Ads by Google Ads by Google

Senate looks to amend admin’s Retirement Fund contributions bill

Retirement Office executive director I’aulualo Fa’afetai Talia and Retirement Fund Board of Trustees chairman, Va’anatiu T. Iafeta
Sens. Magalei and Tuaolo agree that ASG should shoulder some of the burden
fili@samoanews.com

Pago Pago, AMERICAN SAMOA — Following yesterday’s hearing, the Senate Retirement Committee is looking at making its own changes to an Administration bill, which seeks to amend current ASG Employees' Retirement Fund law.

There are three major amendments outlined in the bill, which were the subject of yesterday’s hearing, where Retirement Office executive director I’aulualo Fa’afetai Talia and board chairman, Va’anatiu T. Iafeta testified.

MEMBERS’ CONTRIBUTION

Current law has a contribution rate of 11% (3% by employers and 8% by ASG) to the Retirement Fund.

Under the Administration’s bill, ASG’s contribution rate remains the same, while employee rates will increase — effective Jan. 1, 2020 to 4.5%; 6% by Jan 1, 2021 and a final increase of 7.5% effective Jan. 1, 2022.

Va’anatiu said the Board supports the proposed changes, and he reminded senators that an increase in the contribution rate was also discussed during the Fund’s Honolulu meeting in February this year.

I’aulualo said the recommendation sent to the Administration was an increase of 15%- 16% in contributions, but how that percentage is divided between the employer/ employee is up to the Administration.

While supportive of the proposed change, Sen. Magalei Logovi’i said he has several concerns. And one of them is whether the proposed increase in the contribution, effective next year, includes the current 3% because it's not made clear in the bill.

According to the bill, effective Jan. 1, 2020, the contribution by employees is 4.5%. He questioned whether the 4.5% is added to the current 3% or is it 1.5% added to the current 3%

Another concern from Magalei is that the employee will carry the heavy burden of the proposed increases over the next three years. For example, come 2021, if the bill is enacted into law, 6% will be paid by the employee, who will also still have to pay the 2% wage tax — totaling 8%.

“Eight percent is a lot of money,” he said, adding that in 2022, contribution rate will be 7.5% — and add on the 2% wage tax — "that’s a lot, and doesn’t include the employee paying FICA and other required taxes.'

According to the Tualauta senator, it’s the government that always borrows from the Fund, not employees. He said ASG should have a share in the contribution hike instead of workers carrying the burden by themselves.

Magalei made clear that he supports the increase, but not the employees taking on all of it.

Committee chairman, Sen. Tuaolo Manaia Fruean, who is also the Retirement Fund Board vice chairman, agreed saying he believes the government’s contribution should be higher than the employees. He said the ratio should be two-to-one, with the government's percentage, higher.

In the end, the committee opted to plan another hearing soon to get more information from the Administration. There was talk amongst the senators of possible amendments to any final language of the bill.

RETIREMENT PAYMENTS

The second major amendment in the bill states that $85,000 will be the maximum salary used in calculations to determine retirement payments.

Va’anatiu told senators that the Board doesn’t support placing a cap on salary levels. He said the Board has researched the issue and doesn’t support it for reasons, which he didn’t specify, but said he can give details at a later time.

Magalei, a former Retirement board member, said he too doesn’t support this amendment. He said capping the amount through the law, takes away the authority vested with the Retirement Board, to set policies for the Fund. He believes such issue can be set by policy with the Board working with the employee.

He explained that an employee with an annual salary of $100,000 pays into the Fund based on that salary level. But upon retirement, the retirement payment is capped at $85,000.

“So, what happens to the rest of the money that was deducted under the salary of $100,000? Nothing?” he asked.

According to the bill’s preamble, capping at $85,000 will help a greater number of retirees by ensuring more money is available for retirement payments.

ASTCA BUDGET REQUIREMENTS AND PROFITS

The bill would also create a new section under current law, titled: “American Samoa TeleCommunications Authority (ASTCA) budget requirements and appropriation of profits”.

It allocates a 100% of ASTCA’s profits for specific use. (See story for details in Samoa News Mar. 26, 2019 issue.)

Va’anatiu said the Retirement Board has no knowledge of this provision of the bill and informed senators that the Fund has a firm agreement with ASTCA and that is the only issue pertaining to ASTCA they are aware of — nothing pertaining to the bill.

Magalei, a former ASTCA board member, also voiced his disagreement with this provision, which he says severely restricts the ASTCA Board from making necessary improvements to its infrastructure in a highly competitive telecom industry.

GOVERNOR’S HEALTH

Before the hearing ended, Tuaolo asked I’aulualo for an update on Gov. Lolo Matalasi Moliga’s health, since I’aulualo recently returned on island after visiting the governor at a Seattle hospital.

I’aulualo said he and Lolo had spoken, and the governor is doing well.