"DEBT, DISCIPLINE, AND THE DUTY TO PROTECT OUR FUND"

Dear Fellow Citizens, Lawmakers, and Guardians of the Public Trust,  

The recent House hearing, as reported by Talanei News, on the American Samoa Government’s $13.9 million debt to the American Samoa Government Employees Retirement Fund (ASGERF) marks an essential step in a long-overdue reckoning. The facts are now on the record: the debt is real, the violations are evident. The impact on our workers, retirees, and the long-term solvency of the Fund is undeniable.

This letter is not a technical memo. It is a fiduciary call to action — a reminder that what we do next will determine whether we honor our promises or become complicit in breaking them.

THE DEBT: Real, Legal, and Growing

As of June 30, 2025, the American Samoa Government owes $13.9 million to the Fund, comprising $12.2 million in unpaid employer contributions and $ 1.7 million in employee contributions withheld from paychecks but never remitted. The latter alone constitutes a breach of legal trust. These are not discretionary funds. These are workers’ retirement savings, held in trust by law.

This nonpayment violates the law. However, more importantly, it violates the principle of fiduciary responsibility that underpins every pension system.

Let us be clear: When government withholds pension contributions from an employee's paycheck and fails to remit them to the Fund, that is not an accounting oversight — it is the erosion of trust in its purest form.

DANGEROUS OPTIONS: Not All Paths Are Equal

Several options have surfaced to “retire” this debt. Each deserves serious scrutiny — not just for its feasibility, but also for its long-term consequences.

Using ARPA Funds

On the surface, using ARPA (American Rescue Plan Act) funds appears to be the easiest fix — liquid, available, and already appropriated. But serious legal questions remain. Federal guidance on ARPA restricts its use for direct pension contributions, and while some argue this case is unique — because it addresses withheld employee contributions — others in the legal and ARPA offices remain unconvinced.

If pursued, this option must be:

- Justified clearly under ARPA guidelines

- Explicitly targeted to the employee portion of the debt (approximately $1.7 million)

- Disclosed fully to the public and Fono with legal backing

The risk of misusing ARPA funds is not just an audit finding — it could trigger federal clawbacks, undermine future grant eligibility, and erode public trust.

Renegotiating Contribution Rates

Lowering the government’s contribution rate might offer short-term fiscal relief, but at a steep long-term cost. ASGERF’s current funded status — 52% — is already below the 80% benchmark considered minimally healthy. Reducing contributions would erode this further. We do not solve a crisis by undermining the very structure meant to fix it.

Converting the Debt to a Loan

This may seem rational — formalize the debt, stretch repayment. But let us be honest: borrowing from the Fund to repay what is already owed to the Fund is a circular maneuver. It raises serious fiduciary questions. Would any financial adviser recommend lending money back to someone who has not paid what they owe?

MISGUIDED REASONING: A Flawed Sense of Fiscal Security and Confusion Over the Numbers

The Treasurer testified that the increase in ASG contribution rates was enacted during a time of pandemic-related federal windfalls — over $1.5 billion in stimulus — and while he did not say those funds caused the increase, he rightly noted that the timing gave local decision-makers a false sense of fiscal security. With federal aid now gone or about to expire, he argued, the government can no longer afford the higher rates under its regular budget.

This is a fair observation. However, the critical issue remains:

Contribution rates must reflect actuarial realities, not temporary fiscal highs.

Actuaries recommended increasing contribution rates to prevent the Fund from collapsing by 2040. That necessity did not disappear with the end of stimulus funding — it has only grown more urgent. The fact that ASG may not be able to afford its obligations under a “normal” budget is a budgeting issue, not a justification for shortchanging the Fund.

To reduce contributions now — because stimulus funds have dried up — is to treat the symptom rather than address the disease. It reveals a more profound truth: ASG’s budget structure is out of sync with its long-term obligations to its workers.

However, a more profound concern lies here — confusion over what the actuarially recommended rate is.

In a board meeting before or during the time the increases were enacted, I recall the Executive Director stating that they had advocated for a total contribution rate of 16%. They were reportedly surprised when the Governor, who had previously denied contribution increases twice due to a lack of a revenue source, proposed a 20% increase.

In a later board meeting in 2024, after the 20% increase was fully implemented, I recall the Chairman expressing second thoughts about the contribution increases due to the growing contribution receivables ($9 million at the time), suggesting the employer contribution should be reduced back to 8% (from 14%).

This discrepancy raises a serious governance question:

What was the actuary's actual recommendation — 16%, 18%, 20%? And on what funding assumptions?

The Fund’s fiscal future must not hinge on informal preferences or surprise policy moves. It should be anchored firmly in actuarial evidence.

I urge the Fono to formally request and publish the actuarial report that led to the proposed increases, so this matter is no longer decided in the shadows of internal discussions but illuminated by public, professional guidance.

Only then can contribution rates — whether sustained, adjusted, or phased — be debated responsibly.

THE PENSION EQUATION: A Simple Truth Too Often Ignored

The health of a pension system can be boiled down to a simple formula:

C + I = B + E

Contributions (C) plus Investment Returns (I) must equal Benefit Payments (B) plus Expenses (E).

But here lies the rub: more often than not, ASGERF overspends on administrative operations (E). Instead of reducing expenses, we rely on the other three components — particularly investment returns — to make up the shortfall. That’s not sustainable.

No fund can invest its way out of chronic overspending. We need governance discipline. We need transparency in operating budgets. And we need a lawmaker-enforced cap on administrative costs as a percentage of total Fund assets.

This Is About Promises, Not Just Numbers

The Fund exists for one reason: to ensure that government workers — teachers, nurses, police officers, and civil servants — can retire with dignity. Every dollar diverted, withheld, or delayed jeopardizes that mission.

The time for evasions is over. The Fono must do its job: enforce the law, protect the Fund, and restore public confidence.

I urge every legislator, every trustee, and every citizen to remember this:

When the government betrays its duty to its workers, it erodes the very trust on which democracy stands. This is not just about numbers. It is about trust, responsibility, and the promises we keep — or break — to those who have served.

Sincerely,

Fuiavailili Keniseli Lafaele

Former Secretary- Treasurer, ASGERF Board of Trustees