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Retirement Fund Cost of Living freeze remains in effect

Rendering of the proposed new Fono Building. [SN file photo]
Fund is not an ASG lending institution, say faipule

The ASG Employees' Retirement Fund (ASGERF) is still freezing the Cost of Living Adjustments (COLA) for retirees, until the funded status improves to at least 60 percent. The actuary report presented at the February meeting in Honolulu showed that the funded status of the Retirement Fund was 46%.

This is according to Retirement Fund Board Chairman, Va’anatiu Iafeta Tofala and executive director of the ASGERF, I’aulualo Talia Fa’afetai, during a hearing on Tuesday before the House Retirement Committee, chaired by Vailoata Eteuati Amituana’i.

The hearing was called after Tualauta Rep. Samuel Ioka Ale Meleisea told House members that a lot of retirees from his district are asking why the ASGERF is still freezing the COLA, while the cost of living is high. Meleisea said the retirement fund is not only for ASG employees who are still serving in the government, but also for those who have retired.

“The retirees deserve to have the COLA, and I think that is the reason why they are so desperate to know why the Board is still freezing the benefit they deserve,” Maleisea said.

Va’anatiu told the committee that last year, government and employee contributions to the Fund fell short of benefit payments to members. Reports from the Retirement Fund presented to the Fono earlier this year, show that contributions for FY2016 totaled $11,061,000 but benefit payments totaled $24.1 million.

This means for every dollar that was paid out, the Fund had only 46-cents to cover it. The balance came from the investment returns.

I’aulualo echoed Va’anatiu’s testimony and said there are options that have been set to make sure the value of the retirement fund increases every year; and if that happens, and the funded status climbs up to 60% or more, there is a good chance the retirees will have the COLA.

According to I’aulualo, one of the options to increase the value of the funded status is to hike contributions from both employees and employers, if the Fono passes the Board’s proposal.

Another Tualauta faipule, Rep. Vui Florence Saulo thanked Va’anatiu and I’aulualo for trying their best to protect the fund, and implementing every aspect to increase the value of the Fund for ASG employees who are working hard to serve the government and the people.

“You’re doing a great job for everyone, but one of the concerns from my constituents — and also the community — is the opportunity the Retirement Fund has given to some government agencies to draw loans from the Fund.

“We received reports that ASTCA is asking for a second loan, but the Fund is not in a situation where it can afford any more loans at this time. If you accept ASTCA’s application for a second loan, I know for sure they will come back and ask for another loan again,” Vui said.

Va’anatiu thanked Vui and members of the committee for their concerns, and the effort they put into ensuring that the retirement fund is well secured for the future of all ASG employees. He told the committee that one of the Board’s duties is not only to make sure the fund is fully secured, but also to find ways to invest for the purpose of increasing the Fund's value every year.

He added that the law allows the ASGERF to invest 10% of the total fund locally — for the purpose of increasing its value.

“We believe that accepting ASTCA’s first loan application was the right thing to do — not only to invest but also to assist them during their financial need. Although the Board has not acted on ASTCA’s second loan application, we believe that accepting that application will also be a right decision to make. We have to take into consideration the impact to the employees and also the government — if something happens to ASTCA,” Va’anatiu said.

I’aulualo took the committee back to 2008 when the ASGERF suffered a huge loss of $44 million from its international fund. Because of that incident, the Board accepted the recommendation to move the $38 million from the international fund into the ASGERF local fund, to avoid any future loss to the Fund.

I’aulualo told the committee that the government has a perfect record when it comes to loans. Not only do they make their payments on time, they also pay the 8% interest in full.

“The Board believes that investing the fund locally is more secure than investing in the overseas market. We don’t want to duplicate the problem that affected our Fund almost 10 years ago,” I’aulualo said.

He added that the Board would never act on a decision such as the COLA, unless they consult with the Fund’s investment consultant in the US for their input.

Rep. Sataua Dr. Mataese Samuelu wanted to know if the 8% loan interest would help increase the value of the Fund. He said if it does, then ASGERF will have enough to cover the COLA for retirees.

I’aulualo responded affirmatively — that the 8% loan interest is another way to increase the Fund’s value.

Of the recommendation to increase contributions from the members — from the current 11% to 15% or 16%, Vice Speaker Fetui Fetu Jr. said the last recommendation he heard after the meeting in Honolulu with the Fund’s actual consultant, was to raise the employees' contribution from 3% to 5% while ASG contributes 11%.

“The Board needs to remind employees that the increase in contributions to the Fund is their own money, their own savings in the Fund. It’s very difficult for local residents to save about 2% of their paycheck every pay period; but in this case, the employee is saving this money for the future when they retire,” Fetui said.

Va’anatiu said the Board has already sent their proposal to Governor Lolo M. Moliga for his review, and they’re still waiting for a response.

Although the Board believes that investing the Fund locally is a good way to increase the Fund's value, representatives believe that the main purpose the retirement fund was established is for government employees when they get retire — not as a lending institute for the government.