The Retiree Committee reaches tentative agreement with the FOMB that will significantly limit pension cuts

• The tentative agreement protects 61%, or over 102,000, of all current retirees from any cuts
• Limits pension cuts to a maximum of 8.5% for retirees with monthly retirement benefits of more than $1,200, as opposed to a maximum of 25% cuts proposed by FOMB

 
The Official Committee of Retired Employees of the Government of Puerto Rico (COR, for its acronym in Spanish) has reached a tentative agreement with the Financial Oversight and Management Board for Puerto Rico (FOMB) that will substantially improve the treatment of retirement benefits of 167,000 retired government employees as compared to the terms proposed by the FOMB in the latest fiscal plan approved in May 9, 2019.  Retirees with monthly pension benefits below $1,200 will receive no cuts at all, resulting in the full protection of 61%, or over 102,000, of all current retirees. For those retirees with monthly pensions of more than $1,200, the agreement will limit reductions to a maximum of 8.5% and will ensure a minimum monthly post-cut pension benefit of at least $1,200.  As noted in COR’s open letter to retirees, Social Security benefits and the monthly medical insurance benefit for those who receive it will be fully protected. Covered under this tentative agreement are the retired employees from the Employees Retirement System of the Government of Puerto Rico, the Teachers Retirement System, and the Judiciary Retirement System.

“After almost two years of legal actions, mediation sessions and negotiations we reached an agreement  with the FOMB that will significantly limit pension cuts and provide other substantial protections,” said former judge, Miguel Fabre, chairman of the COR.

The tentative agreement negotiated by the COR marks significant progress from the terms proposed by the FOMB, which would have affected 75% of the retiree population in Puerto Rico. Major highlights of the tentative agreement include:

• Raise in the minimum pension threshold to calculate cuts from $600/month to $1,200/month, increasing the number of retirees who are completely protected from pension cuts, from 25% (45,000 retirees) to approximately 61% (102,000 retirees).
• Certainty that cuts to monthly pension benefits will not exceed 8.5% vs. 25% as proposed by the FOMB
• Guarantee that Social Security benefits will not be affected by any cut.
• Protection of the medical insurance monthly benefit for those who receive it.
• Protection for future PayGo payments. Under the agreement, there is a provision for the creation of a potentially multi-billion-dollar pension reserve fund to help fund pension payments in later years, when the fiscal plan projections reflect operating deficits for Puerto Rico. 

• Assurance that if Puerto Rico’s economy exceeds the financial projections in the fiscal plan by a certain level in a given year, retirees whose pensions were cut will get a portion of cuts restored for that year.
• Cuts would not occur until July 1, 2020, at the earliest.
• Creation of an independent board, consisting of retirees who will be elected by retirees, to supervise the reserve fund, PayGo payments, and compliance with the terms of the pension benefit agreement included in the Fiscal Plan.

 
“Although, the COR would have preferred no cuts, we believe that significantly worse cuts would have been sought by the FOMB in the bankruptcy process and that ignoring said reality would have been irresponsible from our part and lethal to our community of retirees. Under the circumstances, the COR is convinced that this agreement is the best option to ensure the well-being of our community and the continuity of our pensions,” stated the COR’s chairman.

The proposed agreement will be included in the Commonwealth’s Plan of Adjustment (POA) under Title III of PROMESA, which will be subjected to the vote of impaired creditors at a later date that will be announced by the federal court. The COR will provide information at the appropriate time regarding voting on the POA.  Said plan will then be considered for confirmation by Judge Laura Taylor Swain, who is in charge of the Puerto Rico’s bankruptcy proceedings under Title III.

“It is important to emphasize that pensions cannot be modified until at least the time when the Court has confirmed a POA for Puerto Rico,” Fabre indicated. Said confirmation will take place after the affected parties have evaluated details of the POA and voted in favor, or against it.

The COR will be engaging with retirees to offer additional information about the agreement and its impact on retirees, and the voting process. It is important to stay up-to stay up-to-date with the latest information, register in www.porturetiro.com or follow Comité Oficial de Retirados on Facebook.


About the COR
The COR was authorized and appointed in June 2017 by the United States Trustee to represent the collective interests of more 167,000 government retirees from the Employees Retirement System of the Government of Puerto Rico, the Teachers Retirement System and the Judiciary Retirement System in Title III cases to restructure Puerto Rico’s debt, under federal law PROMESA.
 

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To read the Plan Support Agreement and Term Sheet, download this document:

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