Lawmakers Say GERS Can’t Make Policy Affecting Benefits Without Senate OK

Sen. Kurt Vialet, chairman of the 32nd Legislature’s Committee on Finance (File photo).
Sen. Kurt Vialet, chairman of the 32nd Legislature’s Committee on Finance (File photo).

A Senate committee on Wednesday approved a bill that would clearly prohibit the Government Employees Retirement System board from making policy that would affect retiree benefits without first getting the green light from lawmakers, something GERS said it wasn’t planning to do.

“It has to do with the fact that there were proposals in being able to salvage GERS that included reducing pension benefits,” said Sen. Kurt Vialet (D-STX). “This bills says that before any reduction or any change is made to an annuity, that it must first receive the approval of the Legislature.”

The Senate Finance Committee approved Bill No. 32-0238, sponsored by St. Thomas Democrats Dwayne Degraff and Myron Jackson, which requires the GERS board to bring any new policy to the Legislature if such policy would impact the benefits of current retirees. It also mandates that any increase in employee contribution rates or reduction in benefits can only apply to new members of the pension system.

Voting in favor of the bill were Sens. Marvin Blyden (D-STT), Nellie Rivera-O’Reilly (D-STX), Tregenza Roach (I-STT), Neville James (D-STX) and Vialet.

GERS Administrator Austin Nibbs told lawmakers that GERS is neither in support of nor opposition to the legislation, saying the system has no authority to implement any policy impacting member benefits in the first place. Nibbs pointed to the GERS board’s rejection of an actuarial recommendation to reduce Tier 1 benefits by 30 percent and increase Tier 2 contributions. The actuary projected that the strategy would extend the pension system’s solvency until 2042, but the board rejected it because it had no authority to make such adjustments unless expressly authorized by the V.I. Code.

“Additionally, the board considers members’ benefits to be a contract between the government of the Virgin Islands and the member,” said Nibbs. “Under the Organic Act, the contract cannot be impaired, and therefore, the GERS does not have the authority or will never seek authority to reduce members’ benefits.”

Nibbs added that the GERS cannot quantify any economic impact the bill would have because it did not ask its actuary to perform an analysis, again saying the system already lacks legal authority to do what the bill prohibits.

The Legislature did give GERS the ability, albeit very limited, to increase employer and employee contributions at a rate of three percent every five years. This is not nearly enough to bridge the discrepancy between collections and payouts, Nibbs said. The GERS’ monthly retiree payroll stands at $20.5 million, with only $10 million in employer and employee contributions monthly.

The power to make significant changes to employer and employee contributions lies with the Senate, said Nibbs, since GERS has no access to revenue projections and other financial information that is available to the Virgin Islands government.

The past two years also saw the exodus of some 1,000 active employees making contributions to the system. Between January and November 2018, the agency received 614 refund applications from non-vested members, with 405 refunds paid out totaling $6.5 million.

Without a significant infusion of cash into the system, Nibbs said, by 2023 the Virgin Islands government and its employees could end up shouldering the $136 million annual retiree payout and administrative expenses.

Phyllis Nielsen of the St. Croix Retirees Inc. seemed to agree with this course of action over reducing retiree benefits.

“When and if the time comes when there is no other alternative than to reduce benefits to retirees, the V.I. government as the plan sponsor of the retirement system should by law subsidize the legally awarded benefit annuity for each retiree,” Nielsen said.

Nielsen also took up former gubernatorial candidate Warren Mosler’s call for directing retiree check taxes to GERS instead of the central government.

Helen Hart of Government Retirees United for Fairness, Inc., or GRUFF, expressed concerns about a section of the bill that states any increase in employee contributions or reduction in benefits must be applied only to employees who enter the system after the bill is enacted. Hart said this raises questions of which employees would be protected from any such changes, and if GERS would create another tier of employees.

The committee also approved the following:

– A lease agreement between the V.I. government and Grantley Samuel for Plot No. 4-RB VICORP LAND, Prince Quarter St. Croix, an approximately 5.437 acres of land to be used primarily for farming.

– A lease agreement between the V.I. government and Philippe Philbert for Plot No. 9-R and 9-S VICORP Land, Prince Quarter, St. Croix, approximately 19 acres of land for farming purposes.

– A lease agreement between the V.I. government and Louis Orta for Plot No. 9-C VICORP LAND, Prince Quarter, St. Croix, approximately 15 acres of land, also for farming purposes.

– A lease agreement between the V.I. government and Andrea and Claritta Montoute for Plot No. 4-SA VICORP LAND, Prince Quarter, St. Croix, approximately 3 acres of land, also for farming purposes.