs said Thursday, "I would ask retirees to talk to Sen. Hansen and ask her to be fair."
In other business, GERS trustees discussed a dispute with the West Indian Company Ltd. over its budget allotments and a recently penned management agreement for Havensight Mall. GERS owns the mall. In February, WICO and GERS agreed to the general outlines of a new five-year management agreement, where WICO would get a fee of 6 percent of mall lease revenues.
But WICO President and Chief Executive Officer Joseph Boschulte and GERS do not agree on the numbers and what is due to WICO from GERS.
"We are not in agreement on the amount," Nibbs said.
Charmaine Modeste-Antoine, GERS internal auditor, said there is disagreement over salary levels, pay cuts and other financial figures.
Nibbs agreed, saying WICO is also using its 2010 budget as a baseline in its 2014 budget. He said it is a "problem … because salaries have been cut, so how can the old budget be used?"
At issue is roughly $1 million in potential payments to WICO.
In executive session, the board discussed final negotiations to hire five investment managers to oversee its small capitalization investments, the WICO management agreement, and financial matters at Carambola Beach Resort.
Trustees present included Vincent Liger, Leona Smith, Wilbur Callender, Edgar Ross, Desmond Maynard and Carol Callwood.
