| Volume 4 Issue 4 |
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Prior
Service Program Gets Much Needed Funding
On, Dec. 6, 2004, the FSM Social Security Administrator,
Alexander R. Narruhn, made a presentation during the President’s
Visit to the Pohnpei State Government and Private Sector. In his presentation,
Mr. Narruhn narrated the history of the Prior Service Program.
When World War II was drawing to an end, Micronesians started to work
for the U.S. Military under very meager salaries with no employee benefits.
These people were often paid as low as 9 cents an hour. After the war
ended, these men and women continued to work for the Department of the
Navy and later the Department of the Interior, which took over as the
administering authority for the Trust Territory of the Pacific Islands.
It was in 1966 when wages increased to 70 cents an hour and insurance
programs were introduced that the idea of establishing a Social Security
program began to attract serious interest.
In 1965, formulation of a social security program began when the Trust
Territory Government contacted the Chief Actuary of the U.S. Social
Security Administration Robert J. Myers to develop a social security
program for the Trust Territory. In 1968, the initial efforts bore fruit
and a social security program was established for the Trust Territory
of the Pacific Islands.
In recognition of the substantial services performed by Micronesians
at very low wages without any rights to retirement, survivor or disability
benefits, provisions were made in the law for a Prior Service Benefit
Program. Micronesians with five or more years of service between September
1, 1944 and the establishment of the region’s own social security
system in 1968 were entitled to a supplemental, albeit small Prior Service
benefit which augments benefits earned after July 1, 1968 under the
new program.
When the first benefits were paid under Prior Service in 1969, funds
were made available by a U.S. Congressional appropriation within the
annual Trust Territory Government Budget. In the early 1980’s,
when the eventual demise of the Trust Territory Government was apparent,
the Trust Territory Social Security Administration approached the U.S.
Congress for future funding of the Prior Service Program after the end
of the trusteeship.
In 1986, the United States Congress acknowledged a commitment on behalf
of the United States Government to fund the Prior Service Benefit Program
after considerable debate and a Congressional hearing. $8 million dollars
was appropriated for the initial capitalization of the Fund in P.L.
99-349. In May 1996, an Actuarial Valuation established an additional
$15.5 million – value of the program. The program experienced
lack of funding during the late 1990’s – funding began to
diminish, and no additional funding was provided by the US Government.
$700,000 was appropriated in 2001, which helped the program to prolong
its existence. In 2002, Prior Service Administration and its Board of
Trustees began to take measures to lengthen the life of the Prior Service
Fund by making a resolution – to pay benefits on an “every
other month basis” while negotiations continued. Later that year,
another $250,000 was received from the Department of the Interior stating
that it will be the last appropriation. As recent as September of this
year, an additional $1.6 million was granted by the Department of the
Interior to:
- Finance all unpaid benefits for CY 2002
- Finance all unpaid benefits for CY 2003
- Continue paying out benefits and related costs through October 2005
- Provide funds related to transition costs associated with the decentralization
of the Prior Service Program.
On November 25, 2004, the FSMSSA received information of another $1
million for payments appropriated by Congress for payments to replace
the Prior Service Trust Fund as proposed by the House. The managers
directed the Department of the Interior to work with the Prior Service
Trust Fund Board of Trustees to reach an agreement no later than October
25, 2005 to replace the Prior Service Trust Fund. Such an agreement
shall provide for:
- The pension systems of FSM, Palau, CNMI and Marshall Islands to
assume responsibility for the enrollees of the Prior Service Benefits
Trust Fund;
- The allocation of potential future US funding, if appropriated;
- A reasonable transition overhead rate;
- Appropriate changes in benefits if any;
- The termination of certification and enrollment of new beneficiaries
by March 31, 2005.
The managers also directed that if no agreement can be reached, this
$1 million in funding should be reprogrammed for general technical assistance
uses.
Taking into account all the recent funding appropriations (excluding
the recent $1 million), benefit payments and Administrative costs, the
Prior Service Trust Fund status as of October 2004 clocked in at $965,000.
Near the end of his presentation, Mr. Narruhn again asked for the government’s
assistance in the lobbying of funding for the Prior Service Program.
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