Puerto Rico government launches defined contribution program for 110,000 employees
The government of Puerto Rico announced Tuesday the launching this month of a new defined contribution savings plan for 110,000 public employees, who will be allowed to determine how their pretax contributions will be invested for their retirement.
The new retirement plan, similar to a 401(k) program, will include government employees covered by Act 106 of 2017, the Act to Guarantee Payments to Our Pensioners and Establish a New Defined Benefit Plan for Public Servants.
Starting Dec. 19, these employees will be able to decide how a combined $584 million, in accumulated interest-bearing funds that have been withheld from their wages for retirement since July 1, 2017, is invested. “For the first time, public employees will be the ones deciding how they wish to invest their money. This will make for a sustainable, transparent, reliable and viable system. There are no more patch ups here, but a true and definitive solution that will empower employees and achieve a true transformation of the [commonwealth] Retirement System,”
Puerto Rico Retirement Board (PRRB) Executive Director Luis M. Collazo said during a roundtable with journalists at the Fiscal Agency and Financial Advisory Authority’s (Aafaf by its Spanish acronym) offices at the Minillas Government Center in Santurce, where he was accompanied by Aafaf Executive Director Omar J. Marrero.
Collazo said that employee contributions and matching agency contributions in the similar 2000 Commonwealth Retirement System Program were set aside to be invested by the government on behalf of participants. In turn, public employees in the new retirement savings plan will be able to choose investment options from a roster of 11 funds that were selected by a special PRRB committee, the PRRB chief said. Participants will be able to invest in fixed maturity combined funds and basic funds, including stocks, bonds and short-term instruments such as certificates of deposit and money market funds, he said. Employers will not make matching contributions in the new plan.
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