In several meetings since December 15, 2015 up until January 21, 2016 the American Samoa Government Employees Retirement Fund board has discussed a number of issues and among them is that there would be no COLA raise (Cost of Living Allowance) for fund members at this time due to the volatility in the market and the increase in the unfunded liability. This was revealed in the minutes of meetings and the audit report that were obtained by Samoa News.

At their January 19 meeting, the board members and the Executive Director expressed grave concerns at the market volatility and suggested that the board contact its investment advisors. A report from the investors was distributed a week earlier to the members.

In a phone call the board discussed with Jim Garell the drop in the portfolio over the last few months and asked for recommendations about getting out of the international and emerging markets. Garell stated that if the board wants to move out of the international and emerging markets, he recommends moving to the S&P 500.

At their next meeting on January 21 the board voted unanimously to transfer the proceeds to the State Street S&P 500 Index Fund. (According to the S &P 500 website, they are widely regarded as the best single gauge of large-cap U.S. equities. There is over USD 7.8 trillion benchmarked to the index, with index assets comprising approximately USD 2.2 trillion of this total. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.)

Also at the January 19, 2016 meeting the board moved to table ASTCA’s loan request until further notice. Other issues discussed were the salary of the new Executive Director, the removal of Assistant Executive Director’s name from ASGERF’s bank accounts, the AG’s office is seeking additional financial information dating back to 2009, and the increase of medical retirees.

Of interest is the Board’s concern about the increase in medical retirees to the Fund. According to the minutes of the meeting, the Board discussed possibly looking for another doctor to sign off on the retirement physical examination papers, which it says at this time Dr. Iotamo Saleapaga is the only doctor who signs off on these papers and there is a concern that over 60% of the retirees are medical retirees. The Board noted that ASGERF management will look into how Social Security processes the disability applications and maybe adopt some of those guidelines in order to minimize the number of medical retirees on an annual basis.

Another item of interest, is the discussion that ensued over the base salary for the new executive director I’aulualo Talia Fa’afetai. Board chairman Tofala Iafeta pointing out that it should be on the same level as a CEO’s for ASG semi-autonomous agencies, which stands at $90,000. However, Board member Beaver Ho Ching said the board had approved a budget of $85,000 for the salary and there is no need to change it. On the other hand, Board member Tony Togiai concurred that the budget has been approved for the Executive Director’s salary but noted that they could re-evaluate his performance ever two years and approve a raise accordingly.

Vice Chairman, Le’i Sonny Thompson, in discussion, said the salary should go up to between $90K-$115K, while Ho Ching and Togiai noted that the Executive Director needs to prove his ability to the board and then the board will evaluate his performance and negotiate a raise.

In the end, Togiai motioned to approve $90K, while Maeelopa Tuiasosopo, a Board member, motioned for $85K and a 10% increase, which was seconded by Le’i. The board members then voted and it was a tie, which led to the chairman voting for the $85,000 salary plus 10% increase, which amounts to $93,500.

Other issues discussed concerned the Fund’s bank accounts. The board approved unanimously motions to remove the Assistant Executive Director’s name from the bank accounts until an accountant or bookkeeper is hired to reconcile the accounts, add the new Executive Director on as an authorized signor, and allow the Executive Director’s single signature on the Administrative Account up to $1,000, with anything above requiring a second signature.

Also at this meeting, the Executive Director expressed his concern about having only one investment consultant for the fund at this time. He mentioned to the board that he would bring up the issue again at the Honolulu meeting to see how the board feels about hiring another consultant to assist in managing the investments. 

AUDIT REPORT

The independent audit report called the ASGERF Comprehensive Annual Financial Report essentially points out there has been a decrease of $28 million in net assets of the ASG Employees Retirement Fund (ASGERF) that are in trust for pension benefits. This 13% decrease happened between 2014 and 2015 — and is primarily due to poor domestic and international equity market conditions.

The audit report, by the accounting firm of Moss Adams LLP, states that the net assets for ASGERF at the close of fiscal year 2015 were at $185.60 million and as of October 1, 2014 the ratio of the fund’s fiduciary net position as a percentage of total pension liability was 46.75%. In general, this indicates that as of September 30, 2015 for every dollar of benefits due, the fund had approximately $0.47 of assets to cover it, the report stated.

INVESTMENTS

The report says that while continuing to monitor the markets both domestically and internationally the board of trustees has made the decision to allocate approximately 49% of the fund’s portfolio to investments in international and emerging markets. The report says that the fund’s portfolio “experienced extreme volatility, especially during the last quarter of the year ended September 30, 2015.”

It notes, “the fund was negatively affected by the sell-off in all of its equity investments,” but says “the effect of the sell-off was mitigated by decisions by the Board of Trustees to reduce the fund’s overall volatility by reducing the portfolio assets allocation target for emerging markets by 33% during FY 2014 and FY 2015 (from 30% to 20% of the fund’s investment portfolio).

Samoa News will report on the audit, as well as the retirement fund issues and reports in later editions.