Accrued Pension in PR: who pays it and how to correct it

Where your pension money physically comes from

Since **July 1, 2017**, the pension checks of Puerto Rico government's three Retirement Systems **do not come out of those systems' assets**. They come from an account created for that.

**Article 2.1 of Act 106-2017** creates the **Account for the Payment of Accrued Pensions**, **under the custody of the Department of the Treasury**, held in a **trust fund separate from the Government's general assets and accounts**, operating on a **«pay as you go»** basis. From that date, payments of the Accrued Pensions of all three Systems (including the Judiciary's) **are disbursed from that account**.

«Pay as you go» means exactly what it sounds like: there is no pre-funded pool paying out of its returns. What is collected this month comes in this month. That is why it is worth knowing what feeds the account, and the statute lists it:

And there are two collection mechanisms almost nobody knows about: the **Office of Management and Budget may withhold** from agency appropriations the amounts needed to pay the Pay-Go Charge when it determines the withholding is necessary to ensure compliance; and **every government entity must budget** each year the funds needed to pay it.

• **The net liquid proceeds from liquidating the assets** of the Retirement Systems, under House Joint Resolution 188-2017 approved under PROMESA, with two named exclusions: the segregated funds of the Teachers' System Defined Contribution Program (Act 160-2013) and the **Capital Center Building, North Tower**, the Teachers' System headquarters, which **does not have to be liquidated**.
• **The «Pay-Go» Charge** determined and imposed by AAFAF.
• **Budget appropriations** of the Government, special appropriations to finance shortfalls in pension payments, and special statutes passed for those purposes.
• **Donations and bequests** from any public or private entity.
• **25% of the initial payment or of the periodic payments** of Public-Private Partnership contracts, under Article 17(e) of Act 29-2009.
• **Other funds and revenue** the Legislative Assembly earmarks for that purpose.

The sentence that answers the most anxious question

The question many people ask is this: «if my agency or my municipality does not pay its share, am I left without a pension?». The statute answers head-on, in that same Article 2.1, and it is worth quoting as written.

**«Regardless of the employer's payment of the Pay-Go Charge, the disbursement of benefits to all Pensioners and Beneficiaries is guaranteed by the General Fund through the pay as you go scheme, with the entities' responsibility to remit payment of that Charge subsisting».**

That is: the employer's obligation **does not disappear** (it still owes) but payment to the pensioner **does not depend** on the employer meeting it.

The article closes by reinforcing that with three concrete situations. Participants, beneficiaries or pensioners **whose employer ceased or has ceased to exist**, those who **moved to a Public-Private Partnership**, and those whose employer **for any reason does not pay the Pay-Go Charge**: their pensions, like those of all the Systems' pensioners, **are guaranteed by the Government** through the pay as you go scheme.

That is the guarantee written into the statute. What the statute cannot do (and we are not going to pretend otherwise) is guarantee the General Fund's fiscal condition. What is clear is that the responsibility does not shift to the pensioner if their employer defaults.

What exactly the Pay-Go Charge is

It is not a rate or a percentage of payroll. **Article 2.1(b)** defines it very concretely: it is the charge **determined and imposed by AAFAF** on the Government, Municipalities, the Legislative Branch, the Courts Administration, Public Corporations and other covered entities, and it **equals the amount actually paid to the Pensioners and Beneficiaries coming from each covered entity**.

Translated: each employer is billed what is actually being paid to its own pensioners. Whoever has more pensioners of their own pays more, not by an actuarial formula but by the month's invoice.

**The Secretary of the Treasury**, or their designee, is authorized to collect it. And there is a specific exception for municipalities: the **administrative charges** of the pay as you go scheme **are not included in the computation** of the municipal Pay-Go Charge.

On the other side of the coin, **Article 2.4(e)** eliminated, as of July 1, 2017, the **employer contributions** (including the Uniform Additional Contribution and the Magisterial Justice Uniform Contribution) to the Account and to the Systems. The Pay-Go Charge is what replaced them.

If your registry is wrong: 45 days and what counts as proof

**Article 2.2** ordered the creation of a registry with each participant's, beneficiary's and pensioner's Accrued Pension. What almost nobody knows is that the article carries **a complete procedure to challenge it**, with exact deadlines.

