Pension fund melee

A heated war is brewing between Caroni Staff Pension-ers Association and the Staff Associations over the $79 million in surplus pension funds. The trustees of the fund is Republic Bank. The Caroni Staff Pensioners Association is considering taking legal action to ensure that there is equitable distribution of the pension surplus. Actuarial consultant, KR Consulting headed by Kyle Rudden, hired by the Pension Management Committee, in a letter to Sham Ramroop, Manager, Administrative Services, Caroni on May 28, 2003, warned that in the event Caroni was wound up, “it is likely that the distribution of surplus will not follow the suggested benefit improvements.” Sources say that at a meeting in July 23, the Caroni Board sought clarfication on the warnings put forward by KR Consulting. It seems quite likely that the surplus has grown by at least $20 million. KR Consulting said. The surplus was arrived at subtracting the plan’s assets ($240 million) from the liabilities ($161 million.).

Another actuarial firm, Bacon, Woodrow & de Souza, hired by the Caroni board on the instructions of the Government, said the staff proposals would have produced a pension plan “considerably more generous” and hence “expensive” — than is typical in the market. Those increased benefits, said the firm’s partner, TP Kimpton, would have “absorbed most if not all of the surplus disclosed by the actuarial valuation.” The trustees of the fund is Republic Bank. In a letter to Harracksingh on July 10, 2003, pensioners charge that the Management Committee members and active associations are in a consort arrangement of “harvesting the surplus.” “Active employees are members of the fund. Retired employees are members of the fund,” said Pension Association member, Harry Dookran. “Why should not there be equity of the surplus when one takes into account that existing pensioners have not had an increase over the last 21 years. The active unions are apparently positioning themselves for absolute control of the Management Committee, he said, noting that any replacement or formation of a new management committee, the Staff Pensioners Association had to be included. “The Staff Pensioners Association has the advice from more than one attorney-at-law and they have advised that the current officers of the management committee are in conflict of interest and any recommendation will be ruled null and void by Court of Law,” the letter said.

The Pension’s association also warned that unless there is equity and fairness in relation to existing pensioners, legal action will be taken. The letter was copied to Dr Lenny Saith, Agriculture Minister John Rahael, Board Members, Company Secretary and the Supervisor of Insurance. Enclosed in the Pension Association’s letter to the Chairman was a copy of the management committee recommendations for improvements for members and pensioners. Under the heading, “Improving benefits to members by removing early retirement actuarial reduction for persons retiring at age 50 and above to be extended from July 1, 2006, to December 31, 2013, actuaries put the estimated cost of the plan at $14.2 million. Under “Improving benefits to members by a maximum of 15 percent for all active members at as June 30, 2003, the estimated cost of the plan was put at $17.2 million. On “Improving benefits to members by applying a salary of record which is an adjustment of 10 percent as at July 1, 2003 for members with 33 and third years and more service as at June 30, 2003, the estimated cost of the plan was put at $2.8 million.

The Pensions Association have criticised these allocations, noting that they were “unacceptable,” since the active members stand to gain an additional $34.2 million. They have compared this figure to the “Improving benefits to all existing pensioners by 10 percent in payment at June 30, 2003 and which is going to cost the company $11.5 million. The total recommnded estimated cost of the plan is $45.7 million. The Pensions Association though feel that they are going to be shortchanged., noting that the improved benefit to members is to the tune of 75 percent, while the benefit to existing pensioners is a mere 25 percent. “The active members pension will be calculated on a ‘Non discounted method’. This in itself would generate an increase of 0 — 100 percent,” said the letter. On March 6. 2003, in a note to the board with the heading, “Use of surplus in the Staff Pension Plan, Kenneth Dalip, Caroni board member, noted that the surplus has been developed on two premises: that the surplus should be used exclusively for the enhancement of benefits for existing members of the plan, and that it is sole prerogative of the management committee of the plan to determine how the surplus should be used. “As a consequence, the proposals have promoted the interest of one stake holder (active members of the plan) while having completely disregarded the interest of the other stakeholders (retired members of the plan and company),” he said.