Employee contributions to the Retirement Fund have been paid up as of Monday, January 26, according to testimony by Acting Treasurer Brett Butler at a hearing of the House Retirement Committee held Tuesday.
But the unpaid employer contribution to the Fund is $18.5 million. According to Butler, ASG has paid the employer contribution for the months of November and December of last year but the amount owing is for October and months prior. Additionally what ASG has paid in the employer contribution is not the 14% employer contribution rate as stated in the law, but 8%.
Butler explained that ASG just cannot afford to pay the higher rate.
Play Audio8-brett
He said that the administration is submitting a bill to amend the law to reduce the employer contribution to 8%.
Attorney General Gwen Tauiliili-Langkilde said in reviewing the statute authorizing the 14% employer contribution rate, they discovered a requirement for an actuary report that is specific on the impact to the Fund of any change to the statute.
Play Audioag-and-fagaimma
Rep Fagaima Larry Sanitoa said fringe benefits which include Retirement Fund contributions have already been included in the Fiscal Year 2026 budget and should be paid. He was also of the opinion that employees whose positions are grant funded are covered for the employer contribution.
Fagaima recalled that when the bill to increase the contributions was discussed, the actuary report of 2018 showed that the Fund would run out by 2039 if the contributions were not increased. And the Retirement Fund Board had approved the increase.
He and several other lawmakers felt strongly that the government should follow the law and pay the contribution rate provided by statute.
Butler repeatedly said that it’s a matter of sustainability and without an identified funding source to pay for the increase, the government cannot afford to pay the 14% rate. He said the administration has started paying more than $580,000 every pay period, which covers the employee contribution of 6% and the employer contribution of 8% while it builds up revenues. He said new revenue generating measures are being proposed, and mentioned as an example an increase to the tax rates.
Executive Director of the Retirement Fund Vaitautolu Talia Iaulualo said the position of the Retirement Fund is that the law must be followed. And until the law is changed the contribution rate provided by statute is the one that the Retirement Fund supports. He also reminded that the Retirement Fund has a high unfunded liability and this must be taken into consideration. The ASG debt to the Fund exacerbates the unfunded liability.
The Retirement Fund is currently valued at $230 million and according to Vaitautolu the investment return for the Fund is about 11%. “This is a very good return on investment,” he said. He also pointed out that the Fund’s membership has increased to about 7,000 and the higher the membership the higher the Fund’s liability.
Rep Ape Mark Asifoa said he was disappointed to learn that in just one year, the ASG debt to the Retirement Fund has grown from $9 million to $18.5 million. “It indicates that the government, the Retirement Fund and the Fono has not done anything to address the debt,” he remarked. He asked the Acting Treasurer if ASG can afford to pay the 8% contribution rate. Butler replied that the lower rate is affordable but it was vital that a dedicated funding source be identified to cover the payments.
The Chair of the House Retirement Committee Rep Trude Ledoux-Sunia said it was news to her that there was a controversy with the statute that authorized the increase in Retirement Fund contributions.
Photo: Chair of House Retirement Committee Rep Trude Ledoux-Sunia & Vice Chair-Sauasetoa Ho Ching.
