Aiming to keep the Government Employee Retirement System from projected insolvency in just seven years, the GERS board voted during its regular monthly meeting Thursday to increase some less senior employee’s pension contributions.
Since at least the late 1990s, every GERS administrator has urgently warned the V.I. Legislature that unfunded legislative mandates and early retirement incentives, combined with inadequate contribution rates for the pension levels, were bankrupting the system. Eleven years ago, in 2003, then-GERS Administrator Laurence Bryan warned the Legislature the pension plan would be broke by 2023. Some reforms were enacted in 2005 but not fully implemented at the time. Those reforms created two tiers of government employees: benefits and contributions were not touched for existing employees in Tier I. But there were changes to the contributions and benefits for employees hired after the reforms, categorized as Tier II.
Those reforms were not sufficient and a federal audit urged the territory to enact major increases to contributions combined with benefit cuts, saying the system would be bankrupt in about a decade.
In 2014, GERS Administrator Austin Nibbs testified to the Legislature that if nothing is done, the system will have sold off all its assets and be unable to meet retiree pension payments by 2022, which is seven years away.
In Thursday’s meeting, the board approved increasing the Tier II employer contributions from 17.5 percent to 20.5 percent. It approved increasing Tier II employee contributions from 8.5 to 9.5 percent, with additional 1 percent increases on Jan. 1, 2016 and Jan. 1, 2017, according to GERS.
Members participating in the early retirement program for hazardous duty employees will see employee contributions increase from 10.625 percent to 11.625 percent, with an additional 1 percent increase in 2016 and again in 2017.
Legislators’ employee contributions will increase from 11 percent to 14 percent.
Judiciary employees will now contribute 14 percent. The new rates are effective Feb. 5.
The board increased contributions to Tier I in November, with employee contributions going up 1 percent annually for three years, and employer contributions by 3 percent annually for five years. (See Related Links below.) Changes to the Tier II benefits required legislative action first and the Legislature acted in December.
The Tier I employee/employer rates increase became effective Jan. 1. But due to a technical issue at the Division of Personnel, the increased contribution amount was not deducted for the two pay periods in January. Those deductions will be taken out of paychecks on Feb. 5.
The trustees also voted to establish the annuity rate of the current members of the judiciary to 5 percent of compensation per year after one term; and set the annuity rate of members of the judiciary appointed after Jan. 22, 2015 at 3.5 percent of compensation per year after one term.
In other actions, the board elected Wilbur Callender chairman and Edgar Ross vice chairman.