The Cayman Islands government will not release a financial evaluation originally conducted in 2014 of its three public sector retirement savings plans, which include the plans that provide pensions for thousands of civil servants, until March 2016.
The actuarial evaluation, completed by Mercer, details the government’s retirement savings plans for civil servants, lawmakers and the judiciary as they existed on Jan. 1, 2014, and was finished last year. The report was presented to the Progressives-led government caucus (leadership council) on Sept. 8, 2014 as a draft for review.
“During the presentation to caucus, a decision was made to change a number of valuation methods and assumptions that were used in determining the amount of the liability,” the government indicated in a response to an open records request filed by the Cayman Compass seeking the release of the report.
The government’s financial assumptions used to determine the pension funds’ liability as of Jan. 1, 2014 were changed and a re-evaluation of the retirement funds’ financial positions was completed by Mercer on Aug. 5, 2015, Financial Secretary Ken Jefferson confirmed.
The Compass then submitted its open records request for the information. This request was “deferred” until next year, based on the fact that Cabinet members had not reviewed and approved the information in the report.
“It is anticipated the final report will be available for release by March 31, 2016,” the government’s response indicated. That release will occur two years and three months after the relevant period for which the report was written.
According to the latest actuarial review, an evaluation of the funds as of Jan. 1, 2011 of Cayman’s three public retirement systems projected that liabilities were outpacing projected assets in the retirement funds by some $178.3 million in a 20-year rolling period.
This means Cayman’s public sector retirement system has an unfunded pension liability. If the country were to continue along the existing path with pensions, the system would eventually run out of money.
The 2011 public pensions evaluation noted that massive increases in pension contributions would be required to keep the government’s civil service retirement fund afloat over the next decade. At that time, the pensions board actuaries noted that the cost of the defined benefit portion of the civil service retirement plan would require government to increase employee contributions to the fund from the current 12 percent of salary to 44 percent of salary.
“The actuary has determined that a continuation of the current level of contributions to the defined benefit plan is projected to result in the depletion of the defined benefit allocated fund by the year 2026,” according to a Public Service Pensions Board annual report given at the time.
Finance Minister Marco Archer has said on several occasions that neither the retirement plan for civil servants nor retired lawmakers would be allowed to deplete. Mr. Archer has said government intended to take several steps to mitigate the burgeoning liabilities in the Public Service Pension funds.
Mr. Archer said government had made a “short term financial arrangement” that included putting more cash into annual past service liability pension payments. Mr. Archer said government would pay $19.7 million into the civil service retirement fund in the 2013/14 budget, including civil servant salary contributions. For the 2014/15 and 2015/16 years, that payment was budgeted to increase to $23.75 million each year, including worker contributions.
Plans to increase the government retirement age from 60 to 65 would also serve to reduce some of the liability estimates, but that change has not been put into effect.