GERS, deJongh reach agreement regarding payment of government-owed contributions
Published: February 21, 2014
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ST. THOMAS - The Government Employees' Retirement System board accepted a settlement agreement with Gov. John deJongh Jr. on Thursday to pay some of the "missing" contributions owed by the government.
Questions were raised about the legality of the agreement as well as the potential risk to the system, but the board accepted the agreement in a 4-1 vote.
The settlement agreement approved Thursday covers the employer contribution owed for about 250 people who retired between Oct. 1, 2010, and Dec. 31, 2012. It promises delinquent property tax collections to cover the cost of the government's contribution - about $6 million - but the money will not be available until 2016.
In 2011, the government borrowed $13 million from GERS to pay retirement incentives mandated by the Legislature. To repay the loan, the Special Real Property Tax Receipts Fund was created to collect delinquent property taxes from 1973 to 2005.
The settlement agreement states that when the loan is repaid in 2016, any excess money in that account will go to pay the 250 retirees, according to GERS Administrator Austin Nibbs.
Nibbs objected to the agreement, saying that the funding stream is not guaranteed.
"Suppose we never receive any excess payments. Suppose the payments are not there," Nibbs said.
The fact that the system will have to wait until 2016 to find out whether the money will be there puts the system at risk, Nibbs said. He said he will have to continue to liquidate the GERS investment portfolio to pay annuities, which will further weaken the retirement system.
Another concern is that the agreement may actually violate the law.
The V.I. Code states that all contributions from employer and employee must be paid in full before any annuity payments are made.
Despite the law, the 250 employees were allowed to retire based on a handshake agreement with deJongh that the missing contributions would be paid, Nibbs said.
Under the settlement agreement, those missing contributions will not be paid until 2016.
The governor wanted the agreement to extend to those who retired in 2013, but Nibbs and the board did not agree to that. The government has paid $400,000 for missing contributions for people who retired between January and June, 2013, Nibbs said.
He has submitted 69 invoices totalling $516,000 to the government to cover the remaining employees who put in for retirement from June to the present, but no payment has been made to date, he said.
Those people must make a choice - continue to work or retire without receiving an annuity payment.
"We cannot let anyone go home until both sides are paid," Nibbs said.
The GERS actuaries have estimated that the retirement system is owed a total of $47 million in unpaid employer contributions to the system, Nibbs said.
DeJongh has disputed that number and has asked for verification, but Nibbs said it is only an estimate and it would take too much time to go through and validate all of it.
However, the missing contributions for the government employees trying to retire right now is being calculated and verified on a case-by-case basis, then billed to the government, according to Nibbs.
"This agreement that they approved has cost GERS money," board member Edgar Ross told The Daily News after the meeting.
He was the only board member to vote against the agreement.
The settlement agreement waives the delinquency fees for the government. Nibbs said he agreed to waive the fees - something he has the statutory authority to do - because the government was never billed for the missing contributions.
The governor asked for the lost potential investment fee to be waived too, but Nibbs said he would not do that. Factored into the amount the government will be billed for is a 6 percent return on investment fee, the amount the system would have earned if it had that money to invest.
Board members voting in favor of the agreement were Carol Callwood, Vincent Liger, Desmond Maynard and Leona Smith. Ross voted against it. Wilbur Callender abstained from the vote.
Nibbs said the agreement will now go back to the governor for his signature.
- Contact reporter Aldeth Lewin at 714-9111 or email firstname.lastname@example.org.