Puerto Rico’s largest retirement plan will run out of money in about a year unless contributions to the system increase, according to the latest audited report.
The $81.5 million Puerto Rico Employees’ Retirement System, Hato Rey, had only 0.27% of funds to cover $30.2 billion it has promised to current and future retirees, according to an audit of the fiscal year ended June 30, 2014, which Puerto Rico filed Thursday with the Municipal Securities Rulemaking Board’s website. The pension system will run out of funds in the fiscal year that begins July 1 unless it receives more cash.
“If measures are not taken to significantly increase the contributions, the system will become insolvent in fiscal year 2018,” according to the fiscal 2014 audit conducted by KPMG.
Along with public employees, Puerto Rico must repay investors. The commonwealth and its agencies owe $70 billion after years of borrowing to fill budget shortfalls. The U.S. House plans to vote next week on a bill that would create a federal control board to manage Puerto Rico’s budgets and oversee any debt restructurings. The panel would also analyze the island’s pension system to address its low funding levels.
“As has been amply disclosed in the past, the systems’ financial condition threatens the present and future livelihood of thousands of retirees and public employees who have given their lives to public service,” Pedro R. Ortiz Cortes, administrator of Puerto Rico’s $42 million Judiciary Retirement System, said in a statement Friday. “At this critical juncture in Puerto Rico’s history, the results announced today highlight the need for increased attention to the systems net pension liability and long-term funding.”
The judiciary pension system had a net liability of $456 million and a funding level of 9.2% as of June 2014, according to Ortiz Cortez.