ASGERF investment income continues to dip

On March 26, 2018, the CEO of the Retirement Fund, Iaulualo Talia Faafetai testified before the House Retirement Committee that the Fund had to draw down $1.5 million from its investment account or trust fund to make up for the monthly deficit between contributions and benefit payouts for retirees.

The details of the shortfall are much more alarming.

According to  the Actuarial Valuation, the Fund received a total of $25,950,116 but disbursed all but $45,881 or $25,904,235.

Inflows included contributions by the government and its employees totaling $11,061,431 and net investment income of $14,888,685.

The Fund paid out pensions and death benefits of $21,852,378 and $292,013 respectively.

General and administrative cost were 6.66% of expenses or $1,724,887.

By comparison, the US Social Security Administration’s general and administrative expenses is just 3.28%.

As of September 30, 2016, the Retirement Fund had assets of $186,327,821.

In January of this year, the Retirement Fund Board approved a $20,000,000 investment in Hawaiki Cable or 10.7% of the Fund.

Industry experts say that if the cable performs consistently with other submarine cables, it will not turn a profit for five to seven years and will not be able to issue a dividend during this period.

As a result of taking $20 million out of the investment pool, the Fund’s investment income is projected to be reduced by almost $1.6 million.

The loss of investment income is also expected to continue until the Hawaiki Cable begins paying a dividend.

It’s predicted that the immediate effect of the Hawaiki investment is that the Fiscal Year 2016 profit of a little over $46,000 will turn into a loss of almost $1.6 million.

KHJ News has been told that the Fund may have no alternative but to liquidate assets to pay pensions and thus hasten its decline.

Section 7.1401a of the American Samoa Code Annotated states:“The purpose of the Government Retirement Fund shall be to provide retirement annuities for the employees of the government who become aged, thereby enabling the employees to accumulate reserves for themselves in order to meet, without prejudice or hardship, the hazards of old age upon termination of their government service.

“It is the further objective of this fund to act as a strong incentive in attracting qualified personnel to enter and remain in government service to the end that their talents may be utilized for the sake of achieving greater economy and efficiency in the administration of the government.”

Some have suggested that the ownership and management of a submarine cable company clearly falls outside this legal mandate.

Additionally, the Retirement Fund sole sourced the management of the cable to ASTCA.

As a public entity, the Retirement Fund and any of its subsidiaries must comply with government procurement regulations.

Section 12.0212b of the American Samoa Code Annotated states that “A contract may be awarded for construction, goods, or services without competition when, under rules promulgated, the Chief Procurement Officer determines in writing that there is only one source for the required construction, goods, or services.”

In this case, no public tender was solicited by the Retirement Fund despite there being another qualified local vendor, Bluesky.

Bluesky currently manages the American Samoa Hawaii Cable and the Samoa American Samoa Cable while ASTCA has never managed a submarine cable.

The Chairman of the Retirement Fund Board Vaanatiu Iafeta Tofala told KHJNews that the investment in Hawaiki was a sound one according to the Retirement Fund’s investment advisors.

But his statement appears to contradict the facts on the ground and the report from the Fund’s actuary.