What is Title III under PROMESA?
As a result of the financial situation of the Government of Puerto Rico, on June 30, 2016, the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) was enacted. Title III refers to the section of PROMESA that covers court-supervised restructurings of United States territories and their covered instrumentalities or agencies, and permits them to continue operating while implementing fiscal reforms and debt restructuring. On May 3, 2017, the Government of Puerto Rico, by and through the Financial Oversight and Management Board for Puerto Rico (the “Board”), filed a petition with the United States District Court for the District of Puerto Rico, commencing a case under Title III of PROMESA.
What entities are in Title III?
Currently, the Government of Puerto Rico, the Puerto Rico Sales Tax Financing Corporation (COFINA, for its acronym in Spanish), the Employees Retirement System of the Government of Puerto Rico, the Puerto Rico Highways and Transportation Authority, and the Puerto Rico Electric Power Authority have all commenced Title III cases. The Title III cases of the Government and its instrumentalities and agencies are pending before the United States District Court for the District of Puerto Rico. The Honorable Laura Taylor Swain, United States District Judge, was designated as the presiding judge for the Title III cases.
Who represents the retired employees of the Government of Puerto Rico and its Title III instrumentalities in Title III cases?
The Official Committee of Retired Employees of the Government of Puerto Rico (COR, for its acronym in Spanish) represents the interests of the P.R. Government retired employees in Title III legal procedures. The COR was appointed in June 2017 by the United States Trustee. The members of the COR are:
The COR retained the law firm of Bennazar, García & Milián and the law firm of Jenner & Block as its legal counsels. FTI Consulting serves as financial advisors to the Committee, and Segal Consulting is its actuarial advisor. The COR retained Marchand ICS as its Information Agent.
How were the members of the Official Committee of Retired Employees from the Government of Puerto Rico selected?
PROMESA includes certain sections of the Bankruptcy Code that provide for the appointment of committees of creditors with similar collective interests to assure adequate representation of those creditors’ collective interests. In Puerto Rico’s Title III case there are two committees: (1) the Unsecured Creditors Committee (UCC); and (2) the Committee of Retired Employees of the Government of Puerto Rico (COR). The members of the COR were selected by the U.S. Trustee. In forming the COR, the U.S. Trustee considered applications from individual retirees and conducted interviews. On June 15, 2017 the U.S. Trustee filed a “Notice of Appointment” with the District Court, in which it identified the members appointed to the COR.
What will COR do in the Title III cases?
The COR represents and speaks on behalf of the P.R. Government retired employees in Title III cases, on a non-exclusive basis (that is, individual retirees may hire their own counsel, if they choose to do so). Among its responsibilities are:
When would the proposed cuts to the pensions and benefits of Puerto Rico government retirees proposed by the Fiscal Oversight Management Board come into effect?
Pensions cannot be modified outside of a confirmed plan of adjustment by the U.S. District Court. This means that although fiscal plans proposed by the Financial Oversight & Management Board have proposed pension cuts, pensions cannot be modified until the District Court enters an order confirming a plan of adjustment. At this stage in the case, the Board has not yet filed a plan of adjustment for the Central Government of Puerto Rico. When it does, pensioners will have the opportunity to vote on the plan, and the COR, through its lawyers, will have the opportunity to express its position about the plan.
To learn more details about the FOMB’s proposal to modify the pensions, click here to read the Explanatory Memorandum.
Are widows, minor and/or disabled children who receive pension from the retirement systems also represented by the COR?
Yes. The COR represents the widows of the pensioners who receive a pension from the retirement systems. It also represents minor and/or disabled children who receive a pension.
Does the COR represent PREPA retirees under Title III?
The Official Committee of Retired Employees of the Government of Puerto Rico was appointed by the United States Trustee in June 2017 to represent the interests of the approximately 167,000 retired employees from the Employee Retirement System of the Commonwealth of Puerto Rico, the Teachers’ Retirement System and the Judiciary Retirement System in matters related to Title III of federal PROMESA before the U.S. Federal Court.
