NOT ALL GERS RETIREES RETIREMENT BENEFITS ARE IN IMMEDIATE JEOPARDY

In the Thursday May 26, 2016, Board of Trustees meeting of the Government Employees’ Retirement System (GERS), the vice-chairman of the board Judge Edgar Ross after a lengthy discussion on the provisions in Title 3, Chapter 27 Sections 718 and 718(a), and Chapter 28A, Sections 767 and 767a of the Virgin Islands Code, made a motion consistent with the law in Sections 718 and 767 (regular retirees) and 718a and 767a (early retirement program).  The motion, effective immediately, directed the Administrator not to pay new benefits unless the total costs of benefits are paid by the plan sponsor (Government of the Virgin Islands) in accordance with the law.  The motion failed on a tied vote. Notwithstanding, the Administrator was directed to enforce the law.

Allow me to bring some clarity to this matter.

TIER I

Section 718 (a) states “The various obligations of the System shall be financed in accordance with actuarial reserve requirements from contributions by members, contributions by the employer, interest income, and other income accruing to the System.  From time to time, the Board may actuarially determine the rate of contribution for members and employers of the System. After, October 1, 2005, the System may not provide any increases in benefits to members or beneficiaries, unless the administration has identified a specific funding source and concurrently makes a provision for the funding of all future benefit improvements on sound actuarial basis in the annual budget”.

Section 718a (f) states “The System shall not provide any new increases in benefits to members or beneficiaries unless the Government has deposited the funding for the prior fiscal year into the bank account of the System and concurrently makes provision for the funding of all future benefit improvements on a sound actuarial basis in the budget”.

TIER II

Section 767 (a) states “The various obligations of the system must be financed in accordance with actuarial reserve requirements from contributions by members, contributions by the employer, interest income, and other income accruing to the system. From time to time, the Board may actuarially calculate the rate of contribution for members and employers of the system.  After October 1, 2005, the system may not provide any increases in benefits to members or beneficiaries, unless the administration has identified a specific funding source and concurrently makes a provision for the funding of all future benefit improvements on sound actuarial basis in the annual budget".

(f) The employer shall make contributions that, together with the member’s contributions and the income of the system, will be sufficient to provide adequate actuarially-determined reserves for the annuities and benefits herein prescribed.

(j) The employer shall, in addition to any other contributions and payments to the system required by law, contribute to the system the sums as may be required to compensate the system for the costs of any special early retirement program. The system may refuse to pay any special early retirement entitlement claims if the employer fails to pay the contribution to the special early retirement program.

The system may not pay benefits to an employee unless his and the employer’s

contributions adequately financed benefits and related costs provided under this chapter.

What does this all means? Let me refer you to page 2 of the April 2016 GERS Update newsletter (usvigers.com) which shows in Exhibit B, that the Plan Sponsor (Government of the Virgin Islands) in the past 25 years (from 1991 – 2015) has contributed $1.278 billion less than it should have contributed to the GERS for employer contributions. The Plan Sponsor, the Government of the Virgin Islands (GVI) is required on an annual basis to contribute the Actuarially Determined Contributions (ADC), which is the amount of contributions that should be paid in each year in order to keep the System on a sound footing.  The total ADC that should have been contributed between 1991 -2015 was $2.673 billion. The GVI actual amount contributed for the same years was $1.396 billion. In 2015, the GVI should have contributed $200.1 million. The actual contributions paid were $75.2 million. This means that the GVI only contributed 37% of what it should have contributed.

The information above was presented to show that Judge Edgar Ross’s motion was justified based on the law, as Sections 718, 718a, 767 and 767a, states:

1). The System was not funded annually, 2). Any shortfall in funding from the prior fiscal year was not deposited into the bank account of the System, and 3). The GVI did not make provision for the funding of all future benefit improvements on a sound actuarial basis in the budget.

The question is, “ Is it practical to suspend all retiree benefits?” It is not, and the GERS will not suspend the benefits of any retirees currently receiving an annuity.  However, the GERS will delay paying benefits to members who participated in the early retirement program, and who have filed an application to retire under the early retirement program (all hazardous employees, judges and legislators), and who have not received an initialannuity beginning May 26, 2016, until the actuary can calculate the additional ADC the plan sponsor owes for each retiree.  The retiree annuity will be delayed until the plan sponsor has made payment for the additional ADC.

Thereafter, the actuary will determine the additional ADC that is due and the System will bill the Plan Sponsor for each retireewho retired and is receiving an annuity under any early retirement program, to include the nine (9) unfunded legislative mandates that were passed by the 15 ^th, 20 ^th, 21 ^st, 23 ^rd and 24 ^th Legislatures.

The actuary will also determine the additional ADC that is due and the System will bill the Plan Sponsor for all other retirees and active members.

The System will continue to bill the Plan Sponsor prior to the retirement of a member for missing contributions not paid by the employer during the career of the member.

Austin L. Nibbs, GERS Administrator