Pensioners get gloomy news from GERS representatives

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ST. THOMAS - Through three hours of questions and answers Tuesday night about the territory's failing pension system, one piece of advice was repeated so often, in some form or another, that it became almost axiomatic: Suck it up and hope for the best.

Austin Nibbs, the administrator of the V.I. Government Employees Retirement System, presented information on a broad spectrum of GERS issues. But the recurring anxieties of pensioners and government employees centered on how long the system has until it goes broke and what the government is doing to make sure that does not happen.

Nibbs said GERS has an unfunded liability of $1.7 billion. In response to a number of questions about how much cash GERS would need to be considered stable well into the future, Nibbs said roughly 80 percent of that - but he also said that was not likely to happen in the foreseeable future.

Underlying the staggering liability is the system's shrinking ratio of active contributors to retirees. In 1982, more than six active GERS contributors existed for every retiree; in 2012 that ratio is almost one-to-one - 1.22 active contributors for each retiree, according to figures Nibbs presented Tuesday.

He also presented a graph depicting what would happen to the system's investment portfolio if nothing changes from the status quo - which assumes a 7.5 percent return on about $1.2 billion in investments and continued contributions into the system of 17.5 percent of payroll from government employers and 8.5 percent from employees.

Under that scenario, GERS would be broke at the end of 2022, according to the graph.

"It tells a lot," Nibbs said. "These figures don't lie. They're not phantom figures. We have to do something now. The clock is ticking."

Cathy Smith, general counsel for GERS, presented a handful of changes and proposed changes that would help address the solvency issue.

She said the GERS Board already has approved increasing certain employees' contributions from 8 percent to 11 percent by 2016 and raising others' contributions from 10 percent to 13 percent by 2016. The board also voted to suspend all cost of living increases for pensioners beginning in 2013, Smith said to grumbles from the overflowing crowd at Windward Passage Hotel.

"We need your support," Nibbs said, mentioning the 8 percent pay cut most government employees have taken and the higher GERS contributions either already in place or coming soon. "Yes, it's going to be hard. But it's better to keep the system going so you can have some type of retirement in the future."

Smith also outlined an array of legislative changes - most of which are contribution increases and changes to retirement age and career earnings calculations for retirees - that GERS submitted to the 29th Legislature but which have not been acted upon.

Among these yet-unapproved changes is a scenario that Nibbs used to illustrate one possible solution to the system's woes - increasing employees' contributions to 11.5 percent over three years and employer contributions to 38.5 percent over seven years. That would allow GERS to continue paying pensions until at least 2031, according to the projections Nibbs used Tuesday.

An 11.5 percent employee contribution would be the highest in the United States, with the next-highest being Mississippi at about 9 percent, according to Nibbs.

"We can't really put the burden on the employees that much," he said.

When asked whether government agencies, in turn, would be able to pay the almost 40 percent required to make the scenario work, Nibbs said that remains to be seen.

"If they do, hopefully they don't cut salaries any more or don't cut bodies any more because that's going to hurt us even worse," Nibbs said, alluding to the fact that large-scale pay cuts or layoffs would draw even more money out of the GERS contribution pool. "This is the reality. If you do one thing, it's going to be a domino effect on other things."

The question came up several times Tuesday night, and each time Nibbs urged the meeting attendees to speak with their senators to encourage them to address the system's problems or find new revenue streams.

"If this system goes under, the economy of the Virgin Islands is gone, I'm telling you," Nibbs said. "Could you imagine this system going under? We cannot let this system fail, and that's the reason I'm asking you to speak with your senators to let them know the importance of having changes made to the system. And let them know that you are sacrificing."

- Contact reporter Lou Mattei at 714-9124 or email

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