The Mariana Islands are legally inside the United States — just not geographically.
The retirement fund was $640,000,000 in the hole. So, it filed for bankruptcy.
There will be many imitators.
It was a defined benefits plan. Nobody sets these up any more.
It was under 40% funded. That should have been a tip-off to retirees that they were going to get stiffed. But sheep are docile. They think everything is safe, that the guard dog will protect them from the coyotes.
This was not a liquidation. It was a restructuring. This will set a legal precedent. The retirees will not get the level of benefits they were expecting, as in “Sorry, Charlie.”
The feud between the retirement fund and the commonwealth over the government’s responsibility to chip in for employer contributions to the pension plan goes back to 2006.
While the commonwealth court decided in favor of the retirement plan in 2009, the local government has been unable to make the mandated $231 million payment — and now the amount it owes to the pension plan has ballooned to $325 million, according to bankruptcy court filings.
Part of the problem has been the generosity of the pension plan. While the defined benefit program was designed to serve retirees and their spouses, the fund had permitted the grandchildren and great-grandchildren of the first generation of retirees to receive benefits after the original retiree died, according to court documents.
Fat city just went on a diet. The days of wine and roses are over. Time to sober up!
In the meantime, the pension plan created an entity called Pension Holdings Corp., which has enough money to pay two months of benefits to islanders. Thus, beneficiaries can keep collecting while the plan discusses with creditors terms for making future payments.