By: Olkeriil Ngirudelsang
Financial expense for government employees could rise or benefits to retirees reduced if government does not subsidize the Civil Service Pension Plan program (CSPP).
FY 2022 proposed budget did not include any subsidies for Pension Plan and in a letter to OEK (congress), CSPP Board Vice Chairman Mario Katosang requested government for subsidies. He said that without government subsidy, employees’ contribution will be raised from 6% to 10% with government as an employer matching that percentage.
According to CSPP administration Elliott Udui, “Pension Plan pays out about 850,000 every month to retirees which is 10.2 million dollars a year”. “While contributions collected every year depending on the number of government employees at the time amounts to 7 to 8 million a year; therefore, we are short of 3 million dollars,” he further shared. Remittance tax is also given to Pension plan by law but that is not enough as it only runs about $400,000 a year.
That 3 million short-fall, when not subsidized by government is compensated by withdrawing from Pension Plan’s investments in the money market. To date, Pension plan only has 33.2 million dollars invested. Udui shared that “Aside from the investments getting less with every withdrawal; if Pension Plan is terminated at this time, it’s current value is only able to pay out 13% of its’ contributors money”.
At last Wednesday’s press conference, President Whipps said that the government does not have the money to pay for subsidy. He added that “there are two ways to solve this problem, one way is to demand the government to increase its contribution, the other way is to cut benefits”. Whipps also stated that if the government increases its contribution to 10%, “that is about 4 million dollars a year, that is what it amounts to”.
According to administrator Udui, CSPP had surplus in its early days. However, in 1999 when the 30-year service regulation was introduced and government employees who had worked for 30 years before reaching 60 could retire and begin collecting pension plan financial assistance; that was when the damage occurred and the contributions collected fell 3 million short of what is paid out to retirees.
Last year during Remengesau’s administration, the government subsidized Pension plan with 3 million dollars resulting in Pension Plan not having to raise the percentage of contributions, cut benefits or withdraw from its investments.
Today July 27, CSPP is expected to have a meeting with President Whipps. The public is anxious to know if government workers will have to increase their contributions or the senior citizen recipients will have their monthly income cut.