The V.I. Legislature voted to force the Government Employee Retirement System to restart its personal loan program on a limited basis, for one year, lending as much as $20 million.
The GERS is rapidly selling off all its assets to pay current retiree benefits. When all the assets are sold, which is expected to take place in less than a decade, the agency will be forced to cut pensions in half or worse. There is no known way to avoid the collapse and sharp benefit cuts appear unavoidable at this point, although sharply cutting benefits and sharply increasing employee contributions immediately would reduce the ultimate impact.
Those actions are not politically popular however. (See: GERS Collapse Will Come, Retirees Better Start Planning in Related Links below)
GERS stopped the loan program for retirees and active employees in 2015 because its board members and investment analysts were concerned that any multi-year loans that are still outstanding after it sells off the rest of its assets would have to be sold at a steep discount, becoming a loss for the system.
Government employees and retirees who benefit from the loan program protested to GERS and to senators, asking it be reimplemented.
Sens. Kenneth Gittens and Kurt Vialet sponsored legislation to restart the loan program, which GERS officials testified against.
"My position is any type of funding, because we are going to pay benefits by drawing down our portfolio, you would need a large infusion of cash to even consider it," GERS Administrator Austin Nibbs said when the measure was heard in committee. "I would rather see the $12 million one senator talked about or the $30 million another senator talked about … going toward the system," he added.
Senators argued Monday that the loan program was important for government employees and that because payments were deducted from government paychecks, they had a 97 percent repayment rate, and a good interest rate for the government.
Senators amended the bill during Monday’s session to only restart the loan program for one year, for personal loans of no more than $10,000, with a maximum of $10 million per district or $20 million lent out. With a five-year repayment plan, the loans should be paid back, with interest, before the system collapses, so GERS would benefit, Gittens argued.
The bill was approved unanimously, 15-0.
"We have heard repeatedly from GERS that this is one of the areas where they could have collected money, could have raised money, so they shouldn’t have any difficulties with issuing, at least to active members, small personal loans," Gittens said.
The Legislature sent a bill by Gittens to committee for more vetting. The bill would devote rental income from the 122 homes owned by the government on the former Hovensa property to GERS. The properties are expected to bring in about $1.3 million per year in rent, Gittens said.