1. Marshall Islands Social Security Administration
RMI Social Insurance Scheme
Social Security Pension Workshop – International Conference Center
April 25-27, 2016

2. Organization:
MISSA, a component unit of RMI, was established pursuant to RMI Public Law (the Social Security Act of 1990), as amended. The law repealed the Social Security Act of 1987 and established MISSA to administer the Marshall Islands Social Security Retirement Fund.
On March 6, 1991, the Nitijela passed Public Law (the Social Security Health Fund Act of 1991), as amended, which directed MISSA to administer the Marshall Islands Social Security Health Fund.
On April 11, 2002, the Nitijela passed Public Law to repeal the Social Security Health Fund Act of 1991 and to transfer the administration of the Health Fund to RMI’s Ministry of Health (MOH). However, the formal turn over did not take effect until December 1, For accounting purposes, all Health Fund collections starting January 1, 2003, are no longer reflected in MISSA’s books. As part of an agreement with MOH, however, MISSA will still be responsible for the quarterly collection of Health Fund contributions.

3. Organization, cont’d:
Additionally, MISSA is responsible for processing, monitoring and distributing benefit claims under the Prior Service Benefits program.
On March 18, 2013, reforms under Nitijela Bill No. 43 were introduced to amend 18 sections of the Social Security Act of 1990, to provide for changes that will lead to further financial stability of the system by increasing contributions, decreasing benefits and removing loopholes that trigger benefits to uncontrollably increase. The highlights of the bill include increasing the quarterly taxable wages from $5,000 to $7,500 and decreasing benefits by 22% across the board. Unfortunately, the bill was not passed.
In the last five years no law relevant to the social security system in the country was passed

4. Highlights of Bill No. 43
Increase Retirement Fund tax rate from 7% to 9% for both worker and employer contributions
Increase in Taxable Income per quarter from $5,000 to $7,500
The benefit formula was changed that will decrease benefits by 22% across the board.
Changes will increase contributions and decrease benefits by an aggregate total of $ million in an 8-year period; will cover the projected $81.2 million deficit (if bill is not enacted into law) in the same period.
Considered as a temporary fix as it will only extend the life of the fund to another years after which benefits will surpass contributions and the gap will again continue to grow over the years.
Early retirement age was changed from 55 to 60; normal retirement age from 60 to 65;
Others:
The ceiling for MISSA’s administrative expenses was reduced from 20% to 10% of contributions in any given fiscal year.
Non-citizens may elect to claim a lump sum benefit of 80% of workers’ contributions.
Inclusion of jail terms for employers who fail to pay social security contributions
Mismanagement of MISSA funds to be considered a felony.

5. Contributions:
workers and their employers each contribute a percentage of their wages to the Retirement and Health Funds according to the following schedule:
Retirement Fund
3% for wages paid from October 1, 1987 to June 30, 1990
4% for wages paid from July 1,1990 to Sept. 30, 1990
5% for wages paid from October 1, 1990 to June 30, 1995
  6% for wages paid from July 1, 1995 to March 31, 1997
5% for wages paid from April 1, 1997 to Dec. 31, 2000
7% for wages paid from January 1, to present

6. Contributions (cont’d…):
Health Fund
2.5% for wages paid from October 1, 1991 to March 31, 1997
3.5% for wages paid from April 1,1997 to December 31, 2000
2.5% for wages paid from January 1, 2001 to December 31, 2001
  3.5% for wages paid from January 1, 2002 to present
Benefit programs:
A. Retirement benefits
1. Early retirement benefits - claimant must have attained the age of 55 and earned at least 80 quarters of coverage.
2. Normal Retirement benefits – claimant must have attained the age of 60 and earned at least 38 quarters of coverage.

