Future outlook on sustainability

The twelve months of FY 2009 have been a bumpy rollercoaster ride for the Administration as it continued to bear the brunt of the global financial crisis. Fortunately, the Administration's investments have been rallying hard since hitting multi-year lows in the first five months of FY 2009, with MISSA losing another $12.8 million. Fortunately, it was compensated by the significant gains in the succeeding months that resulted to a net gain of $2.2million for the whole of FY 2009. For many, this may be an indication that the financial sector and world economy are close to stabilizing, as the situation may now have stopped getting worse. But for the Administration, the road to recovery is still far from over. Although the US economy may have suffered most from intensified financial strains and the continued fall in the housing sector, third world and developing countries like the Marshall Islands have been hit hard by the collapse in global trade as well as by rising financial problems of their own. As the country's supply chain is totally dependent upon global trade, the inflated prices of prime commodities have seriously affected the purchasing power of the RMI residents. Fortunately, oil prices fell sharply and inflation pressures have subsided quickly around the world - but not in the Marshall Islands. Gas prices are still averaging $5 a gallon while prices of prime commodities remain high. Compounded by a very high level of unemployment in the country, the current situation brings a lot of uncertainties as to what lies ahead. With a declining economy, businesses and self-employed individuals will freeze hiring or much worse, resort to downsizing of their manpower in order to survive. A shrinking labor force will mean reduced revenues for the government and lower social security contributions for MISSA. Read more...

MISSA investments recover as FY 2009 ends

FY 2009 was a year full of uncertainties, but the Administration took a deep sigh of relief as it prevailed over its most grueling financial challenge in recent years.

The most recent investment performance report presented by Frank Armstrong, MISSA's investment advisor, reflected a net investment gain of $2.035 million and a net internal rate of return of 4.39% for the twelve - month period ending September 30, 2009.

Although the amount is dwarfed by the much bigger gains of the Administration in 2006 ($5.37 million) and 2007 ($7.63 million), it boosted MISSA's resolve to remain financially stable, even in the short term. This rally may also be indicative of a better investment outlook in the coming months. Some may even consider this as the beginning of the end of the global economic downturn that started in late 2007. Read more...

Financial performance in FY 2009

The Administration's $1.731 million investment gain in September virtually saved MISSA from the year-long rollercoaster ride of its offshore investments which dropped in value by as much as $12.28 million in the first five months of FY2009. This resulted to a cumulative net investment gain of 2.04 million dollars for the twelve months ended September 30, 2009.

According to the latest (unaudited) financial report for the FY ended September 30, 2009 prepared by Sheryl Profeta (pictured), MISSA's Finance Manager, MISSA's net assets increased by $2.6 million mainly due to other income comprised mainly of interest and dividends and the effect of the cumulative net increase of $0.99 million in the fair market value of MISSA investments. Read more...

MISSA Board approves FY 2010 Budget

In what could be a preview for the most difficult test the current Administration will be taking in the coming months, Saane K. Aho (pictured), MISSA Administrator, presented to the Board a gloomy FY 2010 Budget during their meeting held on September 23, 2009.

Prior to the meeting, the Administrator met with her senior managers several times to ensure that all proposed figures are realistic and reflect the true picture of what lies ahead.

With an impending cash deficit of at least $1.2 million in the coming fiscal year, the Administrator and the entire MISSA staff shared a common conviction that belt-tightening must start from inside MISSA. Thus, the budgeted administrative expenses were closely scrutinized to reflect only the expenses that were deemed necessary in the course of MISSA operations. This cost cutting measure resulted to a 12.6% reduction (more than $150 thousand) in budgeted administrative expenses for FY 2010 when compared with the budget for FY 2009. The cuts were comprised of reduction in payroll (MISSA will no longer hire an in-house lawyer), off-island travels and trainings, utility costs and supplies. All MISSA personnel, particularly the department managers, were made aware of these cost cutting measures to ensure that any administrative expense that is spent is within the budgetary limits. Read more...

Actuary: Retirement fund will run out of money by 2022

With the release of the most recent actuarial report from Joseph Nichols (pictured) of Pacific Actuarial Services, MISSA's actuary, the pressure to initiate drastic changes in the social security laws and regulations has now come to utmost urgency for MISSA's top management and Board of Directors. At stake for the people of the Marshall Islands is the future welfare of both their current and future generation of retirees and their immediate families.

The report said that as of October 1, 2008, the total accrued actuarial liability (AAL) of MISSA stood at $225.8 million while the market value of Trust Assets was $63.2 million. This results to an unfunded AAL of $162.6 million or 72%. Therefore, the funded AAL is only 28%. This simply means that if the social security program in RMI is stopped on that date, MISSA can only pay for 28% of all benefits due on that date. Although this is an improvement in funded status to past years, there are warning signs showing future stresses to the System. Due to market decreases in 2008, the funded status of the System has hit a critical mark. Adding to the stress on the System is the fact that the number of workers and taxable earnings continue to decrease. Read more...

MISSA expects $1.2 million cash deficit in FY 2010

Unless an unexpected $1.2 million (at the least) in long-outstanding obligations is collected in the coming fiscal year or the RMI Government offers a cash subsidy to MISSA, the Administration stands to face the inevitable - a huge cash shortfall in the next few months. The last time the Administration made a drawdown from the Trust Fund was in 2000 when the administration of the Health Fund was still under MISSA. During the 1990's, MISSA had been regularly making drawdowns from the Retirement Trust Fund.

Since FY2006, the combined amounts of benefits and administrative expenses paid out by MISSA exceeded its cash collections. Fortunately, other sources of revenue like interest and dividends were generated from local investments which enabled the Administration to maintain a positive cash flow, ensure uninterrupted benefit payments and even generate cash surpluses until FY2008. The extra cash were then subsequently invested. Read more...

Recent actuarial report not promising but better than projected

According to the actuary, MISSA's AAL as of October 1, 2008 totaled $225.8 million while total assets amounted to only $63.2 million. The imbalance resulted to an unfunded AAL of $162.6 million or 72%. Therefore, the funded AAL is only 28%.

The AAL represents the liability of the Administration for benefits already earned, including those in pay status, as well as benefits earned as of the valuation date for workers who are earning future benefits. One can think of this liability as the amount needed today to pay for all benefits earned as of today that are either already being paid or will be paid in the future. Read more...

MISSA opposes Bill# 50

On March 9, 2009, another proposed legislation (Bill# 50) was introduced in the Nitijela to repeal Sections 103(q), 136(1)(a), 136(2)(a)(c), 13 6(3)(4) and 144 of the Social Security Act of 1990 (The Act).

The bill seeks to remove the early retirement benefits in order to enable a worker or self-employed worker to be fully insured to the amount contributed at the normal retirement age of 60. It will also eliminate the "earnings test" which will get rid of reduction of quarterly benefits of a retiree aged 55 to 62 years who is still in covered employment

The act provides oprion for a worker and self-employed worker to get an early retirement at the age of 55 provided that such worker or self-employed worker is "service insured' (has earned at least 80 quarters of coverage). Read more...

PSTF benefits assured until end of 2009

In March, May and August 2009, MISSA received a total of $ 68,458 which enabled the Administration to continue paying its PSTF beneficiaries every other month.

As of September 30, 2009, only the benefits for the month of September remain on hold while the October benefit checks will be released at the end of October 2009.

At present, the Administration needs at least $11,100 to meet its monthly PSTF benefit payments, including the 20% administrative fee that MISSA is entitled to. Unless additional funding is received, the current PSTF fund will only last until October 2009.

Additional funding received from PSTF in FY's 2008 and 2009 totaled $245,439. Read more...