Governor Reluctantly Signs GERS Reform

Nov. 3, 2005 — While attacking the Government Employees Retirement System Reform Bill for its ambiguous language and other shortcomings, Gov. Charles W. Turnbull made it law.
In his transmittal letter to Sen. Lorraine Berry, Turnbull stated he had "agonized" over passing the bill, as it does not solve GERS's most critical problems.
Consequently, Turnbull asked for a "meeting of the minds," in which members of the three government branches meet with the GERS board and other stakeholders to correct the deficiencies. Such an action is necessary, he said, because on its present course, "GERS is a giant vessel heading toward a huge iceberg."
The bill, introduced by Sen. Louis P. Hill in May, was unanimously approved by the Legislature in September, when senators were given a presentation by Willis C. Todmann, GERS administrator, regarding the status of the system. Todmann said GERS is currently paying out more in benefits than it is receiving in contributions, and has had to liquidate its assets in order to keep up with retiree payments.
While Hill has admitted the bill does not address the GERS' unfunded liability, he did say it would correct some major structural weaknesses within the system. This includes:
— giving GERS the ability to pursue alternative investments to bring in more money. This includes investments in bonds rated BBB or better and real estate.
— the implementation of a two-tier system for employees. Employees hired after Oct. 1, 2005, would be covered by rules that are less costly to the system.
— allowing for a separation of GERS from the Legislature so that the system can set and adjust contribution values for the employer and employees.
While Turnbull did not oppose these specific provisions, he did say there were others within the bill that did not protect the system or its beneficiaries.
For example, retirees under the new bill can— as they have been able to in the past—put any accumulated leave time toward early retirement. However, they will now have to pay into the system such contributions, as they would have made had they been working for those years. Turnbull wrote that he opposed this section of the bill because it creates additional expenses for retirees before they are able to receive an annuity.
"These 'expenses' are something that the retirees didn't anticipate," Turnbull said. "As a result, some of the employees who had planned to retire next year may have to delay their retirement for years…or may have to obtain loans to pay GERS for these expenses."
However, Collette Monroe, Hill's chief researcher, said this is not true. When contacted Thursday, Monroe said GERS would work with employees to create a payment plan for such "expenses," and won't keep any individual from retirement.
Turnbull also said he is disturbed by a section of the bill stating that non-unionized GERS employees can only be terminated or suspended if there is justifiable cause. Since the current law states all exempt employees on boards or commissions currently serve at the pleasure of the governor or board, Turnbull wrote it is "unfair" for this rule to be changed for GERS alone.
Turnbull described a section of the bill, which creates a Committee of Medical Review to streamline the evaluation process for disability claims, as costly. "To have seven physicians on the committee, each of whom will be retained on contract, appears to put an unnecessary financial drain on GERS," he wrote.
Two sections of the bill also violate federal law, Turnbull said. One section reduces benefits for judges and could subject them to higher contribution rates. A second provides that employees automatically retire when they turn 70. In the latter case, Turnbull said the current law—which was adopted by the V.I. government in Jan. 2004— removes any age limit for retirement purposes.
Turnbull stated sections of the bill also have two different criteria for setting cost-of-living increases for annuitants and pensioners.
A section allowing GERS to increase contribution rates by no more than 3 percent over a five-year period raises other issues, Turnbull said, as there is no provision preventing a large rate increase within the first year. Additionally, while the section does mandate contributions be paid within 10 days after the closing of payroll, there is no allowance for late contributions brought on by catastrophes, computer failures, or other acts beyond the government's control.
Turnbull also spoke against a section of the bill which allows for viatical senior and life settlement investments. Those allow individuals to earn quick cash when they sell their life insurance policy to a third party. Turnbull wrote such investments are "high-risk, unregulated, and do not provide guaranteed returns."
In a press release issued by his office Thursday, Hill said Turnbull never responded to the Senate's attempts to get input on the bill. "Otherwise, I would have made sure all of his concerns were considered by the Legislature in the form of amendments," Hill said.
Hill further stated that he hopes senators do not have to wait until the next bill is vetoed or approved before it is Turnbull's position is made clear.
"If history is any indicator of what may happen in the future, we, unfortunately, will not see any leadership or input from his office until the Legislature acts or a catastrophe is upon us," Hill said.

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