The GERS Board, not the Legislature, needs to be the one to raise contribution rates to fix the V.I. Government Employees’ Retirement System, Senate President Ronald Russell said this week.
“Today’s media reports suggest that the GERS has called on the Legislature for years to increase contributions; however, the responsibility to raise contribution levels belongs to the GERS Board, plain and simple, and has for seven years,” Russell said in a statement from the Legislature.
News stories in the Source and other local media discuss a recent U.S. Interior Department Office of the Inspector General report calling for legislative action to fix the GERS. But GERS trustees were given that power in 2005, when the Legislature passed the GERS Reform Act, Russell said. Rates need to be increased, but the law already addresses that, he said.
In the same statement, Senate Vice-President Louis Hill said he "applauded the overall findings designed to save the system," but also pointed the finger back at GERS.
“It was the 26th Legislature which responded to calls from GERS officials by enacting the GERS Reform Act, aimed to prevent additional unfunded legislative mandates and increase contributions to a level necessary to sustain the System,” Hill said. “Seven years later, the unfunded liability has grown to over $1.4 billion dollars while GERS has only just begun to implement critical changes mandated long ago in the [GERS Reform Act].”
In response, GERS Administrator Austin Nibbs argued that that is only partly true and that GERS can only make small changes, insufficient to do the job.
"Yes, the board can change the rate up to 3 percent every five years," Nibbs said. But that only applies to more senior government employees who fall under the Tier I category under the 2005 reform act, he said. For the rest, the Tier II employees, GERS can only recommend changes to the Legislature, he said.
And in any event, the necessary increases are much larger than allowed under the law, he said.
"I testified (before the Legislature) in August that the rates need to be at 43 percent to meet the full actuarial costs," he said.
Nibbs did not mention it, but in 2009, the Legislature passed a measure delaying the implementation of Tier II benefits—and increased contribution levels—until the beginning of 2011.
Reached Tuesday evening, Russell again emphasized GERS can raise rates now. Asked about Nibbs’ contention that the needed changes are too large to be permitted under the law, Russell questioned whether such a drastic increase was necessary or feasible.
"Regardless of who changes the law, no one can pay a 43 percent contribution," Russell said. "I think we need to sit down with them and ask why they take that position. Instead, perhaps GERS can get a loan and invest the proceeds, he suggested.
"We need to have a different way of financing this; it cannot be entirely on the backs of government workers," Russell said. "You might have to take some risks you might not want to take, but we have to be creative here…. Maybe some changes to the law are necessary, too."
Regardless of who bears what responsibility, the Legislature will be looking into how to address the GERS situation early in the new year "or possibly before then," Russell said.