The Cayman Islands would be required to publish reports on all contingent and actual liabilities – including those in the public pensions and healthcare systems – under a proposed framework agreement with the United Kingdom government.
The Framework for Fiscal Responsibility, released Tuesday, is still being negotiated between the two governments. If the Cayman Islands agree to the part of the proposal dealing with liabilities it would be required to evaluate pensions and healthcare systems once every three years. Those actuarial assessments would have to be published within three months of receipt by the government.
“Government will publish its proposals to address the results of the assessments no later than the budget following the receipt of the actuarial assessment,” the UK framework proposal reads. For instance, if an actuarial evaluation were to be completed as of 1 January, 2012, the local government would have to include proposals to address it in the 2012/13 budget which is due on 30 June, 2012.
The Cayman Islands Public Service Pensions system has performed an actuarial evaluation on its various investment funds at least once every three years, but it has not published the results of the two most recent reviews done in January 2008 and January 2010.
The last time any actuarial evaluation of the country’s healthcare liabilities was done occurred in 2004, according to records submitted with a government bond offering.
An evaluation done in 2008, according to the bond offering, put the unfunded liability figure at US$248.4 million (CI$204 million, using an 0.82 conversion rate, US dollars to KYD).
There was another estimate on pension liabilities, presented as part of the 2009 bond offering, that put the unfunded liability in Cayman’s three Public Service Pension funds at US$324.8 million (CI$266 million). The more recent Miller-Shaw report in 2010, estimated the Public Service Pensions system’s unfunded liability at US$400 million, but it was unclear what estimates were used to arrive at that figure.
The 2009 bond offering memorandum made an estimate of US$798 million (CI$654 million) in unfunded liabilities for healthcare coverage provided to Cayman Islands civil servants. The figure was based on an actuarial estimate done in 2004.
The projections are essentially accountants’ best guesses at what the government will owe for the total benefit package at civil servants’ expected retirement dates – which can be as far as 40 years in the future.
The UK-proposed framework requires the Cayman Islands government set out its strategy for dealing with those liabilities in the government’s strategic policy statement, which is due out later this month.
A number of reports regarding the financial health of the public pensions fund – which have been requested by the Compass – have not been revealed.
Also, the Public Service Pensions Board’s ownership agreement with the Cayman Islands government for 2011/12 contains virtually no information regarding the financial performance of the fund.
The ownership agreement document for the current budget year [2011/12] lists the net assets of the Public Service Pensions system as ‘information not available’. Also, the total liabilities of the Public Service Pensions system, as per the latest available actuarial valuation on 1 January, 2005 are listed as ‘information not available’.
The net worth of the pensions system, which is subject to the next actuarial evaluation, was again listed as ‘information not available.’
An email seeking clarification about the ownership agreement statements was sent to Financial Secretary Ken Jefferson, and copied to Premier McKeeva Bush’s office on 21 June. The Caymanian Compass has received no response.
Statements contained in an auditor general’s office review have indicated two actuarial reviews of the public pension system have been done since the report dated 1 January, 2005. An actuarial review is done to determine what the estimated assets of the retirement fund will be compared to estimated liabilities over a period of years, essentially to determine whether – in the actuaries’ view – the fund will have enough money to cover what it is required to pay in future years.
The healthcare actuarial deficiency would estimate the same thing with regard to healthcare coverage.
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