DeJongh signs law allowing GERS to repay contributions withheld from retro checks
Published: March 19, 2014
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ST. THOMAS - Gov. John deJongh Jr. signed a bill into law this week that will allow the Government Employees Retirement System to return the 8 percent contributions - with interest - withheld on the 2010 retroactive payment checks issued to some retirees.
The bill was passed by the Senate earlier this month during a session called by petition of senators.
The measure, sponsored by Sen. Alicia Hansen, returns the 8 percent contribution withheld on retro checks with 9 percent interest.
In his transmittal letter to Senate President Shawn-Michael Malone, deJongh said he supports the measure and found it "fitting and proper" to rectify the situation and return the withheld money to the retirees.
"However, to be equitable, and given its annual deficit, GERS should pay no more than the regular rate of interest the law requires to be applied to other refunds, neither less than 2 percent nor more than 4 percent," deJongh said.
In testimony taken March 3, GERS Administrator Austin Nibbs said the amount of interest on the $1.5 million in employee contributions withheld from about 4,618 retirees is approximately $136,495, using the 9 percent interest rate.
The governor also asked the Legislature to extend the deadline for returning the money.
The law provides for a 90-day deadline to return the money, but deJongh said GERS will not be able to meet that deadline without incurring significant overtime costs.
"To avoid this unnecessary expense, more time should be provided to the system," deJongh said.
The issue of the 8 percent contribution withheld from the retirees' retro checks was raised in recent months by a new advocacy group, Government Retirees United for Fairness.
The group's attorney, Joe Arellano, sent letters demanding that the 8 percent employee contribution on the retro checks be returned to retirees.
Between 1989 and 2002, the government negotiated salary increases that never were honored for some collective bargaining units. In 2007, legislation established the Retroactive Wage Commission to determine exactly who was owed how much.
The commission determined 10,718 past and present government employees were owed $219 million in retro pay.
With only $45 million available, each individual received 16.7 percent of the total amount owed to them.
When the retro payments were made to the retirees, the checks were disbursed with Medicare, Social Security and 8 percent for the employee's contribution to GERS being withheld.
In his initial response to the group, Nibbs said he agreed with the retirees, but the law restricted him from repaying the money.
The new law frees the GERS administrator, allowing for those withheld contributions to be returned to retirees.
The lowest expected refund is 30 cents, and the highest is $2,581, according to Nibbs.
Nibbs told senators on March 3 that assessing an interest charge to GERS is unfair, as the retirement system submitted legislation to correct the problem in the 29th Legislature. He said the measure stalled in the Rules and Judiciary Committee.
He reminded senators that GERS is struggling with a $1.2 billion unfunded liability, and the system is in danger of becoming insolvent in less than 10 years.
- Contact reporter Aldeth Lewin at 714-9111 or email firstname.lastname@example.org.