The San Juan Daily Star
AAFAF chief requests data confirming insolvency from PREPA retirement system
By The Star Staff
Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) Executive Director Omar Marrero Díaz says he has asked the Puerto Rico Electric Power Authority’s (PREPA) Retirement System (SREAEE) for information to confirm that it will become completely insolvent and unable to pay monthly pensions in three months.
“Whatever information we get out of the situation in the SREAEE, the administration of Governor Pedro Pierluisi has always had the public policy to protect vulnerable populations,” Marrero said in a statement over the weekend.
AAFAF is the island government’s fiscal entity.
Marrero noted that the administration fought efforts by the Financial Oversight and Management Board to cut pensions during the commonwealth restructuring. PREPA’s amended debt adjustment plan, whose contents will be discussed on Tuesday, proposes to convert the power utility’s pension system from a defined contribution to a defined benefit plan. It also would raise the retirement age and eliminate cost of living adjustments for the pension system.
José R. Rivera Rivera, chairman of the board of trustees for the SREAEE, said in a statement last week that the actuarial deficit as of June 2021 was over $3 billion. While in 2022 PREPA was supposed to contribute 166.38% of the total payroll, or $23.8 million per month, it has not made payments to the pension system.
As of December 2022, PREPA owed the SREAEE $895 million in delinquent pension payments. Agencies that took former PREPA employees following the LUMA Energy takeover of the PREPA transmission and distribution system owed the system over $8 million.
“The privatization of the Authority has resulted in the displacement of hundreds of PREPA workers and in a wave of retirements, the withdrawal of contributions from members who resigned, and the subsequent reduction of SREAEE revenues, all of which have taken the system to the verge of imminent insolvency,” Rivera said.
SREAEE advisers Asset Consulting Group LLC informed the board of trustees that the system’s economic resources to pay monthly pensions will be depleted in May, including money from active members who are contributing to the pension system, he said.
Rivera noted that SREAEE officials have informed the oversight board of the situation through a certificate of inability to pay retirement benefits and requested a meeting to discuss solutions. The oversight board has yet to reply, he said.