The Government Employees’ Retirement System will NOT cut retiree benefits by 42 percent on Jan. 1, contrary to what GERS Administrator Austin Nibbs described as “misinformation being circulated.”
The pension system has been in a financial crisis and heading toward collapse since at least 1996, due primarily to a series of acts of the Legislature increasing benefits without increasing contributions. Government officials and the past 12 consecutive Legislatures have bemoaned the problem but balked at unpopular solutions. With the passage of time, few options remain, and none that do not involve either massive pension cuts or some entity donating several billion dollars with no strings attached.
The system is projected to completely empty its trust fund by 2024 at the latest, whereupon if pensions are not cut by up to 70 percent, the checks will just bounce due to insufficient funds.
Drastic cuts to pensions would have a profound negative impact on pensioners and the U.S. Virgin Islands economy.
In May, GERS proposed a 42 percent cut for most older beneficiaries, starting in 2021, to avoid total collapse and, GERS hoped, prevent even harsher cuts. Those hired after 2005, who are already due much smaller pensions than earlier GERS members, would not be impacted. According to GERS, this would allow the plan to eventually stabilize and prevent drastic cuts to those receiving the smallest pensions.
According to a statement from GERS on Wednesday, the GERS Board of Trustees’ position is that they cannot unilaterally cut benefits at this time. The board sent correspondence on May 13 to the governor and the president of the Legislature recommending changes, but no action was taken by the Legislature or Government House.
“Since no action was taken by the Legislature on the board’s recommendation, there will be no reduction in benefits on Jan. 1, 2021,” the GERS statement reads.