By Dan Berman
The governor of Puerto Rico this week signed a bill aimed at shoring up the island’s public pension
system for teachers.
The controversial law, which was passed after months of negotiations, increases employee contributions from 9 percent of salary to 10 percent and sets the retirement age for new hires at 62. Under the old law, some new teachers could retire at 50.
Under the new law, current employees who have at least 30 years of tenure can retire at age 55. They are guaranteed a monthly pension of at least $1,625, about $250 more than the current minimum.
“Reforming the commonwealth's pension systems is essential to achieving long-term fiscal health,” said Gov. Alejandro García Padilla in a statement. “Teachers are integral in shaping our future, and these policy changes reflect a compromise between teachers and my administration that will ensure that teachers can retire with confidence in the long-term economic viability of our pension system.”
Many teachers apparently didn’t see it that way as they took to the streets to protest the bill. Earlier statements from their union, the Teachers Federation, said the governor was hurting workers to help bondholders. News reports said the union is considering a strike to express their displeasure at the pension changes.
The pension fund has unfunded liabilities of $10.25 billion and was projected to run out of money by 2020. That would have required large contributions from the government to ensure benefits would be paid. The pension plan has about 80,000 retired and current participants.
The pension fund’s problems and that of the plan covering other public employees were reasons Puerto Rico’s credit rating tumbled to near-junk status this year.
Originally published on BenefitsPro.com