Guam - As we reported earlier this week, the Government of Guam Retirement Fund submitted a report analyzing the feasibility of Retirement Fund reforms. The report included an actuarial analyses of early retirement incentive programs, issuance of a pension bond, and other retirement reforms.

The agency worked with its actuary, financial advisors, and legal counsel to determine the impact of the options for retirement reforms. Director Paula Blas stresses that the Fund submitted the report in order to comply with the law and does not take any position on any of the reforms. Vice speaker b.j. Cruz finds this to be baffling, as the Fund was reportedly the one who approached the Guam Legislature three to four years ago.

"That said the direct contribution plan was going to be to the detriment of all the DC employees and they were the ones that wrote the legislation for the hybrid plan and gave it to a senator to introduce in the last legislature, why they are now saying they are not taking a position escapes me because they were the ones pushing it," he said.

The analysis of the ERIP looked at 600 active employees providing two options one where a person can retire with 22 or 27 years of service without penalty and the second, which would allow a person to buy three years to give them the full 25 or 30 years of service needed for retirement. These are options only if contributions from employee and employer are paid in full. The last time an incentive program was administered was in 2000. 900 employees took advantage of the incentive; the cost to the government and the employees according to Blas were extremely high, since employees had to enter into a promissory agreement for a term of up to 15 years - basically receiving the benefit without paying for it.

The report also analyzed the issuance of a pension bond and how it would decrease the unfunded liability of the Retirement Fund, looking at three different bond amounts. $200 million, $300 million, and $500 million, each affecting the contribution rate, the employers share to the Fund.

The proceeds from the pension bond would be an infusion of assets or cash into the Fund, which means the unfunded liability would go down.  "The portion rate would also go down and the security ratio of the fund which means the total liabilities minus the assets we have would actually put the fund in a better position of security," Blas said.

The report lastly looked at other retirement reforms, one being the increase of benefits in the db plan to determine what their annuity amount would be based on the three highest salaries throughout their career be increased from 3 years to 5 years, which would decrease the contribution rate by 0.69%, or $3.2 million.