Senate votes to approve retirement board’s action to remove cap on local investments

Pago Pago, AMERICAN SAMOA — The Senate unanimously approved in its third and final reading yesterday, a bill aimed at removing the existing 10% cap on investments by the American Samoa Government Employees Retirement Fund (ASGERF) within the Territory.

Last week, during a Senate Retirement Committee hearing chaired by Senator Tuialu'ulu'u V. Tuialu'ulu'u, the Chairman of the Board of Trustees for the Retirement Fund, Senate President Tuaolo Manaia Fruean, testified in support of the measure. He explained that the Board seeks to eliminate the cap to grant greater flexibility in making investments deemed sound and beneficial within the Territory.

Tuaolo explained that if any major government agencies, such as ASTCA, ASPA, or LBJ Hospital, require substantial loans, it will be at the Board's discretion to determine the appropriate amount to be granted, based on the specific circumstances and needs of each request.

He further emphasized that the Board of Trustees considers these transactions to be secure, despite the large sums involved, as full repayment is assured given that the borrowers are government agencies.

Tuaolo underscored the critical role of the Retirement Fund's investments, particularly in the form of loans, to support various government operations when other funding sources are unavailable.

He reminded senators of the substantial $17 million loan provided by the Retirement Fund to finance the Hawaiki Cable—a submarine cable network connecting Australia, New Zealand, American Samoa, New Caledonia, and Tonga, extending all the way to Hawaii and Oregon on the U.S. West Coast.

The bill does not explicitly limit eligibility for loans from the Fund to government entities. Discussions surrounding the legislation highlighted that there are no provisions preventing private companies from applying for loans from the pension fund designated for government employees.

Senator Magalei Logovii inquired whether the Board has considered requiring collateral for loans to private companies as a safeguard to protect the Fund in case of defaults.

In response, Tuaolo explained that the Board would evaluate a company’s assets to determine their suitability as collateral for any loans. He emphasized that the Board’s decision-making process for loan applications would carefully assess the assets of the borrowing company.

Additionally, Magalei proposed the implementation of insurance to cover loans in the event of a default, further ensuring the Fund’s security.

Senator Togiola Tulafono expressed his support for the bill's objective to eliminate the current cap on investments that the Fund can make within the Territory.

However, he voiced concerns that, as currently proposed, the bill would remove provisions in the existing law that he views as a crucial safety valve to safeguard the Fund in the event of unforeseen circumstances or emergencies. He recommended that these protective provisions in the Retirement Fund law be preserved.

Specifically, the provisions stating that "investment may not be made if, after the investment, the fund would own; 

1) Any combination of obligations of any one political subdivision, corporation, or other single issuing entity in excess of 5% of Fund assets at cost; or 

3) Obligations or other investment issued or guaranteed by the government in excess of 17.5% of Fund assets at cost; provided, however, that this limitation does not apply to the obligations or other investments that are unconditionally guaranteed as to principal and interest by, or supported by lease assignment from another entity whose principal business is outside of American Samoa.

Senator Gaoteote Palaie Tofau expressed his support for Senator Togiola’s stance on retaining the existing provisions in the law, emphasizing their importance as safeguards for the Fund.

Meanwhile, Senator Leatualevao Asifoa suggested that if the Fund is permitted to extend loans to private businesses, it should also consider opening its membership to the private sector, ensuring broader inclusivity and equity.

A report on the American Samoa Government's (ASG) outstanding debts to the Retirement Fund for unpaid employer and employee contributions revealed troubling figures. 

While ASG has managed to pay just $1.2 million towards employee contributions, employer contributions have gone unpaid from August of last year through February of this year. The employee contributions amount to $210,293 per payroll, while the employer contributions total $505,133 per payroll. ASG’s cumulative debt to the Fund now stands at $9.4 million.

Senator Togiola emphasized that the credibility of the Fund is at stake, warning that swift resolution of this debt is essential to maintaining trust and stability.

BACKGROUND

In an Open Letter to ASGERF members, by Fuiavailili Keniseli Lafaele, an ASGERF board member, concerns about the bill aimed at removing the existing 10% cap on investments by the American Samoa Government Employees Retirement Fund within the Territory are highlighted. Samoa News published the open letter in its issue of Wednesday, Mar. 04, 2025.

In his letter he points to the “looming financial crisis” the ASGERF fund is facing, which not only includes the ASG’s $9 million obligation to the fund (they haven’t paid since last year August apparently), and the current use of contributions to fund ongoing monthly benefits instead of investing them as well as drawing from the Fund’s investment portfolio when contribution arrears build up, but also the potential local job losses as the Trump Administration cuts back on grant funding.

“The potential impact on federally funded education, healthcare, and social service programs in the territory remains uncertain. However, one thing is clear—the territory’s economy will be significantly affected, leading to reduced tax revenues that help fund ASG’s matching contributions to the Fund.”

Something not discussed during the Senate Retirement Committee hearing was that “the Senate President and the Senate legal advisor simultaneously serve as the Fund’s chairman and legal advisor, respectively,”  according to Fuiavailili, who states in his open letter that “this dual role compromises governance, weakens oversight, and undermines objective decision-making.”

Fuiavailili also notes that there has been no board meeting held since late October or early November and as a result this bill which seeks to remove the cap on local investments was made without proper board review — “instead the chairman, legal advisor and acting director acted independently of the board”.

(There has been no indication by the new administration when it might reconstitute the retirement board.)

Fuiavailili’s open letter highlights the danger of eliminating key safeguards to the Fund that protect benefit payments from disruption, noting that “securities investments (stocks, bonds, money markets) can be liquidated readily to meet benefit obligations”; while “in contrast, local investments in government and businesses may take much longer to recover the investment and return on investment.”

Another failure Fuiavailili points to is that while “the Fund’s trustees are legally required to meet regularly with its investment managers and consultants,” that since he joined the board in early 2022, “we have not met regularly with our several investment fund managers except the lone contracted investment consultant, whose contract is now expiring, if not already.” Meanwhile, he says, “the financial markets are changing and trending south from their positive positions in 2023 and 2024.”

(Samoa News should point out that the current stock market has fallen by more than a 1000 points due to the Trump Administration’s tariffs against Canada, Mexico and China.)

The open letter concludes that the path forward is for ASGERF members “to formally organize and actively shape the policies governing the Fund”. 

Samoa News understands the Fund’s board does not have a member elected by the Fund’s general membership to sit on the board. Instead the board members are appointed by the ASG — executive branch, and the Fono.