For the second time in as many years, the Cayman Islands government is expected to increase its annual pension payments to cover civil service workers’ retirement plans.
Financial Secretary Ken Jefferson said Wednesday that a contribution increase for government workers in the “defined benefit” retirement plan was recommended by government financial advisers in a report done last year. He said it is ultimately up to Cabinet to accept the recommendation, but it was likely government – not the employees themselves – would fund any increase in pension contributions.
The “defined benefit” retirement plan provides a monthly pension for government workers that lasts for their entire lives. Only employees who joined the civil service before April 1999 are still participating in that retirement plan.
Newer government workers participate in a “defined contribution” plan, which operates more like a 401K savings account – once the money runs out, no further payments are available.
Mr. Jefferson estimated Wednesday that only 20 percent of active civil servants are members of the defined benefit plan.
The recommendation to increase pension funding follows a similar one made by the Mercer consulting firm in 2014.
As a result of that recommendation, in late 2016, Cabinet members approved a $16 million additional annual payment toward the “funding deficiency” in the main civil service employees’ retirement plan, to be made in monthly installments for the foreseeable future.
That contribution from government is paid beyond the annual pension contributions made on behalf of government employees.
The government in 2016 also approved an additional “normal cost” 5 percent contribution rate for participants in the civil service defined benefit retirement plan. What that means is the total contribution paid for each civil servant’s retirement by government has gone from 12 percent to 17 percent of their annual salary.
The increases only apply to government workers who are members of the defined benefit retirement plan.
Mr. Jefferson said he anticipated a similar arrangement would be made later this year, but he was not certain of the percentage increase that would be required.
Cabinet members can also choose not to follow Mercer’s recommendations and have their own actuaries review the retirement system, Mr. Jefferson said.