While ASG’s overall financial rating has improved significantly compared to previous years, the “unfunded liability” amount of the ASG Employees Retirement Fund negatively impacts the government’s financial performance as well as U.S. Department of Interior’s funding level, said Gov. Lolo Matalasi Moliga in a letter yesterday to the Retirement Fund board chairman Fanene Morris Scanlan.

The letter, which didn’t specify the current ‘unfunded liability’ amount, followed a meeting yesterday between the governor and the board. It’s also — for the record — the mandates that the governor expects to see addressed.

In the letter, the governor acknowledged that while the ASG pension plan is ranked high with regards to “growth and solvency”, he said, “We face major challenges as more people with high salaries retire, market yield is not as lucrative as in the past and the continuing proliferation in the size of our unfunded liability.”

(As Samoa News reported early this year, ASGERF’s audited financial statements for fiscal year ending 2013, show the Fund’s net position was $210,906,897 [or $210.90 million], a net growth of over $10 million — $10,765,686 specifically — from FY 2012. It also states that the unfunded liability as of 2013 is $52.50 million - up from $48.46 million in 2012.)

According to the governor, the DOI has required that the financial statements of the Retirement Fund be made part of the ASG’s Financial Status thus impacting the ability of government relating to continuing its efforts to improve the integrity of its financial systems.

He also says that DOI representatives, who were on island last month, presented a report about ASG’s financial performance, and shared their concerns over the unfunded liability.

“...while our overall rating improved significantly from previous years, the growing unfunded liability amount negatively impacted our financial performance and it impacts our level of funding from DOI,” Lolo said, adding that this situation is “of great concern” to him and poses a “tremendous challenge” to the board.

The governor then provided for the board his mandate, which he hopes will be used to guide them in their actions to address the challenges that are facing the Retirement Fund.

UNFUNDED LIABILITY

Lolo says it's obvious that the size of the unfunded liability will continue to escalate if steps are not taken to mitigate this “potentially crippling issue to our government’s finances” and asked that the board recommend “options and alternatives we should adopt to mitigate this issue, with sensitivity to our government finances and promoting economic development”.

FUND SPENDING

According to the governor, a comparative analysis was conducted — comparing Retirement Funds of comparable size for states and territories — and this has revealed that “we have the highest operational spending rate among all of these funds”.

Lolo hopes that the board will practice due diligence in reducing this cost, given its impact on the size of the unfunded liability.

While Lolo didn’t provide in his letter any figures pertaining to operational spending, the ASGERF’s FY 2013 audit statement shows that the “general and administrative expenses” totaled $1.50 million compared to $1.22 million in FY 2012.

PRIVATE SECTOR

Lolo said private sector overtures have been made to him for eligibility in the Retirement Fund as an incentive to encourage mitigation of human resources from ASG to the private sector. He requested the board to address this issue and “provide your opinion on this matter.”

PERIODIC MEETINGS

“It would be a healthy practice to orchestrate periodic meetings for purposes of discussing potential policy issues emanating from changing global economic conditions or the financial status of our government,” said Lolo, who recommended the board hold a meeting every quarter.

OTHER MANDATES

Lolo would also like an audit conducted of the Fund that is separate from whatever audit has been done already, and he wants a copy of that audit once it is completed.

He also “strongly recommends” a public forum be conducted allowing fund members to hear from the board on the status of the Retirement Fund.

BACKGROUND

The ‘unfunded liability’ amount of the ASG Retirement Fund, in simple terms, means if everyone retired today and wanted their pension, the retirement fund wouldn’t have enough money to cover everything.