The fact that three public corporations and several municipalities have failed to remit employee contributions for a total of $4.5 million as the Oversight Board reported adds precariousness to the already battered public pension system, which demands urgent and sustainable solutions.

It is unacceptable for public entities to use employee deposits for purposes other than those provided by law which established to remit them to the employees’ defined contribution accounts. Following the Board’s referral, it is up to the state and federal Justice Departments to determine the merits of the fiscal entity’s claim and any necessary remedies.

Failing to remit the funds withheld for retirement may be understood as an indifference to the fiscal discipline that Puerto Rico requires. It evokes those patterns that led to the collapse of the retirement systems and the island’s finances. The use of public money for purposes other than those budgeted for is a terrible administrative practice that governments have been using both to remedy mistakes as to win electoral sympathies.

The Fiscal Agency and Financial Advisory Authority proposed to settle pending municipal debts with the surpluses of the municipalities’ Special Additional Contribution (CAE) since it is a statutory debt. Act 106- 2017 provides that failing to remit contributions involves fines for the entities. Such a violation of the law imposes higher costs on the island that taxpayers would end up paying.

The law, created as a result of the insolvency of the Retirement Systems Administration and the Teacher’s Retirement System, established a new defined contribution plan that corporations and municipalities must reimburse to the central government under the "Pay-Go" system. The goal is to protect the contributions withheld for retirement.

Some of municipalities identified the Oversight Board indicate that they are up to date with their payments. Others admit it and seek to justify actions that have undermined pensioners’ funds for years. The right thing is for them to show sensitivity towards pensioners by complying with the disbursements.

But the challenge of the retirement systems is even greater. They take $ 2,5 billion from the Puerto Rican Treasury annually. They are currently being covered, partly because the government is not paying the public debt. The serious public insolvency forces to negotiate a sensible pension restructuring, which at the same time allows to honor other obligations of an island with an accumulated deficit of $ 70,3 billion.

In that direction, the Board is negotiating with the Official Committee of Retired Employees, which represents 167,000 pensioners. We are confident that they will reach agreements that reasonably address the wellbeing of retired public employees while contributing to the resolution of this and other important debts within the PROMESA Title III process.

In the coming weeks, the Board must submit the central government´s adjustment plan to Judge Laura Taylor Swain who presides over Title III cases. The plan is expected to generate savings of up to $ 694 million in pension payments. Among other measures, the entity proposes to return to active public employees the savings they have contributed to their retirement and that have been used to cover current payments. It also proposes to expand the extension of defined contribution plans for public employees, a kind of 401 (k) in private companies, which the government has been implementing for some employees since 2000.

The whole government has the responsibility to contribute to the solution of a problem that affects the government’s entire fiscal system. For years, retirement funds have served as piggy banks to balance budget deficits or other purposes, to the point of depleting them. Proving the will to change means breaking with that pattern of failing to comply with the commitments made to current and future retirees.

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