Two unions representing Puerto Rico teachers and public employees sued the Puerto Rican government Thursday for mismanaging new defined contribution accounts.
The lawsuit was filed by the American Federation of Teachers and the American Federation of State, County and Municipal Employees in the U.S. District Court in San Juan overseeing Puerto Rico's Title III bankruptcy case.
The lawsuit is seeking declaratory and injunctive relief to replace what it claims are millions of dollars in interest and investment income lost by the commonwealth's failure to fully implement a law that created defined contribution retirement accounts for thousands of union-represented workers.
In addition to the commonwealth and governor, defendants include Puerto Rico's chief financial officer, the retirement system and its board, the financial oversight board and Banco Popular.
A fiscal recovery plan overseen by the Financial Oversight and Management Board for Puerto Rico calls for freezing pension benefit accruals by July 1, 2019, and enrolling all public employees in defined contribution plans.
"By the commonwealth's own admission, it — along with the Retirement Board of the Government of Puerto Rico, the Puerto Rico Fiscal Agency and Financial Advisory Authority, and their responsible officials — has failed to create and administer Law 106's promised defined contribution accounts, and instead has taken hundreds of millions of dollars of employee pension contributions and stashed more than $300 million in government accounts at Banco Popular that earn virtually zero interest," the unions said in a statement announcing the lawsuit.
Randi Weingarten, president of the American Federation of Teachers, said in that statement that the unions learned that educator retirement assets "have been sitting in Banco Popular bank accounts, collecting little or no interest, despite a statute that called for the money to be invested." The oversight board "turned a blind eye to the commonwealth's failure to implement its July 1, 2017, mandate while the bank was unjustly enriched at the expense of hardworking Puerto Ricans," she said.
Lee Saunders, president of the American Federation of State, County and Municipal Employees, said in the same statement that Puerto Rico teachers, public safety officers and other public service workers have "kept fighting for Puerto Rico despite an unimaginable natural disaster and a fiscal crisis they didn't create. For all the sacrifices they have made, and austerity measures imposed upon them, they deserve better than this betrayal. They deserve retirement security and basic respect."