For over 10 years AARP Virgin Islands, under the leadership of State Director Denyce Singleton, has been advocating that Government Employee Retirement System ( GERS) members, both retirees and current workers, familiarize themselves with the challenges GERS is facing and urge decision makers to take immediate action.
In 2005 AARP partnered with the Advocates for the Preservation of the Retirement System, (APRS) and made some headway with the passage of Act 6794, the Retirement System Reform Act of 2005. The Act bestowed authority upon the Board of GERS to take many steps that could have begun the process toward solvency. It provided for a new tier to be created which would bring a higher rate of contributions into the system. It provided the authority to alter the contribution rates all employees and their employer paid into the system. It provided clarity in a number of areas where the original code was so vague that it allowed millions of dollars to leave the system by way of potential retirees taking advantage of loopholes. And, finally, Act 6794 also gave the Board of Trustees new authority to make investments in new types of ventures under the alternative investment section.
Unfortunately, with the exception of the Alternative Investments, the Board did not implement their new authority immediately. Instead it very slowly rolled out one item after another over the decade since the Act passed. While it did create a new Tier II, that tier was not activated for a number of years and only now, nine years later are the Trustees challenging the government by suggesting that employee and employer contributions should be raised.
If nothing is done legislatively, GERS’ actuary says the system has 8-10 years before the program collapses. The looming threat of a systemic collapse is something that AARP has warned members, politicians, and community leaders for years. While many people acknowledged they heard the words being said, no action worthy of being called “corrective action” was initiated.
If the system collapses, thousands of annuitants will stop receiving income from GERS. The devastating economic ripple effect upon the Virgin Islands will be far greater than that experienced by the close of Hovensa in 2011. When Hovensa closed, for instance, 3,000 people were directly impacted.
The collapse of GERS will produce three times the number of people without an income to support themselves in the Virgin Islands then Hovensa’s closure did. But, many GERS retirees won’t have the luxury of uprooting themselves from the community where they own homes, have extended families and responsibilities and simply relocate elsewhere. These people are the heart of the VI economy. They pay rent, purchase goods and services, utilize professionals in a variety of business sectors and without the ongoing circulation of their money in the local economy, the VI economy could be severely impacted again.
On Thursday, December 5th land-mark legislation was quietly signed into law in the state of Illinois. The state, like the Virgin Islands, is in a severe retirement crisis and had suffered from a massively-underfunded pension system following years of delay and inaction that ultimately led to repeated downgrades of the state’s credit rating. Citing the groundbreaking legislation as “a serious solution to address the most dire fiscal challenge of our time” [i], Governor Pat Quinn indicated that after years of previous attempts to achieve pension reform, “It’s the right thing to do, a long time in coming,” [ii]
Although Illinois policymakers fully expect the legislation to be challenged by Illinois Unions, the Governor believes that the legislation will survive a court challenge. . .” [iii]
How and why is this important to note?
The Virgin Islands GERS has 8,370 retirees and 9,240 active workers. It is $1.6 Billion in debt and the Illinois story sound vaguely familiar? VI retirees fear that the “painful recommendations” that the Governor’s Pension Reform Task Force on GERS submitted for consideration to the Legislature may be voted into law as a means of “saving the system.” The most egregious recommendation that has local retirees up in arms is a proposed across the board 10% cut to annuities.
Just recently two groups of retirees, one on St. Croix and one on St. Thomas, have organized themselves to take action they feel is in their “best interest”. Both groups are not willing to throw their hands in the air and give up and AARP agrees with the principles around their objectives. The question is how do we save the system yet not subject retirees to such draconian cuts.
AARP agrees that now is the time to take action. Make GERS a top election issue in 2014. AARP is calling asking that all voters, but especially government employees and retirees, do the following:
- Closely scrutinizine the candidates, and ASK the difficult questions
- Hold the candidates accountable for what they say they will do
- Challenge the candidates to be creative, committed, and TRUTHFUL
- Closely examine political promises and investigate to see if their promises can be fulfilled
- Demand implementation of corrective action in a TIMELY manner