2. History
July 1, 1968 – Establishment of Trust Territory Social Security Administration
July 1, 1974 – Establishment of disability program
February 8, 1983 – Establishment of FSM Social Security Administration

3. System Objective
Purpose – to effect economy and efficiency in the fields of government and business by providing a means whereby employees may be ensured a measure of security in their old age and given an opportunity for leisure without hardship and complete loss of income, and, further to provide survivors insurance for wage earners and their dependents.
Benefits were not meant to replace salaries.

4. FSMSSA… A Defined Benefit Plan
As a defined benefit plan, the FSM Social Security System’s design, as mandated by law, is to have the current working force pay for the current benefits.
Controls are put into place by law that determine who is eligible for benefits, how much they are eligible for and conditions and requirements for continued eligibility.

5. Types of Benefits Retirement Surviving spouse Dependant children
Disability
Lump sum

6. Eligibility Definitions
Fully insured
Retirement & Survivors – 50 quarters of coverage and $2,500 in contributions
Disability – 45 quarters of coverage and $1,500 in contributions
Currently insured – to have earned at least 20 quarters of coverage within the 25-quarter period immediately preceding death or disability.

7. Eligibility Criteria Requirements for each benefit type: Retirement
Fully insured
Reach retirement age
Disability
Fully insured & currently insured
Disabled and has been disabled for 3 full months
Disability means the inability to engage in any gainful employment by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last no less than 12 months
Surviving spouse
Married to an individual who died fully insured
Not remarried
Not working
Surviving children
Fully or currently insured
Lump sum (regular and optional)
When eligibility for regular monthly benefits is not attained

8. Benefit Formula
The Retirement, Survivors and Disability Benefits are being calculated on an annual basis of 16.5% of the first $10,000 of cumulative covered earnings, plus 3% of cumulative covered earnings in excess of $10,000 but not in excess of the next $30,000, plus 2% of cumulative covered earnings in excess of $40,000 but not in excess of the next $262,500, plus 1% of cumulative covered earnings in excess of $302,500:
Total Taxable Wages:
$360,000.00
10,000.00 X
16.5%
1,650.00
30,000.00 3%
900.00
262,500.00 2%
5,250.00
57,500.00 1%
575.00
8,375.00
divided by 12 =
$697.92

9. Miscellaneous Statistics
Wage Earner Counts (CY 2015)
Employers
796
Employees
17,103
FSM Total Population – 102,843

10. Miscellaneous Statistics
Total Number of Beneficiaries - 6,402

11. Financial Statements Unaudited Audited 2015 2014 2013 Revenue
Unaudited
Audited
2015
2014
2013
Revenue
17,632,365
17,714,633
17,321,187
Appropriation from FSMNG
2,000,000
1,000,000
Total Revenue
19,632,365
18,714,633
18,321,187
Benefits
19,240,092
18,985,730
18,431,757
Administrative Expenses
1,202,751
1,121,569
1,153,150

12. Valuation Results 2009 2011 2014 Actuarial Accrued Liability (AAL)
Active Workers
$130,729,000
$138,786,00
$128,270,000
Deferred Vested
32,542,000
38,601,000
50,135,000
In Pay Status
105,920,000
110,384,000
129,208,000
Total Accrued Liability
$269,191,000
$287,771,000
307,613,000
Assets
(36,717,000)
(42,361,000)
(49,134,000)
Unfunded AAL (UAAL)
$232,474,000
$245,410,000
$258,479,000
Funded Percent
14%
15%
16%

13. Total Deficiency 2009 2011 2014 Total Accrued Liability $269,191,000
$287,771,000
$307,613,000
Market Value of Assets
(36,717,000)
(42,361,000)
(49,134,000)
Current Value of Excess Employee Contributions from Active Workers
(63,250,000)
(58,083,000)
(68,422,000)
Total Deficiency*
$169,224,000
$187,327,000
$190,057,000
*The current value of excess employees contributions from active workers includes an allowance for future system expenses.

14. Projected Funded Status

15. Projected Funded Status

16. Investments 8% targeted annual returns Asset Type Allocation
Large Value Equity
12.5%
Large Core Equity 5%
Large Growth Equity
SMID Core Equity
10%
Non-US Equity
15%
Core Fixed Income
20%
Intermediate Fixed Income
Master Limited Partnerships
U.S. REIT
8% targeted annual returns

17. Making Changes, 2000 to Now 2000 Increased tax rate to 6% 2003
Introduced retroactive limits to benefits, 12 months for retirement and survivors and 24 months for disability
2005
Increased taxable wage base from $3,000 to $5,000
2006
Paid foreigners lump sum benefits equal to contributions
Created voluntary contributions program (local and abroad)
2007
Introduced minimum contribution requirements ($2,500 for retirement and survivors and $1,500 for disability)
Introduced fourth tier to benefit formula to counteract increasing benefits
2008
Increased quarterly taxable wage base from $5,000 to $6,000

18. Making Changes, 2000 to Now
2009
Modify language in the law to give FSMSSA more options and authority in collecting delinquent taxes
Change investment law to allow Triple B bonds
Allow international investments through ADRs
2010
Increased quarter requirement for retirement and survivors to 50
Increased quarter requirements for disability to 45
Reinstated currently insured status as a requirement for disability
Increased tax rate to 7%
2011
50% to retirees from age 60 to 64
2013
Tax rate increased to 7.5%
Quarterly tax rate increased to $7,000

19. Proposed Amendments
Elimination of taxable wage base – Net impact on the System would be net increase of $1.63 million
Inclusion of new benefit tier at 1% - Decrease unfunded liability by approximately $22 million
Inclusion of new rule that requires all fishing vessels registered in FSM and under FSM Flag to pay SS tax – Increase annual collections by $1.755 million
Requirement that all FSM residents to pay SS tax into FSMSS system regardless of participation in another SS system
Allow retirees at age 65 to receive 70% of the calculated benefit while being able to work with no earnings test except this reduction is permanent – Unfunded liability would decrease by approximately $14 million and the annual benefits, in the short term, would increase by approximately $300,000
Inclusion of a maximum benefit – if $1,000 benefit cap is put in place, the unfunded liability would decrease by approximately $7.3 million
The use of revenue interest from a $10 million loan from the National Government Trust Fund – At 7.5% annual return, this would yield an additional $750,000 return per annum

20. END