Law prohibits return of $6M to retirees, Nibbs says
Published: February 3, 2014
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ST. THOMAS - Government Employees' Retirement System Administrator Austin Nibbs has agreed with a group of retirees demanding the return $6 million in contribution withholding on the 2010 retroactive salary payments, but said the law prohibits him from doing it.
The Government Retirees United for Fairness, a group formed in October, hired attorney Joseph Arellano to represent them in matters concerning government retirees.
Last month, he sent a demand letter to Nibbs, the GERS board and V.I. Finance Commissioner Angel Dawson Jr. seeking answers to questions about the retro payments made to some retirees in 2010.
Chief among the demands was that the 8 percent employee contribution should not have been taken from the retro checks paid to retirees in 2010. Arellano argued that according to Title 3 section 704 of the V.I. Code, "The required contributions for any service which have not been made prior to a member's retirement may not be made by any person after the member's retirement."
"Please take this letter as my clients' formal demand that the sum of money represented by the 8 percent withholding from the October 2010 retro checks be remitted to each of them, and be further remitted to each and every one of the then-retirees who received a retro check from which the 8 percent GERS contribution was withheld," Arellano said.
Nibbs responded in a letter dated Jan. 24, saying that the GERS is not opposed to refunding the 8 percent deductions to the retirees, but the V.I. Code does not allow it.
Nibbs also addressed another concern raised by the group of retirees, whether the retro checks required the retirees' annuities to be recalculated.
Nibbs said the annuities were not recalculated because the law states that a recalculation can only be done to correct an error.
"Again, the GERS has no objection whatsoever to refunding your clients the deducted employee contributions, but the Virgin Islands retirement laws, as written, do not permit the GERS to perform neither a refund of the employee contributions nor a recalculation of the retirement annuities," Nibbs said.
Arellano replied to Nibbs' letter Friday, stating that the $6 million withheld from the retro payment to retirees should not be considered a contribution, so the law limiting the refund of contributions should not apply.
"As the $6MM was never properly a 'contribution,' the $6MM was never properly received by GERS; therefore, that money cannot be 'refunded' to the retirees - it must be disbursed to them as a belated part of the retro payment, to correct the withholding error. In other words, GERS has no authority to hold - or to continue to hold - the $6MM. As a result, GERS must disburse (not refund) the $6MM to the retirees," Arellano said.
Nibbs had indicated that he sent proposed legislation to correct the problem to the Senate in 2010, but Arellano said under his interpretation, Legislative action is not required.
"In short, my clients are entitled to the money without any amendment to the V.I. Code; and the act of submitted proposed legislation to the Senate, my clients fear, will only obfuscate and further delay this already far too-delayed matter," he said.
Arellano said Dawson has not responded to the original letter.
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.
After three years of reviewing more than 1 million paper documents, the commission determined that 10,718 past and present government employees were owed $219 million in retro pay.
The Retroactive Wage Commission had a set amount of money to use to pay the retro - $45 million from the Insurance Guaranty Fund - so they developed a formula that would give each individual 16.7 percent of the total amount owed to them.
When the retro money payments were made to the government's retirees, the checks were disbursed by the V.I. Finance Department, which withheld Medicare, Social Security and 8 percent for the employee's contribution to GERS.
Arellano said the letter is the first step to address just one of the issues affecting retirees in the territory, and additional matters will be brought to light in the near future.
- Contact reporter Aldeth Lewin at 714-9111 or email firstname.lastname@example.org.