Overview:
A proposed 30% cut in Social Security benefits for Palauan retirees living overseas drew strong criticism at a Senate public hearing on legislation that would also increase contributions, raise retirement ages and reduce pension payouts. Retirees and business owners questioned the impact of the proposed changes.
By Elilai Rengiil
KOROR, Palau (Oct. 29, 2026) The proposal to cut Social Security benefits by 30% for all retirees residing outside Palau drew criticism at a Senate public hearing on legislation that would also raise contributions and revise retirement benefits.
The Senate Judiciary and Governmental Affairs (JGA) and Ways and Means committees held the hearing at the OEK satellite building last Thursday, October 29, to explain proposed Senate Bill 12-80, which would affect Social Security and the Civil Service Pension Plan, and gather public feedback.
“It is important for us to receive the community’s input so the Senate can make an informed decision,” JGA Committee Chairman Senator Siegfried Nakamura said.
Ways and Means Committee Chairman Senator Mark Rudimch added, “The hearing is part of efforts to increase public participation in the legislative process, we encourage public recommendations to the Senate.”
Attendees challenged the proposed overseas benefit cut, questioning why payments should depend on where retirees live.
“The Compact of Free Association and our constitution enable us to travel outside of Palau, and now you are reducing our benefits by 30%, for what?” one attendee asked. “It is my decision to make… if my family cannot live here in Palau and I choose to live in the United States, who are you to tell me I am not entitled to all the benefits I am supposed to receive?”
Another retiree asked whether the cut would affect current or future retirees and raised concerns about those who stay overseas to help family members.
“Some of us, as mothers, visit our children when they give birth and live there until they are well enough,” the retiree said. “Benefits should not be reduced, expenses in the US are more than in Palau and in Palau at least we can eat fish and tapioca.”
Senator Rukebai Inabo said the proposal sought to address differences in how benefits are adjusted for retirees who work.
“We are trying to make it equitable,” she said.
Inabo said Social Security applies an earnings test to retirees working in Palau but lacks earnings records needed to make the same benefit adjustments for those working in the United States.
Figures presented at the hearing showed both programs facing substantial unfunded liabilities.
The Civil Service Pension Plan has at least $200 million in unfunded liabilities and about $24 million in assets. Annual shortfalls of $3 million to $4 million require withdrawals from those assets.
Proposed pension changes include raising employer contributions from 6% to 7% and introducing retirement-age tiers to defer benefit payments.
The bill sets the normal retirement age by birth year:
- 60 for those born on or before Dec. 31, 1967
- 61 for those born in 1968 or 1969
- 62 for those born in 1970 or 1971
- 63 for those born in 1972 or 1973
- 64 for those born in 1974 or 1975
- 65 for those born on or after Jan. 1, 1976
Early retirement would remain available, but benefits would be permanently reduced at fixed rates. Reduction rates have yet to be set, awaiting actuarial study before determination.
The bill would also lower the multiplier used to calculate pension benefits from 2% to 1.75%, reducing all payments calculated under the new formula. This reduces the amount of the pension benefit paid overall.
Social Security has about $94 million in assets and $200 million in unfunded liabilities. The bill would raise contributions to 8% for employers and 8% for employees. It would also change survivorship benefits so that a person entitled to two Social Security benefits would receive only the larger payment.
Attendees questioned the effects of an aging population and noncommunicable diseases on people’s ability to work beyond 60. Some suggested retirement-age tiers of 55 to 60 instead of 60 to 65. One attendee who retired at 60 said retirement should remain at that age.
Nakamura asked working attendees whether they supported a one-percentage-point contribution increase. Some indicated support; others raised concerns about costs to businesses.
In a separate interview, a small business owner said higher Social Security employer contributions would put further pressure on businesses already facing rising costs for goods.
“Even just now, with the cost of goods continuing to increase, how would we survive with this increase as well?” the owner said.
The small business owner also proposed allowing private-sector employers and employees to join the Civil Service Pension Plan voluntarily.
Senate Bill 12-80 passed its first reading on September 8, 2026. Senators attending the public hearing included Senate President Hokkons Baules, Floor Leader Kerai Mariur, Siegfried Nakamura, Mark Rudimch, Rukebai Inabo, Ann Pedro, Topps Sungino, Andrew Tabelual, and TJ Remengesau.