Later, on July 3, 2017 a petition was filed under Title III of PROMESA for the Puerto Rico Electric Power Authority (PREPA). PREPA Retirees receive pensions and other post-employment retirement benefits (OPEB) through the PREPA Retirement System, known also as the Employees’ Retirement System of the Puerto Rico Electric Power Authority (SREAEE, for its acronym in Spanish). According to PREPA’s Fiscal Plan, which was certified on April 19, 2018, the SREAEE is “significantly underfunded” by no less than $3.6 billion, OPEB obligations of $384 million are completely unfunded, and PREPA’s debt structure is “not sustainable.”
In light of the recent developments related to PREPA Retirees, on May 14, 2018 the COR filed a motion that requested either the formation of a statutory committee to represent PREPA Retirees or the expansion of the COR’s authority to include representation of the PREPA retirees. This motion was filed to help ensure that the PREPA retirees receive adequate representation in the Title III proceedings.
On June 6, 2018, Judge Laura Taylor Swain denied without prejudice the COR’s motion, stating that despite the serious retiree-related issues within the PREPA Title III process there is no clear evidence that the PREPA retirees do not have adequate representation at this time that would require the appointment of a formal PREPA retiree committee. Judge Swain also noted that the Court and the U.S. Trustee will continue to monitor the issue.
In consideration of the above, the COR does not represent PREPA's retired employees.
What is the COR’s views on the constitutionality or validity of PROMESA?
The Committee is focused on protecting the interests of retirees in their pensions and other benefits and strengthening Puerto Rico’s economy in the process. It intends to use every legal tool available to achieve those goals, including PROMESA, if the statute furthers those objectives. If others attempt to use PROMESA to harm retirees, the Committee will oppose those efforts vigorously under all applicable law.
Recently, a group of general obligation bondholders filed a motion to dismiss the Title III cases on the basis that the Board was unconstitutionally appointed. This particular argument, if successful, would not be helpful to Puerto Rico or its people. Therefore, the COR (among other parties) filed an opposition to that motion, and the District Court will hear oral argument on the motion in January 2018.
Federal Judge, Laura Taylor Swain, entered an order denying the challenge by the investment fund Aurelius on the constitutionality of the Puerto Rico Financial Oversight and Management Board under the Appointment Clause of the Constitution of the United States and the motions to dismiss Puerto Rico’s Title III petition and relief from the Automatic Stay.
Does the COR represent individual retirees?
No. The COR represents the collective interests of all retirees in their pensions and health benefits in the Title III process.
Do I need to file a claim with the District Court to protect my pension and my benefits?
No. The District Court has not set a deadline to file a claim in any of the Title III cases. When a deadline is established, we will add that information to this website. At this time, we believe that the procedures regarding claims will direct the COR to file a single proof of claim on behalf of all retirees for pension, healthcare, and any other general retirement benefits.
What do I do if I have other claims against the Government and its instrumentalities?
It is important to note that the COR only represents your interest regarding your pension, healthcare, and any other general retirement benefits owed by a governmental entity in the Title III cases of the P.R. Government and certain of its instrumentalities. The COR cannot represent you concerning other debts that the P.R. Government, public corporations or instrumentalities might owe to you. You will need to file your own, separate claim for such other debts.
All creditors should receive by mail a notification when a claims deadline is set by the Court and a claim form (called a “Proof of Claim” form). For claims other than those related to your pension, healthcare, and other general retirement benefits, you will need to file a proof of claim with the District Court before expiration of the deadline (which has not been set at this time). Instructions for filing a claim will be provided on the Proof of Claim form.
What is the current status of my pension and benefits?
The status of our pension and benefits packages remains unchanged. At present, it is not anticipated that your pension or other benefits will change before a plan for the adjustment of debt (a “Plan of Adjustment”) is approved by the District Court. The Fiscal Plan that was certified in March 2017 contained proposals for modifications of accrued retirement benefits. That Fiscal Plan is being revised due to the effects of Hurricane Maria. However, it is the Plan of Adjustment that will likely determine the final status of pension and other benefits, and that Plan will be developed after the Fiscal Plan is revised.
What is the status of the Title III cases?