Once the registry is produced, each person is notified **by a sure, effective and suitable method**, the statute mentions postal mail, an Internet portal, a notice in a newspaper of general circulation and, where appropriate for active participants, personal notification. From that notification, **forty-five (45) days** run to present the Systems' Administrators **reliable evidence** that the information is incorrect or inaccurate.

The statute says what counts as reliable evidence, and the list is not exhaustive:

Two protections worth knowing before giving up. First: the Government, Municipalities, the Judicial Branch, the Legislative Branch, Public Corporations and the Retirement Systems have a **ministerial duty** to diligently produce the documents you request for this, and if a document is unavailable they **must issue a certification saying so**. Second, and this is the one that saves cases: **the 45 days do not run** while a request for reliable evidence is pending before a government entity that has not produced it or certified it as nonexistent. An entity's delay **cannot hurt you**.

And now the hard part, which is the reason for this section: if you do **not** present evidence within the term, the registry information is deemed **faithful and exact**, and **the correction of the registry will not be reviewable**. It is not a door that stays ajar.

• Copies of **personnel files**.
• Copies of the **retirement file**.
• **Pay stubs**.
• **W-2 forms**.
• **Copies of tax returns**.
• **Employer certifications**, or any combination of these and other official documents.

The appeal ladder, step by step

The Administrators must **analyze the evidence you present and notify you of their decision in writing**. If that decision does not satisfy you, Article 2.2 sets four more steps, each with its own deadline. Let any of them lapse and **the determination becomes final and firm**.

The step fewest people know is the third: **the appeal clock also starts if the Administrators do not answer**. Silence does not leave you stuck waiting.

• **Reconsideration: twenty (20) days** from notice of the Administrators' decision.
• **The Administrators have ninety (90) days** from receiving the reconsideration to issue their determination.
• **Appeal to the Retirement Board: thirty (30) days**, counted from notice of the final decision **or from the lapse of those ninety (90) days without an answer**.
• **The Retirement Board has ninety (90) days** to resolve the appeal.
• **Judicial review before the Court of Appeals**, if the Board does not rule within that period or if its final determination does not satisfy you, under the Court of Appeals Regulation for reviewing administrative decisions.

Under which rules what you will collect is computed

**Article 2.3** sets the reference point, and it is broader than people assume. The payment terms of each participant's, beneficiary's or pensioner's Accrued Pension **are computed under the statutes of their respective Retirement Systems as of the moment Act 106 took effect**.

And not only the years-of-service pension. That same article extends the rule to **disability pensions, death benefit payments, payments to beneficiaries, refunds of contributions and any amount owed or benefit of a similar nature**.

There is a carve-out for those mid-process: employees who, when the statute was approved, **were processing an application for disability benefits or any other benefit could finish that process** under the law in effect when they began it.

And an accounting piece that explains why the government did not «collect» agencies' old debts: **Article 2.5** provides that payments made from the Account **are deducted from the Contributions Owed** and from any other debt that, on the statute's effective date, the Government, Municipalities, Public Corporations, the Legislative Assembly and the Courts Administration had with the Systems.

What we do not publish here

This guide explains **what the statute says**. There are three things the statute does not answer and that we will not fill in from memory.

**Where to see your registry today.** Article 2.2 allowed notice by mail, by an Internet portal, by newspaper notice or in person, and ordered the registry produced within deadlines that expired years ago. Which portal is current, whether yours was produced, and how it is consulted today **we did not verify**. Ask the Retirement Board directly.

**How much your employer's Pay-Go Charge is.** The statute says how it is determined (AAFAF sets it and it equals what is paid to that entity's pensioners) but the concrete amounts do not come from the statute and we do not publish them.

**Whether you are still in time.** The Article 2.2 deadlines run from **your** notification, and we cannot know when that was or whether it has lapsed. What is worth knowing is that the 45 days **do not run** while an entity has neither produced a document you requested nor certified that it does not exist. If you are in that situation, request it in writing and keep a copy of the request: that date is what holds the argument up.