Puerto Rico's governor on Wednesday signed a law that establishes a pay-as-you-go pension plan and sets aside $2 billion this year for tens of thousands of retirees who depend on a public pension system that's expected to run out of money next month.
Gov. Ricardo Rossello said the government's general fund will now be responsible for ensuring retirees get a monthly check, and that the new defined-contribution plan will operate similar to a 401K retirement savings program. The current system faces nearly $50 billion in liabilities.
"If we had left things as they are, our retirees starting as early as September would not have received pension payments that they worked decades for in public service," he said.
The announcement comes just weeks after a federal control board overseeing Puerto Rico's finances said the pension system will face a 10 percent cut given the island's deep economic crisis. Government officials rejected that measure and said they would create their own law to protect retirees.
Board members did not immediately respond to a request for comment. The board also has said that all newly hired employees in Puerto Rico will be enrolled in Social Security. Currently, local teachers and police officers do not receive Social Security and depend solely on the public pension system.
Those representing retired Puerto Rico union workers lamented the new law was approved without any public hearings or input from retirees. They also said that any cut to the public pension system would be devastating.
"We have retirees who receive $500, $800 a month, and they can't live off of that," said Dwight Rodriguez, president of a federation representing retirees of the Puerto Rican Workers Central union.
Andres Miranda, vice president of that federation, said in a phone interview that his organization also wants an investigation into why the public pension system is nearly depleted.
"The crisis that the system faces is caused by the government, not the retirees," he said.
Puerto Rico is entering its 11th year of recession and seeking to restructure a portion of its $73 billion public debt load, accumulated in part because previous administrations borrowed billions of dollars to cover increasing deficits. The board already has voted to impose furloughs that will affect tens of thousands of employees starting in September.
A large protest is planned for next week to reject furloughs as well as looming pension cuts and the privatization of certain government operations.