As stated above, a Fiscal Plan was certified by the Board in March 2017, prior to the commencement of the Title III cases. Fiscal Plans were also certified for the other entities after commencement of their Title III cases. In light of the economic effects of Hurricane Maria, the Fiscal Plans must be amended. The COR understands that the Board is in the process of working on revised Fiscal Plans, which may not be finalized for several months. While Hurricanes Irma and Maria have affected and interrupted the Title III cases, the Puerto Rico Government has indicated that it wishes to move forward with the Title III cases promptly. Therefore, with some short delay, it is expected that various pending litigation will resume soon.
Will I have the opportunity to express my opinion before a Plan of Adjustment is approved by the District Court?
Yes, you and other members of the community of the P.R. Government retired employees will have the opportunity to vote on the proposed Plan of Adjustment, and you may file a written objection and appear in Court. For this reason it is important that the community of the P.R. Government retired employees is up-to-date about the process and the proposals. If the P.R. Government retired employees do not agree with any adjustments that may be proposed for their pensions and benefits, then the District Court may consider arguments regarding the legality of such adjustments and the fairness and appropriateness of the proposed Plan of Adjustment.
How will I know when to vote on the plan to adjust the debt?
When the time to vote arrives, you will receive a notice by mail with the information regarding when and how to vote. In addition, the COR will keep you informed -through its information platforms- about its position regarding the plan and its impact in the community of retirees.
Is there a mediator in connection with the Title III cases?
Yes. On June 23, 2017, the District Court entered an order appointing a 5-person mediation team. According to the order, the purpose of the mediation team is to facilitate confidential settlement negotiations regarding any and all issues and proceedings arising in the Title III cases.
As a result of the financial situation of the Government of Puerto Rico, on June 30, 2016, the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) was enacted. Title III refers to the section of PROMESA that covers court-supervised restructurings of United States territories and their covered instrumentalities or agencies, and permits them to continue operating while implementing fiscal reforms and debt restructuring. On May 3, 2017, the Government of Puerto Rico, by and through the Financial Oversight and Management Board for Puerto Rico (the “Board”), filed a petition with the United States District Court for the District of Puerto Rico, commencing a case under Title III of PROMESA.
What entities are in Title III?
Currently, the Government of Puerto Rico, the Puerto Rico Sales Tax Financing Corporation (COFINA, for its acronym in Spanish), the Employees Retirement System of the Government of Puerto Rico, the Puerto Rico Highways and Transportation Authority, and the Puerto Rico Electric Power Authority have all commenced Title III cases. The Title III cases of the Government and its instrumentalities and agencies are pending before the United States District Court for the District of Puerto Rico. The Honorable Laura Taylor Swain, United States District Judge, was designated as the presiding judge for the Title III cases.
Who represents the retired employees of the Government of Puerto Rico and its Title III instrumentalities in Title III cases?
The Official Committee of Retired Employees of the Government of Puerto Rico (COR, for its acronym in Spanish) represents the interests of the P.R. Government retired employees in Title III legal procedures. The COR was appointed in June 2017 by the United States Trustee. The members of the COR are:
- Retired Judge Miguel J. Fabre Ramírez
- Mrs. Carmen Haydee Nuñez
- Mr. Juan Ortíz Curet
- Rosario Pacheco Fontán
- Mrs. Milagros Acevedo Santiago
- Dr. Marcos A. López Reyes
- Mrs. Lydia R. Pellot
- Mrs. Blanca Paniagua
The COR retained the law firm of Bennazar, García & Milián and the law firm of Jenner & Block as its legal counsels. FTI Consulting serves as financial advisors to the Committee, and Segal Consulting is its actuarial advisor. The COR retained Marchand ICS as its Information Agent.
How were the members of the Official Committee of Retired Employees from the Government of Puerto Rico selected?
PROMESA includes certain sections of the Bankruptcy Code that provide for the appointment of committees of creditors with similar collective interests to assure adequate representation of those creditors’ collective interests. In Puerto Rico’s Title III case there are two committees: (1) the Unsecured Creditors Committee (UCC); and (2) the Committee of Retired Employees of the Government of Puerto Rico (COR). The members of the COR were selected by the U.S. Trustee. In forming the COR, the U.S. Trustee considered applications from individual retirees and conducted interviews. On June 15, 2017 the U.S. Trustee filed a “Notice of Appointment” with the District Court, in which it identified the members appointed to the COR.
