University of Puerto Rico Retirement Board sues college administration for $58M
The University of Puerto Rico’s Retirement Board filed a civil lawsuit against the University of Puerto Rico seeking restitution of some $58 million owed in contributions to the pension plan.
In the 14-page suit filed in the San Juan Superior Court, the representatives of the UPR’s Retirement Board claim that the university breached its duty of paying its employer contribution to the Retirement System, as calculated and recommended by the actuary; payments agreed upon in the closed amortization promissory note; and the reimbursements of administrative expenses.
“Said breaches put at risk the solvency of the Retirement System for the payment of its administrative obligations, and the return-on-investment assets,” the plaintiff stated.
According to the lawsuit, before 2015, the UPR made contributions to the Retirement System at its discretion, not complying with the contributions recommended by the actuaries, which “generated a significant actuarial debt.”
“However, it was not until this year that this information was made public in the financial statements of the UPR, and as a result of new requirements of the actuarial rules (GASB 67/68), the Governing Board and the Retirement Board agreed on a payment plan for the existing actuarial debt. This payment plan is additional to the annual contribution of active participants,” the lawsuit states.
On Feb. 6, 2015, the firm Cavanaugh MacDonald Consulting LLC issued to the UPR Retirement Board an “Annual Actuarial Valuation of the University of Puerto Rico Retirement System,” as of June 30, 2014. The actuaries recommended a contribution of $86.6 million to cover the actuarial debt of the UPR with closed amortization over 30 years for the year 2015.
The same firm issued several more reports in subsequent years in which it detailed its recommendations to further reduce the actuarial debt. The 2018 report showed that the debt had jumped to $96.1 million, and by 2022, the debt stood at $154 million.
In September 2020, the Appellate Court determined that the UPR’s Governing Board did not uphold its fiduciary duty to the retirement system and named the Retirement Board as the substitute trustee.
On June 14 this year, the UPR Retirement System Trust had to sell investment assets worth $5 million to cover the payroll needs for pensioners, loan disbursements, supplier payments and reimbursements of contributions in the insurance of funds, due to the delay in payment of employer contributions from the UPR, which as of May 30, amounted to nearly $3.2 million.
“As of the date this lawsuit was filed, the University of Puerto Rico has not made payments in accordance with its obligations and, consequently, forced the Retirement System Trust to sell assets and appeal before this Court to demand that the UPR pay obligations,” the lawsuit stated.
The UPR formally established the Retirement System Trust of the University of Puerto Rico in 2016.