News of a “quagmire” at the Government Employees Retirement System, first reported after Thursday’s GERS board meeting, sent territorial officials racing Friday to find out what had happened and reassure employees.
Under a law passed in 2008, a government retiree’s annuity must be based only on contributions actually made by the employee and the employer. In the past, when there had been a discrepancy between what ought to have been contributed by the employer and what actually was accounted for, the employees were credited with what should have been in the account. Under the 2008 law, the employee would have to either accept a lower annuity or pay the difference themselves.
Further, the board learned that while waiting for the situation to be resolved, staff had been instructed not to process any new applications for retirement benefits, which one employee worried had put the GERS in a position of liability for several months.
The board ordered the staff to resume normal operations, and said while no one may like the option of having to accept a lower retirement payment, that is what the law says. They also suggested aggrieved retirees could sue the government for relief.
News of the discussion raced through government circles Friday morning, causing
worry on the part of employees and retirees, and surprise on the part of government officials.
“It caught us all by surprise,” Gov. John deJongh said in a telephone interview Friday. “We have heard a lot of employees’ concerns. We are very much concerned about it, about how it impacts our employees.”
DeJongh emphasized that his administration has never missed a payment of retirement contributions, and in fact has increased the amount contributed. He said he doesn’t know when the alleged shortages might have happened, noting that employee accounts go back as much as 30 years.
The Government Employee Retirement System is not a branch of the government. When it was first created in 1959 by the Third Legislature it was under the executive branch’s Division of Personnel. But by legislation it become an independent, quasi-governmental agency in 1987.
Friday deJongh wondered whether some contributions might have been missed at the time of the transfer from Personnel to its current status. “It’s clearly from much earlier years,” he said.
But the governor’s first concern Friday was how the GERS administration dealt with the problem.
“What I’m concerned about is they never met with the responsible government officials and agencies to determine what should be done,” the governor said. “The staff of GERS could easily have communicated to us that there was a problem.”
“It causes unnecessary stress and anxiety for our employees,” he said.
DeJongh said he would meet with GERS Chairman Raymond James to find out what happened and how the situation can best be resolved.
The GERS board also called an emergency meeting for 6 p.m. Monday at the systems office on St. Thomas. No indication was given on what would be discussed or whether the board would go into executive session. The board already has a regular board meeting slated for June 21, and a retreat for the week after that.
Meanwhile concern over the potential missing government contributions overshadowed the system’s structural problem – that it pays out more in benefits than it takes in in contributions from employers and employees. The board learned Thursday that the system ran a net deficit of $7.4 million in April, and so far this year is $73.8 million in the red.
GERS, like other government employee pension systems, are not required to be insured because the plan’s sponsor is almost always a government agency with the power to levy taxes.
“The theory is that if you run into a situation you will use your taxing authority,” the governor explained. In a community the size of the U.S. Virgin Islands, this raises the fear that if the GERS is unable to meet its obligations, the taxpayers would have to foot the bill.