CSPP proposes to increase contribution to 20%

By: L.N. Reklai

February 14, 2017 (Koror, Palau) Palau’s Civil Service Pension Plan 2015 audit shows over $250 million of unfunded liability projected into the future based on a 2015 actual study, according to report presented by CSPP to the leadership at yesterday’s meeting.


Among the proposed solutions to resolve the growing unfunded liability, is to increase employer and employee contribution to Pension Plan.  Currently the contribution is 12% with an employer paying 6% and an employee paying 6%.  The proposal is to increase the contribution to 20% with employer contributing 10% and employee contributing 10%.

The proposal seeks gradual increase from 2% in the first year and thereafter, the increase will be .05% until it reaches 20%.

Additional proposals include liquidating CSPP WCTC shares by selling them off to the public and raising money for the Plan, raising the retirement age to 63 and move from Defined Benefit model to Defined Contribution model.

These proposals were presented at the national leadership meeting yesterday.

Currently, CSPP received $6.3 million in contribution annually and pay out $9.1 million in benefits resulting in a $2.7 million shortfall.

If the Plan continues at the same level, by 2023, the investment value of CSPP Trust Fund of $27 million will drop to $9 million.  Each year, CSPP has been forced to drawdown from the fund to cover the shortfall.

9th government passed laws to fund the Plan, such as Remittance Tax  and Environmental Impact Fee (EIF) from the Marine Sanctuary Act.  Proposals to postpone implementation of EIF have been made due to expected tourism downturn this 2017 and despite $27,000 monthly income from Remittance Tax, the Plan still falls short of each monthly pay outs.

President Remengesau assured the CSPP Board that this remains a priority of his administration. Some members of the leadership advocates adopting the casino bill to fund CSPP.

Civil Service Pension Plan is a government pension plan covering all government employees, national, States and semi-autonomous agencies of the government..  [/restrict]