FSMSSA Participates in Micronesian Leadership Conference

On September 8, 2009, FSMSS Administrator Alexander R. Narruhn made a presentation at the Micronesian Legislative Conference in Palikir, Pohnpei. The conference was attended by members of the FSM Congress and members from the legislatures of the four states including the Chuuk State Senate. Administrator Narruhn gave an introductory remark and Claim Officer Francky Ilai took over with a presentation detailing Public Law 15-73.
Ilai presented the challenges facing the program that necessitated the amendments. They were: 1) Benefit payments had surpassed tax collections.

2) Downsizing and abolishment of salary increases in the government since 1997 along with the closing down of several major businesses in the FSM have had a negative impact on tax collections. 3) Rising delinquency: despite the collection of $3.8 million in calendar year 2008, $4.461 million in delinquent taxes from the private sector and a number of municipal governments remained. 4) Social security began in 1968 and 2008 marks its 40th Anniversary. Every person who started contributing into the program at its beginning have already reached or surpassed retirement age. When the program began, there were no beneficiaries. All participants were contributors. The program started paying for benefits two years after and the number of beneficiaries has been growing ever since. The program has aged and as a result, more people are receiving benefits today. 5) The disparity between what an individual contributed to the system through taxes and what an individual received from the program in benefits was substantial. 6) The program’s funded status was too low at 14% with an unfunded accrued liability of $232 million.
The FSMSSA had been drawing down funds from its Trust Fund to cover the shortfalls between collections and payments and coupled with the market crash, the FSMSSA’s investment portfolio went from $43.4 million at the end of 2007 to $33.86 as of the end of 2008. It was noted that as of July 31, 2009, the portfolio’s value was at $35.8 million. All these factors necessitated the FSMSSA to propose the bill to ensure the viability of the program.
The administrator took over and presented to the gathered leaders projections of the program. Actuarial studies indicated that the program would need outside funding as of 2014 without the new law even if congress gave the FSMSSA $2 million every year. With the new law, the FSMSSA’s actuary projected that with congress subsidizing the program with $2 million injections each year, the program would last for at least twenty more years. After the presentation, the administrator entertained questions from the gathered leaders. There seemed to be the impression that the national government had money to fund the program’s shortfalls without resorting to changing the law. Senator Joseph J. Urusemal revealed that the national government did not have the money to fund the program which was the reason why congress passed the new law. To illustrate his point, Urusemal revealed that the special election to fill the at-large seat left vacant by Resio S. Moses was delayed due to there being no money to facilitate it although only $60 thousand had been needed.
Senator Magdalena Walter of Pohnpei moved the discussion to the FSMSSA’s administrative costs. She felt that the annual budget for the program was too great. Furthermore, she indicated that a fixed budget should be used instead of one that depended on the collections of the previous year. Narruhn acknowledged Walter’s concerns and assured her that all steps were being taken by the FSMSSA to ensure that the costs were controlled at an acceptable amount. Narruhn asked the gathered leaders to assist the FSMSSA by providing lots for the branch offices and the headquarters. He said this would help lessen administrative costs by effectively removing lease and rental fees. The administration paid $61,763 each year in rental and lease charges for the five office spaces. Narruhn also revealed that communications had been sent to the previous administrations for a space for headquarters to no avail. Senator Berny Martin of Pohnpei assured the administrator that this issue would be visited upon by the Pohnpei State Legislature. Senator Ausen Lambert brought up the possibility of having subaccounts within the system so that each state only paid benefits out of their collections. Narruhn said that although this was possible, it would be a massive undertaking that must take into account a number of factors that must be studied before any definite and suitable action would be taken. Narruhn said he would look into this issue.
Further discussions were had concerning the possibility of delaying or repealing certain sections of the new law. The administrator reiterated his support for the new law as a means of ensuring the program’s ability to provide for current beneficiaries and also for the future. However, Narruhn said that the administration would support any decisions made by the gathered leaders in ensuring the viability of the program.
“We can only recommend the proposed bill and implement it. The decision remains with the leadership of the Federation,” explained Narruhn in closing. The leaders gathered for the conference agreed to delay the effective date of the tax rate increase and the new retirement provision by one year.

Posted on 01/14/2010.

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