The trustees of the Government Employees’ Retirement System of the Virgin Islands voted Thursday to increase contribution rates for employees and employers at a board meeting focusing on reducing a multimillion-dollar funding gap.
Retired Judge Edgar Ross made the motion to increase employee contributions by 1 percent for the next three years and that government employers pay an extra 3 percent into the system for the next five years.
Testifying before the 29th Legislature and again at the 30th Legislature in September, GERS Director Austin Nibbs implored senators to pass a pension reform bill. Although Finance Committee Chairman Clifford Graham said the issue would be addressed before the end of the year, there appears to be no pending legislation.
Ross said the board has the authority according to the V.I. Code, and recommendations made to the governor, the governor’s Pension Reform Task Force and the Legislature have been ignored. In the meantime, retirees have lost a cost of living increase and now have to pay more for medical insurance, he said.
“Two years later, nothing has been done. And the only segment of the system that is bearing anything is the retirees,” Ross said. “Retirees gave up
$31 million dollars in benefits to try to put the system in a sound place.”
Ross said if the motion did not pass, he would move to increase the COLA 1 percent. The “pain should be shared by all,” he said. The board approved the measure; only Carol Callwood voted “nay.”
In 2012, Gov. John deJongh Jr. formed the Pension Reform Task Force to address predictions that the retirement system would be bankrupt by 2023. According to the task force’s 2013 report, GERS has a growing, unfunded liability of almost $2 billion. The report called for increasing contributions and reducing costs of administering the plan and increasing the years of service or age limit before retiring.
In September, Nibbs told the V.I. Legislature that $3.4 million of $5.2 million in outstanding employer contributions have been collected recently. With the exception of the Gov. Juan F. Luis Hospital, all government and autonomous agencies are paid up to date, he said.
On Thursday he told trustees the hospital owes around $5.3 million in contributions.
A $10 million gap between income and expenses was made clear by Chief Financial Officer Grasilda Dobbins’s report for October 2014. Loan payments, rent, parking fees, loan principle and interest as well as employee and employer contributions totaled $17,033,164.
Disbursements during the same period of time were $27, 016,142.
Payments into the retirement system were $11.8 million and annuity payments and administration totaled $20.9 million. Contributions into the system improved $4 million over October 2013.
The CFO’s report projects the deficit will creep up to $2.5 million by the end of Fiscal Year 2015. Without giving specific numbers, the board later approved a $21,271,941 budget for 2016.
Bruce Thomas, GERS investment officer, told trustees the $878.9 million asset level of the system is declining because gains and losses exceeded cash withdrawn from the fund. Assets are performing at about the same level, he said, as when they were managed by brokers, but $1.5 million in fees has been saved.
In other business, the trustees authorized Carambola Northwest LLC to file a gaming license application for Carambola Beach Resort and Spa. Legislation will be needed to address several discrepancies, several members commented.
Miguel Nico, representing St. Croix retirees, questioned the board about several issues. He asked about retiree bonuses, town hall meetings for government employees and 1009 forms that report income that retirees have paid taxes on already.
According to Nibbs, bonuses will be paid this month and the tax forms for 8,000 retirees should be updated by the end of November. He said there are workshops and radio programs for retirees to learn about the process, rather than town hall meetings. He described the last town meeting as “very raucous” and said he “was threatened.”
Trustees at the meeting were Ross, Callwood, Desmond Maynard, Leona Smith, Vincent Liger, chairman, and Dr. Wilbur Callender.