WASHINGTON — The Northern Mariana Islands Retirement Fund has filed for Chapter 11 bankruptcy protection, in what may be the first such filing by a public pension plan.
“I don’t know of any other pension funds that have filed for bankruptcy,” said James Spiotto, a partner and bankruptcy expert at Chapman and Cutler LLP in Chicago.
“Certainly none have filed under Chapter 9, but they are not a municipality, they are a territory,” so Chapter 9 would not apply in their case, he said.
The fund’s website contains a two-page letter telling its members about the bankruptcy filing.
“We are not liquidating or closing the fund; we are just restructuring the fund’s obligations to align them with the fund’s current assets and revenues. Without such steps, there is a significant risk the fund would be unable to continue operations beyond the middle of 2014,” the letter said.
“The fund is not looking to eliminate your rights to receive benefits and we have every intention to recover any unpaid contributions from the government. However, until we are able to collect, this process allows us to continue making benefit payments at a sustainable level until such time as we are able to improve our funding level.”
“We intend to use all tools and remedies made available through this federal court process to cause the government to fulfill its past and future funding obligations,” the letter said.
The Northern Mariana Islands Commonwealth has municipal bonds outstanding, according to the Municipal Securities Rulemaking Board’s EMMA site. It most recently issued refunding bonds in 2007. There do not appear to be any annual financial or operating statements filed on the EMMA site.
The bankruptcy filing was first reported by Investment News.
The pension plan is only funded at 38.8%, because of low investment returns and benefits that have been increased without corresponding increases in funding, according to article that appeared online Thursday.
The fund currently holds $268.4 million in assets, but faces $911 million in liabilities, the article said.
The letter the fund posted said that it has been warning for years that its assets would be depleted if contributions were not increased to appropriate amounts and future benefits were not adjusted to sustainable levels.