Puerto Rico's Pension Head Seeks Probe of Pension Officials After In-Depth Study

(October 19, 2010) — On Monday, Puerto Rico’s Retirement Systems Administrator Héctor Mayol Kauffmann said he is referring the findings of an independent study on the public pension crisis to the island Justice Department, Government Ethics Office, and Comptroller’s Office for investigation, Caribbean Business Online is reporting.

The referrals come from a study by consulting firm Conway MacKenzie, which delved into the reasons for the dismal state of the Retirement System Administration. The report discovered that neither the Puerto Rico administration’s management nor its board acted to address the growing actuarial deficit during the previous administration of Acevedo Vilá between 2004 and 2008.

With current contributions amounting to about 59.7% of the actuarially required contribution, the government’s main pension fund has an unfunded liability of $17 billion, which is growing. According to the news service, the system can run out of cash to meet benefit payments by 2014. Lacking promising options to reform the retirement system, experts point to increased employee and government contributions and a reduction in benefits as possible efforts to revamp of the public pension system.

Despite developments to improve Puerto Rico’s pension, Mayol has said he has a realistic set of expectations to make-up the system’s $20 billion in actuarial deficit (including the Commonwealth’s Teachers’ fund, which Mayol also oversees). “I think that some progress will be made,” he told aiCIO in June. “I am not 100% confident that it will be a fully permanent solution in the sense that we will see the assets begin to grow. I hope to see some room in future budgets for contribution increases; on the other hand, cutting back on benefits is possibly something that has to be taken a look at. Of course, this is politically sensitive.”