Hikes in Retirement Fund contributions go into effect in Oct

Pago Pago, AMERICAN SAMOA — Gov. Lemanu Peleti Mauga signed into law on Apr. 26, an Administration bill, which increases the contribution rate by both ASG and employees to the ASG Employees Retirement Fund.

The new law hikes total contribution rate for both ASG and employee from the current 11% to a total of 20.37% in order to reduce the shortfall, which is reported by ASGERF at $9.4 million for Fund-year 2019, according to the preamble of the bill.

The latest report reviewed by the Fono indicates that the Fund pays out yearly benefits and refunds amounting to about $25.3 million, while contributions amount to $7.8 million from ASG and $3.02million from its members. And this totals to a $14.5 million shortfall between contributions and payouts paid from the Fund’s investment earnings.

The governor announced the signing in a news release last week Thursday, saying that the legislation to increase the contribution rate “aims to fulfill the critical need of the ASGERF, while not causing too much strain on employees all at once.”

The news release also says that one of the main focuses of the Lemanu-Talauega Administration is to ensure employees their appropriate income, and minimizing government strains on their paycheck.

In 2021, the Administration improved the pay scale for its entire workforce, and revived annual increments for all employees. The Administration also repealed the two percent (2%) Wage Tax after thirteen years of deductions from workers’ biweekly pay.

According to the legislation, the ASG contribution increase starts at 10% from Oct. 1, 2022 through Sept. 30, 2023; 12% from Oct. 1, 2023 to Sept. 30, 2024; and 14% after Sept. 30, 2024. Funds for ASG’s contribution shall be provided for in the annual appropriations of ASG’s budget for the fiscal year in which the contributions are due.

For employee contribution: 4% from Oct. 1, 2022 thru Sept. 30, 2023; 5% from Oct. 1, 2023 through Sept. 30, 2024; and 6% after Sept. 30, 2024, according to a summary of the bill, which also states the legislation becomes effective Oct. 1 this year upon passage by the Fono and approval of the governor.

Lemanu had twice last year rejected Fono approved bills — which originated from the Senate — to increase the contribution rate, saying that his top concern is that the bills do not identify a funding source for the increase in the government contribution.

He said the increases for government and employee contributions are “too high” as proposed by the Fono bill and he recommended that the increase in contributions be prorated over a period of 3 years.