It has been recommended that government pay about $35 million over the next 20 years to cover a severely underfunded retirement plan for Cayman Islands lawmakers, according to records obtained by the Cayman Compass.
That amount is the total the Mercer consulting firm recommended – as of Jan. 1, 2014 – that government and the legislators would have to contribute to keep the lawmakers’ pensions solvent through 2034. Cabinet is not mandated to follow any recommendations from the report, which is done every three years as an evaluation of the public sector retirement system.
The vast majority of the $1.765 million projected annual contributions would come from government coffers. About $1.3 million of that would go to cover “funding of deficiency over 20 years” in the legislators’ defined benefit retirement scheme.
That scheme – which pays a monthly pension to lawmakers and their spouses based on how long the lawmakers have served – had a total of $22.2 million in liabilities as of Jan. 1, 2014, the latest date for which figures are available. The liabilities are measured over a 20-year period, so they are not amounts that are all due immediately.
The plan had about $8.1 million in assets at the time the report was done, meaning it was underfunded by about $14 million with assets covering only 36 percent of plan liabilities, according to assessments produced by Mercer.
Lawmakers’ required contributions to the defined benefit retirement scheme were estimated at $40,000, while the government contributed an estimated $384,000 to the plan, assuming retirement plan investments earned about 7 percent each year.
The additional $1.3 million was recommended to settle the underfunded amount, referred to as the “deficiency,” between 2014 and 2034. All of that would have to be paid by government as well.
“The Jan. 1 2014 valuation requires that contributions be maintained at these levels for 20 years [until 2034],” the Mercer report stated.
Fewer than 100 people are paying members or retirees in the Parliamentary Pensions Plan, according to figures compiled by Mercer. The number of retirees far outweighs the number of lawmakers currently contributing to the plan.
The vast majority of those, 48, are retired lawmakers and their surviving spouses who receive total annual pension payments of $1.3 million from the fund.
Another nine retirees are deferred pensioners, who earn annual deferred pension amounts of nearly $235,000.
There are only five active members in the legislators’ defined benefit plan, according to Mercer records. The other 13 lawmakers are in a different retirement plan, the defined contribution plan, which acts as a retirement savings account rather than a monthly pension.
All plan participants contribute 6 percent of their annual salary toward the retirement fund. They are eligible to retire as early as age 50, but age 55 is considered the normal retirement age for the plan.