7. A. Retirement benefits (cont’d…)
Benefit programs:
A. Retirement benefits (cont’d…)
3. Deferred retirement benefits – claimant must have attained the age of 60 and one month, earned at least 38 quarters of coverage and have not applied for and received early retirement benefits or normal retirement benefits.
B. Disability benefits - claimant must have earned at least 38 quarters of coverage and be “currently insured” and must be or have been unable to engage in the continued performance of his duties by reason of any medically determinable physical or mental impairment.
“Currently insured” means having earned at least six quarters of coverage during the most recent forty (40) quarters ending with the quarter of the worker’s retirement, disability or death, whichever first occurs. Currently, the minimum disability insurance benefit is $  

8. Benefit programs:
C. Survivor benefits
Surviving spouse insurance benefits – the surviving spouse of a worker who is fully insured and dies is entitled to a surviving spouse insurance benefit of 100% of the “basic benefit”, subject to the maximum and minimum survivor benefits, and subject to the earnings test. This is paid until remarriage or until death of the surviving spouse, whichever occurs first.

9. Benefit programs:
C. Survivor benefits (cont’d…)
2. Surviving child insurance benefits – each surviving child of a worker who is fully or currently insured and dies is entitled to a surviving child’s insurance benefit of 25% of the basic benefit; provided, however, that the total monthly survivor’s insurance benefits payable to both Surviving Spouse and the Surviving Children shall neither exceed the basic benefit applicable to the deceased wage earner nor be less than $128.99; and where more than one person is entitled to survivor’s benefits, the payments shall be made to all such proportionately to the percentage of basic benefit due them.

10. Benefit programs:
D. Lump-sum benefits
Due if claimant has reached the age of 60 but has not earned the minimum of 38 quarters of contributions;
Due if monthly survivor benefits are not paid or are stopped because all beneficiaries become disqualified as a result of death, remarriage, adoption, attainment of 18 (or age 22 if a bona fide student), or recovery from disability, a lump-sum benefit is due; provided that the benefits paid for under the wage earner’s account are less than 4% of his CCE.
The amount of lump-sum benefit equals the total CCE multiplied by 4% less the total monthly benefits already received under the wage earner’s account.

11. FINANCIAL HIGHLIGHTS (In Million US Dollars)
9/30/ /30/ /30/13
Net assets $ $ $72.99
Market Value of Investments as of Jan. 31, 2016
Local $13.57
Foreign
Total $63.72
9/30/15 9/30/14 9/30/13
Investment Gain (loss)
Local investments $ $ $0.90
Foreign investments (0.96)
Net gain (loss) $ $ $8.04

12.
Contributions $13.70 $13.89 $12.70 $13.31 $12.45
Benefits
Deficit ($7.12) ($5.37) ($5.74) ($3.80) ($3.80)
Drawdowns $6.5 $ $4.0 $ $2.30

13. Beneficiaries as of Jan. 31, 2016
Count % to total Monthly Benefit
Old age retirees 2, % $1,126,719
Medical retirees ,624
Surviving spouses 1, ,739
Surviving children ,130
TOTAL , % $1,712,212
Average monthly benefit : $378.64
Minimum benefit per month : $128.99

14. Percentage of Collection
Collection rate if based in the number of employers %
Collection rate if based in amount collected %

15. ACTUARIAL VALUATION
Note: Comparatively, accrued liability decreased in 2014 by $23 million. This was caused mainly by the inadvertent inclusion of certain deceased beneficiaries in the data provided to the actuary during the 2013 valuation. These erroneous data have already been cleaned out from the MISSA system.

16. The urgent need for RESTRUCTURING the present system….
Excerpts from latest actuarial study:
“While the participants currently receiving benefits have received, on average, four (4) times of their lifetime tax payments to the System, the current plan design projects that these participants will collect an additional nine (9) times of their lifetime payment to the System. Conversely, the participants who have yet to receive benefits from the System will not receive their benefit entitlements given current projections.”

