Retirement Fund will not allow withdrawal of contributions

Monday November 26, 2007 By Gemma Q. Casas Variety News Staff

GOVERNMENT employees hoping to get extra cash this year through a law allowing them to withdraw their contributions from the Retirement Fund even if they have reached 15 years of service will not be allowed to do so.
The Retirement Fund board of trustees adopted a resolution last Tuesday allowing the agency’s administration “to suspend processing applications for retirement or any other benefits of any Retirement Fund member with deficient employer contributions.”
Juan T. Guerrero, board chairman, told Variety in a telephone interview that the resolution would apply to all current government employees seeking to retire or withdraw their contributions.
“The resolution basically freezes all applications for retirement,” he said. “I’m pretty sure that there’s going to be some reaction from employees. They are not going to like this, but we have a fiduciary duty to protect the Retirement Fund’s assets for all the members’ benefit. The court has ruled that the Fund can decide on this issue. We’re protecting the interests of everybody, not just those who have retired.”
He said the move will not affect the pensions of retirees.
“The pensioners are protected,” he added.
The Fund fears the islands’ economic meltdown may force many vested employees with over 10 years of service to seek a lump-sum withdrawal of their contributions rather than choose to receive pensions at age 62.
As a rule, government employees who have contributed for 10 years or more to the local pension system cannot withdraw their contributions anymore.
This rule was changed on Oct. 15 this year when House Bill 15-277 became Public Law 15-98 through a legislative override.
This new law essentially allows Class 1 members or those hired before May 7, 1989 to withdraw their 15 years or less of contributions from the local pension system.
Gov. Benigno R. Fitial vetoed House Bill 15-277 saying: “The existing 10-year period for withdrawal is sufficient and fair to members who are considering whether to withdraw their contributions. Approval of the 15-year period will decrease the investment capital of the Fund, and further risk the ability of the Fund to continue to meet its obligation of caring for the commonwealth’s retirees and their families.”
Guerrero said they were strongly opposed to the bill.
“That’s a very bad law — we want active employees to be contributing to the system,” he said.