MISSA’s cash position declines as 2009 ends
Posted 1/31/10
As of December 31, 2009, MISSA’s cash in bank totaled $694 thousand, or $123 thousand less than what the Administration had a year ago and $931 thousand short of MISSA’s cash as of December 31, 2007.
It is noteworthy to mention that in FY 2007, MISSA was able to invest another $300 thousand from its cash surplus.
From FY 2002 through 2006, the Administration had positive cash flows that enabled MISSA to generate cash surpluses which were subsequently invested. During this period, MISSA was able to inject $300 to $500 thousand every year to its investments. No additional cash investments were made in FY's 2008 and 2009 as cash collections and investment income were just enough to sustain MISSA’s benefit payments and administrative expenses.
This unfavorable trend indicates an impending cash flow dilemma that the Administration expected as early as 2006 when the combined amounts of benefit payments and administrative expenses exceeded contributions.
With benefits expected to increase steadily between 8% to 10%, while collections are assumed to remain constant, MISSA is now deeply concerned about the long-term financial stability of the retirement fund. Considering MISSA’s cash flow in the past several months, it is expected that a draw down from the fund will take place sometime in May 2010.
Contributions recorded in the 4th quarter of 2009 totaled $3.05 million. Payments for retirement, disability, survivor and lump-sum benefits amounted to $3.54 million while administrative expenses totaled $194 thousand. If the $680 thousand deficit (excess of the combined amounts of benefit payments and administrative expenses over contributions) will remain constant, it may result to a deficit of about $2.7 million every year (before investment and other income). If this happens, the only option left for the Administration will be to dip into its Trust Funds in order to ensure uninterrupted benefit payments.
One factor that seriously affects MISSA’s current cash flow is the inability of certain employers, more particularly a number of local governments and government corporations to settle their past due obligations to MISSA which have already ballooned to millions of dollars.
The consistent bi-weekly remittances of the RMI Government, monthly payments by MalGov, and quarterly contributions of KRS, Chugach and the rest of the top 50 employers were again the main revenue drivers for the quarter ended December 31, 2009.