U.S. Virgin Islands – V.I. Attorney General Denise George announced today that the Third Circuit Court of Appeals issued its decision in the cross appeals by the Government of the Virgin Islands and the Government Employees Retirement System regarding the amount of missing employer contribution, including interest and penalties, due to GERS, and whether the 1984 Consent Judgment obligates the Government to pay the Actuarially Determined Employer Contribution (“ADEC”) as the GERS claimed. The Third Circuit affirmed in part and vacated in part the February 2, 2020 and April 3, 2020 Judgment of the District Court and remanded the case for further proceedings.
As it relates to the Government’s appeal challenging the District Court’s award of principal in the amount $18,860,879 for employer contributions and $49,282,627 in interest and penalties for a total award of $68,143,506, the Third Circuit affirmed the award of the principal and $6,121,273 in interest on unpaid employer contribution during the period 2010-2018. In March 3, 2020, the Government paid GERS $5 million, therefore, only $13,860,879 of the principal is currently due to GERS. The Third Circuit further held the District Court “erred when it enhanced the award by applying late-arriving interest and penalty statutes retroactively.” It explained that “[n]either the delinquency-fee provision nor the interest statute contains any express indication that the legislature intended retroactive application. And the GVI asserts with, no contrary indications from GERS, that ‘that there is no legislative history reflecting intent to apply retroactively 3 V.I.C. §§ 704 and 736.’” As a result of the impermissible retroactive application of the statutes, the Court vacated the portion of the Judgment awarding the GERS interest and penalties of $43, 161,354 on unpaid employer contribution during the period 1991-2009. Based on the Third Circuit’s ruling, the total award to GERS was reduced from $68 million to approximately $25 million. It should be noted that during the District Court proceeding GERS claimed that it was owed over $72 million in past due employer contributions from 1991 to 2017 in addition to interest and penalties.
As it relates to the GERS appeal of the District Court holding “that the consent judgment does not require the GVI to fund GERS for the delta between its assets and liabilities,” the Third Circuit in affirming the District Court on this issue also found “no anchor for this sweeping duty GERS seeks to impose on the GVI.” The majority agreed “that the consent judgment does not obligate the GVI to contribute billions to actuarily equalized GERS’s assets and its liabilities to pensioners,” as “[t]he text to the statute (section 718(f)) and GERS’s cited authorities do not support imposing an obligation solely on the GVI to the point of actuarial soundness.” The Third Circuit went on to state that the “statutes do not provide a mechanism for keeping GERS actuarily funded if that fixed rate funding structure comes up short—whether because of proliferating unfunded mandates, GERS’s own mismanagement, flawed actuarial projections, or the like.” The appellate court expounded that “saddling the GVI alone with the obligation to fund the GERS to the point of actuarial soundness is, at best, inconsistent with the text of Section 718” and a “more natural reading of Section 718(f), then, is that actuarial soundness is a function of all of the following: the GVI’s contributions as employer, its employees’ contributions, and GERS’s investment income earned through prudent financial decisions. Echoing the Government’s argument that the remedy for GERS’s troubles could not be found in the courts, the Third Circuit in its opinion explained that “were we to cut that obligation on a rationale made of whole cloth, the system would remain insolvent. The citizens of the United States Virgin Islands—population 106,405—simply cannot pay the necessary billions. The cure for GERS’s chronic underfunding is not judicial but legislative—if not at the territorial level, then perhaps on Capitol Hill.” In its conclusion the Third Circuit poignantly explained that it had to “take off the table tens of millions of dollars in enhancements that were awarded to GERS under an unsupportable retroactive application of Virgin Islands law. We have no doubt that GERS needs more—possibly billions more—to fend off insolvency. But as members of the Third Branch, we can neither write legislation nor levy taxes. And we are powerless to re-write imperfect but unambiguous statutes even if doing so would make them better serve the needs of their intended beneficiaries.”
FOR IMMEDIATE RELEASE
April 9, 2021
Sandra Goomansingh
Media Relations Director
(340) 774-5666 ext. 10105
Email: sandra.goomansingh@doj.vi.gov