Former Lt. Governor candidate Larry Sanitoa is speaking up against the administration’s bill to raise the cap on the Retirement Fund’s local investment from 17% to 35 %.
One of the points he makes in a media statement is that while the Retirement Fund is regulated locally by Chapter 14 Title 7 of the American Samoa Code Annotated, it is governed at the federal level by the Employee Retirement Income Security Act, commonly known as ERISA.
This stipulates that 10% is a set standard for loans of asset funds at cost to the sponsor.
Sanitoa says the intentions of the US Congress were to place a cap on the loans to the sponsor in order to protect the plan in the event the sponsor is unable to repay the loan.
Sanitoa says recent information revealing that the cap on local investment increased from 10% to 17.5% due to the $20 million loan under the Togiola administration is correct.
However that loan was repaid in 2016.
Therefore to be in compliance with ERISA, the cap should have been reduced back to 10% regardless if there was a sunset provision under the $20 million loan legislation.
Regarding the Retirement Fund Board’s decision for the Fund to own Hawaiki Cable’s American Samoa Branch venture, Sanitoa says this far exceeds the board’s mandate and dangerously reduces investment income for the Fund for the next ten years.
Additionally the Board’s decision to loan or invest in ASTCA a total of $30 million within the last two years clearly violates the prudent man rule on which ERISA is based.
Sanitoa says, “It’s disheartening that the Board decided to loan ASCTA all that money knowing full well that ASTCA’s Fiscal Year 2016 audited financial statements show a cash flow of minus $2,090,000 and minus $1,069,827 for FY2017.
He says “in the real world, no bank would make a loan to a company” with ASTCA’s financial status.
“Yet the Board managed to mitigate their risk by getting ASG to agree to guarantee ASTCA’s debt.”
He says if ASTCA defaults on their loan from the Retirement Fund, the government and ultimately the taxpayers of American Samoa will be responsible for repaying the loan.
Sanitoa who’s one of the candidates in the Tuala-uta House election, also questions the wisdom of investing this amount of money on Hawaiki, a very risky business venture, with just an 8% return on investment when the global market performance raised a return of 12.78% according to the Fund;s actuarial valuation for FY2017.
He said its worrisome that what was once a source of security for Fund members has become ASG’s source of loans for projects and refinancing government debts.
Sanitoa reminds that the Fund was created over 40 years ago to help support the income of elderly employees like his own mother and many residents with parents whose Social Security was not enough when they ended employment with ASG.
The House Retirement Committee will hold a hearing on the bill to increase the cap of local investment by the Fund at 1 pm today.
Witnesses will be the Attorney General Director of the Retirement Fund, Board chairman and the Acting CEO of ASTCA.