17. Option 1: No change to the present system

18. Option 2: Liquidate MISSA Assets and distribute on a pro-rata lump-sum payment
Net Assets as of December 31, 2015 totaled $66.43 million, decreased by $5.38 million from last year due to investment withdrawals and decrease in the fair market value of MISSA investments;
If assets are liquidated, it will be distributed pro-rated to the following (approximately half of his lifetime contributions):
4,522 retirees and survivors
1,500 inactives but fully insured
9,000 current workers not receiving benefits
15,022
MISSA assets (as of Dec. 31, 2015) that may be liquidated in a short period of time totaled $51.5 million, comprised mainly of foreign investments.
Other assets (as of Dec. 31, 2015) that may be liquidated over a longer period of time amounted to $13.33 million, mainly comprised of local investments (MIHI/BOMI/MISCo)

19. Benefit reduction is 34.20% in 2016.
Option 3: Pro-rated benefits based on Contributions collected form prior year
Contributions in FY 2015 totaled $13.89 million; projected to remain flat at $13.70 million in FY 2016.
Benefits in FY 2015 amounted to $19.26 million; expected to increase to $20.82 million (or 7.8% increase) in FY 2016.
Benefits in the current year should not exceed contributions collected from the previous year
Benefit formula for FY 2016:
Percentage of benefit that will be paid: $13.70 million divided by $20.82 = 65.8%
If regular benefit is $500 per month: 65.8% of $500 will be paid = $329
Benefit reduction is 34.20% in 2016.

20. Option 4: Hybrid plan with maximum benefits
Plan A – Maximum lifetime benefits
Divide participants into 2 groups with a split of the current Fund into two smaller funds for Groups 1 and 2
Group 1 – those who are currently receiving benefits; set a maximum benefit of 3X of contributions, after which:
a flat rate of $150 will be paid monthly; OR
a one time lump sum benefit will be paid as a final payment; OR
those in this group will continue in the current system with benefit category bands of $900, $700, $500, $300 with a minimum benefit of $150 monthly. Additionally, those who have received more than 3X of the contributions will get 70% of their benefits before category bands are applied; AND
There is no survivor benefits after death for retirees when lifetime maximum benefits have been reached.

21. Option 4: Hybrid plan with maximum benefits
Group 2 – those who are not currently receiving benefits:
Retirement age is 60 years and at least 40 quarters of contributions; no early nor deferred retirement allowed.
Maximum benefit may range from two (2) times up to three (3) times the wage earner’s lifetime contributions (wage earner’s share only), depending on age and number of quarters of contributions. Retiree is given the option to choose to receive monthly benefits ranging from 60 months (5 years), 120 months (10 years) and 180 months (15 years). If a retiree opts for 5 years, he will only get 75% of the benefits due; if 10 years, will get 100% of the benefits due; and if 15 years, will be given 125% of the benefits due.
Minimum benefit will be $150 monthly.

22. Option 4: Hybrid plan with maximum benefits
Group 2 : Example 1 - if a worker earned the maximum taxable wages of $20,000 per year and contributed $28,000 for 20 years, he is entitled to get 3X his contributions amounting to $84,000. If, upon retirement, he chooses to receive benefits over a five-year period (60 months), he gets $1,050 per month or 75% of the total benefits due per month. If he prefers 15 years or 180 months, he gets $583 per month or 125% of the total benefits due per month.

23. Option 4: Hybrid plan with maximum benefits (cont’d…)
Group 2 : Example 2 –
Assuming wage earner is receiving minimum wage of $2 per hour;
Total wages for one year = $5,008
365 days - 52 Sundays = 313 working days
313 days = 2,504 hours X $2 per hour =
$5,008

24. Option 4: Hybrid plan with maximum benefits (cont’d…)
Plan B – Individual Retirement Accounts
Group 1 – those who are currently receiving benefits and those who are not currently receiving benefits 50 year and older. Set a maximum lifetime benefit of 3X of contributions, after which:
a flat rate of $150 will be paid monthly; OR
A one-time lump sum benefit will be paid as a final payment; OR
Those in this group will continue in the current system with benefit category bands of $900, $700, $500, $300 with a minimum benefit of $150 monthly. Additionally, those who have received more than 3X of the contributions will get 70% of their benefit before category bands are applied; AND
There is no survivor benefits after death for retiree when lifetime maximum benefits have been reached.

25. Option 4: Hybrid plan with maximum benefits (cont’d…)
Plan B – Individual Retirement Accounts
Group 2
Go into new individual accounts or private savings accounts; and
Everyone will get 80% of their pro-rata share of their contributions; and
Everyone under 45 will get 60% of their pro-rata share of their contributions

26. End of presentation Thank You!