Among the many complex issues in Puerto Rico’s dire financial situation—the Island owes a staggering $73 billion in debt—is how to treat the pension obligations owed to the more than 100,000 retirees and 125,000 active members in the Puerto Rico Government Employee’s Retirement System (PRGERS).  Hedge fund managers who gambled on Puerto Rico, paying 30 and 40 cents on the dollar in hopes for full dollar value repayment plus interest, will say Puerto Rico should pay them first.  Close more schools if you have to (Puerto Rico has already closed 100), layoff more public sector workers if need be (30,000 have already lost their jobs in this economic crisis), or throw seniors who depend on their pensions into poverty; the hedge funds really need their money back.
 
Rather than taking this path, the U.S. Congress must pass legislation to protect Puerto Rico’s public pensions so we do not throw hundreds of thousands of the island’s residents into poverty upon retirement.
 

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Puerto Rico’s public safety officers, nurses, and other public employees pay a portion of each paycheck—now nearly 10 percent—toward their pension.  At the end of a career in service to the people of Puerto Rico, these public servants retire with an average pension of $12,708 (according to the 2013 plan valuation).  Extremely modest, their pension is less than half the average of state and local pension benefits in the 50 U.S. States.
 
By contrast to the diligent savings of Puerto Rico’s public employees, the government of the Commonwealth has never made its full actuarially required contribution to the system.  In 1990 the Commonwealth made drastic cuts in benefits to future pensioners.  In 2000, it converted new employees from a traditional pension to a cash balance plan that more closely resembles a defined contribution plan, but the Commonwealth still avoided making contributions. In 2013, all employees were moved to the newer system, employee contributions and retirement ages were increased, and benefits were again reduced. Despite all of the elaborate changes to its pension plan designs, the Puerto Rico has never made its required contributions to the system.
 
The island’s ongoing failure to fulfill its promises to workers to fund the retirement plan has left PRGERS in dire straits.  Puerto Rico’s funding level has declined to almost zero, meaning current working people and retirees are at risk of receiving nothing of the pension they paid for over their working career.  Additionally, current employees who are paying into the retirement system may never see their money returned, as it is being used to pay current retirees. You read that right, the Commonwealth is stealing the contributions of current workers to pay benefits owed to retirees.
 
This is a financial crisis, but it is also a humanitarian crisis.  Poverty rates in Puerto Rico already stand at 45 percent.  We cannot stand idly by and allow more hard-working, honest citizens to be thrown into poverty.  And we absolutely cannot bow to vulture hedge funds who are preying on Puerto Rico as they have done in Detroit, Argentina, Greece, and other depressed economies.
 
Congress must act to give Puerto the tools it needs to restructure its debt.  The features of any bill should give the Island the ability to restructure its debt while protecting the pensions that hundreds of thousands of families earned, paid for, and are depending on to meet basic needs in retirement.  Senator Menendez has introduced a bill that is exactly what is needed to put pensioners’ interests ahead of hedge fund managers.
 
Congress has a moral imperative to act to protect Puerto Ricans like Alejandrina. After working for 32 years at the Department of Health, she retired in 2012, lives alone, and her livelihood depends on her pension.  Her devotion to her community continued even after she retired—she remains dedicated to helping children with special needs, sometimes even giving of her own small, fixed pension income to cover their needs.  Alejandrina was a faithful servant in her work and retirement.  For her and hundreds of thousands depending on us, Congress must act and do so swiftly.

Childers is the executive director of the National Public Pension Coalition.