The Financial Oversight and Management Board for Puerto Rico announced it has referred to the local and federal Justice Departments three government entities and 11 municipalities that allegedly failed to transfer some $4.5 million in withholdings for defined contribution plans into individual employees’ retirement accounts.
“One of the Oversight Board’s highest priorities is to maintain the funding of pension benefits,” said the Oversight Board’s Executive Director Natalie Jaresko. “The people of Puerto Rico need confidence in their pensions. Not to transfer money already withheld from employees’ pay checks into their retirement account is unconscionable and potentially unlawful.”
Puerto Rico Act 106-2017 provides that the head of a government entity that “knowingly and without just cause” fails to remit employee contributions to their defined contribution account could be subject to significant penalties. This conduct may also be a violation of Title 18 of the United States Code 666(a)(1)(A).
On April 30, the Oversight Board informed the Puerto Rico government’s Chief Financial Officer that the latest “PayGo and Individual Contribution Debt by Entity” report by the Puerto Rico Fiscal Agency and Financial Advisory Authority showed that 20 municipalities and seven public corporations had failed to remit about $10 million taken from employee paychecks to a segregated defined contribution account on that employee’s behalf.
The government’s retirement board informed the Oversight Board on May 29 that it had received about $5.5 million of the outstanding contributions
However, three government entities and 11 municipalities, still have not remitted $4.5 million in employee payroll withholdings to those employees’ defined contribution retirement accounts.
The Maritime Transportation Authority, the Integrated Transportation Authority and the Metropolitan Bus Authority, and the towns of Arecibo, Ponce, Ciales, Arroyo, Guánica, Yauco, Maricao, Yabucoa, Naguabo, Vieques and Villalba have been referred to justice officials.
In a brief statement, Puerto Rico Justice Secretary Wanda Vázquez said the referrals have been received and that “if the allegations are true, it is unacceptable.”
“Decades of fiscal mismanagement decimated Puerto Rico’s pension funds,” Jaresko said. “That is why we are extremely concerned about the failure to transfer employee contributions to their individual defined contribution retirement accounts. Those who put at risk the funds in employees’ pensions must be held accountable.”