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  • Writer's pictureThe San Juan Daily Star

Fiscal board seeks court’s permission to end PREPA unions’ collective bargaining agreements due to pensions

The Puerto Rico Electric Power Authority’s Employees Retirement System has recently asserted that the utility owes it $1.2 billion in unpaid employer contributions from 2016 to date, plus an additional $5 billion in future contributions through 2060.

By The Star Staff

The Financial Oversight and Management Board asked the federal bankruptcy court this week to allow it to end the collective bargaining agreements (CBAs) with Puerto Rico Electric Power Authority (PREPA) unions, arguing the utility cannot pay the unaffordable pension and grievance claims.

The oversight board said PREPA has two remaining CBAs – one with the Electrical Industry and Irrigation Workers Union (UTIER by its Spanish acronym), with around 139 active members remaining, and one with the Union de Empleados Profesionales Independientes, with some three active members remaining.

Each of the CBAs require, among other things, that PREPA’s current pension system continue to operate and be maintained as a fully funded trust.

“PREPA cannot assume its CBAs because it is unable to cure the significant multibillion dollar underfunding of its defined benefit plan, meet future funding obligations to maintain the system as it currently exists and as required by the CBAs, or pay the unions’ grievance claims asserted in excess of $1 billion,” the oversight board said in the motion filed Tuesday. “Assumption of the CBAs would also be inconsistent with the pension reform measures the Oversight Board has determined are essential to ensure adequate funding for accrued pension benefits. The pension reform measures are the same as those implemented for governmental employees of the Commonwealth and other Title III debtors.”

PREPA’s Employees Retirement System (ERS) has recently asserted PREPA owes it $1.2 billion in unpaid employer contributions from 2016 to date, plus an additional $5 billion in future contributions through 2060.

“Rejecting PREPA’s CBAs with UTIER and UEPI is necessary to PREPA’s reorganization and to allow for essential reform of pension benefits for participants in the PREPA ERS and to avoid liability for a potentially large administrative assumption claims for employer contributions to and grievances under the CBAs,” the oversight board argued.

The board wants to turn PREPA’s pension system into a “pay as you go” system.

Meanwhile, PREPA bondholders this week lost an appeal in the First Circuit Court of Appeals to overturn the district court’s approval of PREPA’s disclosure statement for the bankruptcy plan of adjustment.

The PREPA ad hoc group, comprising a subset of bondholders that oppose the plan of adjustment, argued in December that the plan was unconfirmable because of the disparate treatment of creditors.

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