Posted on 04/29/2012 6:28:23 PM PDT by Lorianne
In what's believed to be a first by a public pension plan, the Northern Mariana Islands Retirement Fund, Saipan, filed for Chapter 11 bankruptcy protection on Tuesday.
The public defined benefit plan is only 38.8% funded, thanks to low investment returns and a benefit structure that's been increased without raises in funding, according to the bankruptcy filing in the U.S. District Court for the Northern Mariana Islands, a U.S. commonwealth consisting of three major islands in the Western Pacific.
Currently, the pension fund holds $268.4 million in assets, with $911 million in liabilities.
Marcia Wagner, managing director at The Wagner Law Group, believes this is the first time a public pension plan has filed for bankruptcy. Notably, this is a restructuring of the pension fund and not a liquidation, which would be under the jurisdiction of Chapter 7 of the U.S. Bankruptcy Code.
The development of the restructuring will set a precedent, particularly at a time when local government budgets and defined benefit plans are under strain.
In a restructuring, it is likely that participants wouldn't get the level of benefits they were expecting, Ms. Wagner said. As a result, how the court deals with retirees, disabled individuals and others entitled to payments will be pivotal.
The Northern Mariana Islands Retirement Fund has been bedeviled by the commonwealth's inability to make its share of contributions to the pension plan, according to court documents and an April 17 letter to participants.
The feud between the retirement fund and the commonwealth over the government's responsibility to chip in for employer contributions to the pension plan goes back to 2006.
While the commonwealth court decided in favor of the retirement plan in 2009, the local government has been unable to make the mandated $231 million payment — and now the amount it owes to the pension plan has ballooned to $325 million, according to bankruptcy court filings.
Part of the problem has been the generosity of the pension plan. While the defined benefit program was designed to serve retirees and their spouses, the fund had permitted the grandchildren and great-grandchildren of the first generation of retirees to receive benefits after the original retiree died, according to court documents.
Although the fund has ceased paying benefits to descendants of pensioners, managers predict it will be able to pay the current benefit rate for two more years and will fail in 2014, according to court documents.
Officials at the pension fund have petitioned the court to continue making payments to beneficiaries, but also plan to reduce the rate at which it currently pays benefits.
In the meantime, the pension plan created an entity called Pension Holdings Corp., which has enough money to pay two months of benefits to islanders. Thus, beneficiaries can keep collecting while the plan discusses with creditors terms for making future payments.
Calls and e-mails to Jeremy Coffey and Steven Pohl, attorneys at Brown Rudnick LLP who are overseeing the fund's bankruptcy filing, were not immediately returned.
That is so outlandish! Wonder what the rational was behind this?
Probably the liberals running the funds also had relatives who had ‘passed on’ and they wanted the money. You know how ethical those folks are.../s
Crazy isn’t it?
I can’t imagine what they were thinking.
Having lived on Guam, the “natives” (who date from the Spanish Conquest: the combination of disease and the Spaniards killed off virtually ALL of the original Chamorro) got some truly ridiculous promises when we took over large parts of Guam and Saipan after WWII, and built large bases. . .
Things like groceries at the commissary for ridiculously low prices ( like 50-pound sacks of rice at a price set in 1946. . .)
It probably had something to do with native islanders.
Vote buying, as with most government spending.
Coming to cities in your area soon!
Welcome to Micronesia!!
You have no idea of the level of corruption there. (I bet Puerto Rice is just as bad or worse.)
They learned it from us.
thru the looking glass, darkly.......
Yep Yep !!
I thought I had the good ‘ol boy thing down pretty good till I got there. Its an entirely different realm of existence.
Hafa Adai !!
Make up the difference with Marianas commemorative coins made with 100% gold clad zinc!
They learned in Hawaii and took it back home. And by the way, A lapdance is so much better when... /smile
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