What will COR do in the Title III cases?
The COR represents and speaks on behalf of the P.R. Government retired employees in Title III cases, on a non-exclusive basis (that is, individual retirees may hire their own counsel, if they choose to do so). Among its responsibilities are:
- Review the current and any future Fiscal Plan for the Government of Puerto Rico, and analyze all proposals that the government –through the Board– may make to modify pensions and other benefits that retirees are entitled to receive.
- Meet with the Board, the Fiscal Agency and Financial Advising Authority (AAFAF), and other parties-in-interest, as well as with mediators appointed by Judge Laura Taylor Swain as appropriate to address and negotiate any proposed changes to pensions or other retiree benefits and to provide legal, financial, actuarial and economic analysis to support the protection of retiree benefits.
- Speak on behalf of the collective interests of the Government of Puerto Rico retired employees at all court hearings and other public proceedings.
- Keep the community of the Government of Puerto Rico retired employees informed regarding the ongoing legal process with updated, trustworthy and timely information.
When would the proposed cuts to the pensions and benefits of Puerto Rico government retirees proposed by the Fiscal Oversight Management Board come into effect?
Pensions cannot be modified outside of a confirmed plan of adjustment by the U.S. District Court. This means that although fiscal plans proposed by the Financial Oversight & Management Board have proposed pension cuts, pensions cannot be modified until the District Court enters an order confirming a plan of adjustment. At this stage in the case, the Board has not yet filed a plan of adjustment for the Central Government of Puerto Rico. When it does, pensioners will have the opportunity to vote on the plan, and the COR, through its lawyers, will have the opportunity to express its position about the plan.
To learn more details about the FOMB’s proposal to modify the pensions, click here to read the Explanatory Memorandum.
Are widows, minor and/or disabled children who receive pension from the retirement systems also represented by the COR?
Yes. The COR represents the widows of the pensioners who receive a pension from the retirement systems. It also represents minor and/or disabled children who receive a pension.
Does the COR represent PREPA retirees under Title III?
The Official Committee of Retired Employees of the Government of Puerto Rico was appointed by the United States Trustee in June 2017 to represent the interests of the approximately 167,000 retired employees from the Employee Retirement System of the Commonwealth of Puerto Rico, the Teachers’ Retirement System and the Judiciary Retirement System in matters related to Title III of federal PROMESA before the U.S. Federal Court.
Later, on July 3, 2017 a petition was filed under Title III of PROMESA for the Puerto Rico Electric Power Authority (PREPA). PREPA Retirees receive pensions and other post-employment retirement benefits (OPEB) through the PREPA Retirement System, known also as the Employees’ Retirement System of the Puerto Rico Electric Power Authority (SREAEE, for its acronym in Spanish). According to PREPA’s Fiscal Plan, which was certified on April 19, 2018, the SREAEE is “significantly underfunded” by no less than $3.6 billion, OPEB obligations of $384 million are completely unfunded, and PREPA’s debt structure is “not sustainable.”
In light of the recent developments related to PREPA Retirees, on May 14, 2018 the COR filed a motion that requested either the formation of a statutory committee to represent PREPA Retirees or the expansion of the COR’s authority to include representation of the PREPA retirees. This motion was filed to help ensure that the PREPA retirees receive adequate representation in the Title III proceedings.
On June 6, 2018, Judge Laura Taylor Swain denied without prejudice the COR’s motion, stating that despite the serious retiree-related issues within the PREPA Title III process there is no clear evidence that the PREPA retirees do not have adequate representation at this time that would require the appointment of a formal PREPA retiree committee. Judge Swain also noted that the Court and the U.S. Trustee will continue to monitor the issue.
In consideration of the above, the COR does not represent PREPA's retired employees.
What is the COR’s views on the constitutionality or validity of PROMESA?
The Committee is focused on protecting the interests of retirees in their pensions and other benefits and strengthening Puerto Rico’s economy in the process. It intends to use every legal tool available to achieve those goals, including PROMESA, if the statute furthers those objectives. If others attempt to use PROMESA to harm retirees, the Committee will oppose those efforts vigorously under all applicable law.
