SAN JUAN — Puerto Rico faces a $14 billion unfunded pension liability and will not have sufficient funds available to pay retirees in eight years unless it implements reforms to the system, government officials warned Thursday.

Gov. Luis Fortuño announced he will form a special commission to analyze the pension system, which is only 17% funded. The panel will have six months to craft suggestions to help repair the pension program.

The governor and Carlos Garcia, president of the Government Development Bank for Puerto Rico, the island’s financial adviser, announced the special commission and the severity of pension woes at the 2010 Puerto Rico Credit Conference in San Juan.

“We will run out of assets in eight years,” Garcia told The Bond Buyer. “If we don’t do something about the unfunded pension liability, the estimated turnoff of the assets is eight years. So that’s why it is of great importance to take action, but it will have to be very well-analyzed.”

Fortuño did not give details of possible changes to the pension system, such as increasing employee contribution rates or limiting benefits. During the next few days he will select individuals for the special committee from different sectors, including labor leaders, to help identify potential strategies.

“I think this has to come from a diverse group that will actually bring forward specific recommendations,” Fortuño said during a press conference. “I don’t expect one recommendation, I expect a myriad of recommendations, and then we’ll be able to implement a few of them and perhaps it’s a program that takes a number of years to implement.”

Puerto Rico’s pension system covers employees hired before 2000 who receive a defined-benefit plan, similar to a traditional pension plan, and workers hired after 2000 who pay into a defined contribution plan, similar to a 401K.

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