GOV. Eddie “Pepsi” Calvo has released his spending cuts bill, aka the Omnibus Fiscal Reform Act of 2012, and it must be said – the GREED of those quarterbacking Pepsi's proposed raid on the Fund is disgusting.
Employees would be allowed to buy up to five years of service credit, regardless of how close they are to serving the number of years required for them to retire "on years." It would allow an employee, say, only three months away from serving the 30 years required for him or her to qualify for full retirement, to buy an additional five years – even though he or she is just three months from qualifying for full retirement. As a result, the retirement pay of such an employee would be augmented by an additional five years service, bringing an employee close to "maxing out" at 36 years, at 85 percent of his "top three years."
This calls into question the true purpose of those backing this bill, which the governor has touted as allowing early retirement to reduce payroll costs. The absence of a limitation on the number of years allowed to be purchased – to that required to attain full retirement – suggests that the true purpose of this bill has become augmenting the retirement of those who would retire regardless of this bill, AND that drafting of this bill has been hijacked by the coterie of employees that would be benefited by it.
Noteworthy is the fact that no such "incentive" is offered those who are close to retiring "on age."
Of course this bill would be disastrous for the Retirement Fund. Those buying additional years are not required to pay upfront the cost of the augmented benefits garnered by the additional years of service. Instead, they would only be required to sign a promissory note, by which they could pay the cost of their additional benefits over five years. Likewise, no provision is made in the bill for the government to pay the Retirement Fund upfront its share of the cost of the augmented benefits. However, those buying additional benefits would see their benefits augmented by the additional years immediately upon retirement, even though the cost of the retiree's share of the additional benefits would not be paid off for five years, and the government's unpaid share added to the unfunded liability and shoved off into the indefinite future.
The last "early out retirement incentive" in 1999 increased the Government of Guam Retirement Fund’s unfunded liability by $100 million. This was because early retirees were not required, nor was the government required, to pay the additional costs of these augmented benefits BEFORE the early retiree started receiving them.
The latest Government of Guam Retirement Fund actuarial study, the report dated Sept. 30, 2011, found that 43.49 percent of the Fund’s obligations were funded, down from 54.01 percent on Sept. 30, 2007. This compares unfavorably to the lowest ratio of assets to liabilities of any state, Rhode Island, at 49 percent.
Retirees watch out – Pepsi is screwing with your retirement.
Guam and Philippines