Recently, a group of general obligation bondholders filed a motion to dismiss the Title III cases on the basis that the Board was unconstitutionally appointed. This particular argument, if successful, would not be helpful to Puerto Rico or its people. Therefore, the COR (among other parties) filed an opposition to that motion, and the District Court will hear oral argument on the motion in January 2018.
Federal Judge, Laura Taylor Swain, entered an order denying the challenge by the investment fund Aurelius on the constitutionality of the Puerto Rico Financial Oversight and Management Board under the Appointment Clause of the Constitution of the United States and the motions to dismiss Puerto Rico’s Title III petition and relief from the Automatic Stay.
Does the COR represent individual retirees?
No. The COR represents the collective interests of all retirees in their pensions and health benefits in the Title III process.
Do I need to file a claim with the District Court to protect my pension and my benefits?
No. The District Court has not set a deadline to file a claim in any of the Title III cases. When a deadline is established, we will add that information to this website. At this time, we believe that the procedures regarding claims will direct the COR to file a single proof of claim on behalf of all retirees for pension, healthcare, and any other general retirement benefits.
What do I do if I have other claims against the Government and its instrumentalities?
It is important to note that the COR only represents your interest regarding your pension, healthcare, and any other general retirement benefits owed by a governmental entity in the Title III cases of the P.R. Government and certain of its instrumentalities. The COR cannot represent you concerning other debts that the P.R. Government, public corporations or instrumentalities might owe to you. You will need to file your own, separate claim for such other debts.
All creditors should receive by mail a notification when a claims deadline is set by the Court and a claim form (called a “Proof of Claim” form). For claims other than those related to your pension, healthcare, and other general retirement benefits, you will need to file a proof of claim with the District Court before expiration of the deadline (which has not been set at this time). Instructions for filing a claim will be provided on the Proof of Claim form.
What is the current status of my pension and benefits?
The status of our pension and benefits packages remains unchanged. At present, it is not anticipated that your pension or other benefits will change before a plan for the adjustment of debt (a “Plan of Adjustment”) is approved by the District Court. The Fiscal Plan that was certified in March 2017 contained proposals for modifications of accrued retirement benefits. That Fiscal Plan is being revised due to the effects of Hurricane Maria. However, it is the Plan of Adjustment that will likely determine the final status of pension and other benefits, and that Plan will be developed after the Fiscal Plan is revised.
What is the status of the Title III cases?
As stated above, a Fiscal Plan was certified by the Board in March 2017, prior to the commencement of the Title III cases. Fiscal Plans were also certified for the other entities after commencement of their Title III cases. In light of the economic effects of Hurricane Maria, the Fiscal Plans must be amended. The COR understands that the Board is in the process of working on revised Fiscal Plans, which may not be finalized for several months. While Hurricanes Irma and Maria have affected and interrupted the Title III cases, the Puerto Rico Government has indicated that it wishes to move forward with the Title III cases promptly. Therefore, with some short delay, it is expected that various pending litigation will resume soon.
Will I have the opportunity to express my opinion before a Plan of Adjustment is approved by the District Court?
Yes, you and other members of the community of the P.R. Government retired employees will have the opportunity to vote on the proposed Plan of Adjustment, and you may file a written objection and appear in Court. For this reason it is important that the community of the P.R. Government retired employees is up-to-date about the process and the proposals. If the P.R. Government retired employees do not agree with any adjustments that may be proposed for their pensions and benefits, then the District Court may consider arguments regarding the legality of such adjustments and the fairness and appropriateness of the proposed Plan of Adjustment.
How will I know when to vote on the plan to adjust the debt?
When the time to vote arrives, you will receive a notice by mail with the information regarding when and how to vote. In addition, the COR will keep you informed -through its information platforms- about its position regarding the plan and its impact in the community of retirees.
Is there a mediator in connection with the Title III cases?
Yes. On June 23, 2017, the District Court entered an order appointing a 5-person mediation team. According to the order, the purpose of the mediation team is to facilitate confidential settlement negotiations regarding any and all issues and proceedings arising in the Title III cases.