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Puerto Rico’s other crisis: impoverished pensions
Source: Reuters
Puerto Rico’s other crisis: impoverished pensions
By Nick Brown
Filed April 7, 2016, 3:10 p.m. GMT
SAN JUAN, Puerto Rico – When Puerto Rico attempted to shore up its chronically underfunded public-employee pensions in 2013, Francisco del Castillo “knew grown men and women who wept.”
Under the reform package, retirement ages rose. So did employee contributions. Current and future participants were transferred to less-generous defined-contribution accounts, similar to 401(k) retirement savings plans. Del Castillo, then the deputy chief of the island’s largest government-employee pension system, said members of his own staff who were on the verge of retirement suddenly faced the prospect of working seven or eight more years for reduced benefits.
The law extracted “a pound of political flesh” from those, like del Castillo, who helped craft it, he said. “We wanted it to work.”
It didn’t, largely because Governor Alejandro Garcia Padilla’s government hasn’t held up its end of the bargain.
To give the politically painful fixes time to take hold, the reforms required government employers to fund the pensions in the short term through annual lump-sum payments. The central government was supposed to have made $367.6 million in such payments since 2014; so far, it has forked over just $22.7 million.
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By Nick Brown
Filed April 7, 2016, 3:10 p.m. GMT
SAN JUAN, Puerto Rico – When Puerto Rico attempted to shore up its chronically underfunded public-employee pensions in 2013, Francisco del Castillo “knew grown men and women who wept.”
Under the reform package, retirement ages rose. So did employee contributions. Current and future participants were transferred to less-generous defined-contribution accounts, similar to 401(k) retirement savings plans. Del Castillo, then the deputy chief of the island’s largest government-employee pension system, said members of his own staff who were on the verge of retirement suddenly faced the prospect of working seven or eight more years for reduced benefits.
The law extracted “a pound of political flesh” from those, like del Castillo, who helped craft it, he said. “We wanted it to work.”
It didn’t, largely because Governor Alejandro Garcia Padilla’s government hasn’t held up its end of the bargain.
To give the politically painful fixes time to take hold, the reforms required government employers to fund the pensions in the short term through annual lump-sum payments. The central government was supposed to have made $367.6 million in such payments since 2014; so far, it has forked over just $22.7 million.
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Read more: http://www.reuters.com/investigates/special-report/usa-puertorico-pensions/
