Senate OKs GERS repayment of withheld contributions
Published: March 4, 2014
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ST. THOMAS - The Senate passed legislation Monday that will allow the Government Employees' Retirement System to return the 8 percent contributions withheld on the 2010 retroactive payment checks issued to some retirees, with 9 percent interest.
The session was called by a petition of senators to consider the single agenda item.
Soon after convening the session, Senate President Shawn-Michael Malone moved the body into Committee of the Whole to take testimony.
Joe Arellano, the attorney representing Government Retirees United for Fairness, testified in favor of the bill - with one item removed.
Arellano asked that senators remove language that would have retirees entitled to the refund elect to seek their money. He wanted the refund to be automatic.
Arellano also asked for the bill to include a 90-day deadline to return the funds to retirees and to pay 9 percent interest on the money for the three-and-a-half years it was held by GERS.
Monday, bill sponsor Sen. Alicia Hansen offered an amendment in the nature of a substitute that included those suggestions, as well as an additional amendment to add the interest.
GERS Administrator Austin Nibbs testified that under the V.I. Code, he is unable to return the withheld contribution. Although he agreed that the money should not have been withheld, he had no mechanism to refund it, he said.
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 the employee's contribution to GERS being withheld.
Nibbs said the total contributions withheld from all the retro checks issued in 2010, for active and retired employees, was $7.1 million.
About 4,618 retirees were issued retro checks, and $1.5 million in employee contributions were withheld, according to Nibbs.
The lowest expected refund is 30 cents, and the highest is $2,581, he said.
The average refund is about $328, Nibbs said.
While Nibbs supported the legislation passed Monday, he did not support the amendment to pay interest on the withheld contribution.
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.
Assessing an interest charge to GERS is unfair, as the retirement system submitted legislation to correct the problem in the 29th Legislature, Nibbs said. He said the measure went through committee and stalled in the Rules and Judiciary Committee.
"I don't think it's the fault of the GERS that this happened," Nibbs said.
The amount of interest is approximately $136,495, according to Nibbs. He said if the senators want that money given to the retirees, they should appropriate the money to pay it.
The legislation was passed mandating the money be returned, with interest, but the language does not specify where that money will come from.
However, senators had several ideas of where GERS could find the money.
They asked about the bank the money has been sitting in. Nibbs said he did not know how much interest the money had earned while sitting in the bank, but it was nowhere near 9 percent.
Senators asked what will happen to the $2.7 million in employer contributions paid by the government on the retirees' retro checks.
Nibbs said GERS planned on keeping it.
Several senators suggested the interest payment could come from the government's contribution on the retro payments.
The measure was passed unanimously, with only Sen. Clarence Payne III absent from the session.
- Contact reporter Aldeth Lewin at 714-9111 or email email@example.com.