Toward Fairness, Sustainability, and Accountability in Our Retirement System
Honorable Members of the Fono,
In my first letter, I laid out the fundamental equation of our pension system: C + I = B + E — contributions plus investment returns must equal benefits plus expenses. This simple
equation remains the guiding truth of our Fund. Without sufficient and timely contributions, and without disciplined management of revenue and expenditures, the Fund cannot sustain itself.
In this second letter, I expand on several reforms that require your immediate attention if the Fund is to remain viable, fair, and just — not only for today’s retirees, but for future generations.
1. Align Contributions with Actuarial Reality
The law must be amended so that employer and employee contribution rates are determined not by politics or convenience, but by actuarial science. The Board and the Fono must insist on disclosure of the actuarially determined contribution (ADC) and legislate accordingly. This is the foundation of fiscal responsibility.
2. Dedicated Revenue for Debt and Contributions
The government’s arrears to the Fund remain unresolved. One option worthy of consideration is a dedicated sales tax, earmarked solely for retiring the debt owed by ASG to the Fund, and ensuring current and future contributions are met on time. Such a dedicated stream would relieve chronic underfunding and build confidence in the Fund’s solvency.
3. Improve Tax Collection and Close Loopholes
Even as we seek new revenue, we must not overlook the leakage of existing revenue.
Enforcement, audits, and collection must be strengthened. Consider this example: Unlike the Social Security Administration, ASGERF does not consistently issue 1099 forms to its
retirees. How much of the $24 million paid annually in benefits is actually declared and
taxed? This loophole must be closed.
Additionally, there is evidence that government contracts themselves are not consistently reported for tax purposes. Some contractors have not received 1099 forms for payments made,
raising questions about the prevalence of this issue across agencies. If the government itself is failing to capture and report contractor payments, then the tax system cannot be credible or compelling.
4. Capture All Retirement Incomes
Are other retirement incomes being declared and taxed? Military and civil service pensions, private company retirement benefits, 401(k) distributions, and IRA withdrawals — all of these should be subject to the same tax rules. If not, then our tax system is neither fair nor complete.
5. Address the Shadow Economy
The black market and informal economy erode our tax base. Business sales, home transfers,
land conveyances, automobile transactions, and other asset sales — are these being
captured in government records and tax collections? If not, we are allowing millions of
dollars to escape the very revenue streams that should be sustaining our government and,
by extension, the Retirement Fund.
6. End Legislative Self-Dealing
Perhaps the most glaring inequity lies in the law that allows Fono members to choose
whether their $65,000 annual allowance is treated as a tax-free office allowance or as
taxable salary — thereby inflating their pensionable compensation from $25,000 to
$90,000. This is unfair to every other government employee, who does not have this
privilege. It undermines equal protection under the law, violates the principle of uniform taxation, and constitutes a conflict of interest. Pension benefits should be based on actual salary, not on optional allowances disguised for personal advantage. This law must be repealed or reformed.
7. Scrutinize ASGERF’s and the Fono’s Own Budgets
As budget season approaches, it is not only ASG’s budget that demands scrutiny, but also the Fund’s own operating budget. Transparency, efficiency, and accountability must begin at home. Every dollar spent on operations is a dollar not invested for beneficiaries. The Fund must be managed as prudently as the retirement savings of each of its members.
Equally important, the Fono must seriously examine its own budget. As the Fono begins
reviewing the Administration’s departmental budgets tomorrow, one question must also be
asked: who reviews the Fono’s own budget? In practice, the Fono reviews itself. As much as the Fono meticulously delves into the Administration’s numbers, it must apply the same
rigor to its own operations — and the Administration, in turn, must review the Fono’s
budget as part of the larger process. This is a zero-sum situation: there are only so many revenues to meet public needs. If questionable back-scratching substitutes for scrutiny, the public will pay the price in unmet needs.
Conclusion
The Fund’s survival is not just a financial necessity—it is a matter of fairness, trust, and justice across generations. Part 1 of this series reminded us of the pension equation. Part 2 outlines the reforms and revenue measures that must be implemented. The challenge before you is clear: align contributions with actuarial truth, secure dedicated revenues, enforce tax fairness, eliminate self-dealing, and demand transparency — from ASGERF, from the Administration, and from the Fono itself.
Our retirees and our future generations are watching. Let us act with courage, foresight, and integrity.
Respectfully submitted,
Fuiavailili Keniseli Lafaele
Trustee (pending Governor’s decision)
American Samoa Government Employees Retirement Fund
