Talofa American Samoa Government Employees Retirement Fund Members,
I write to bring urgent matters regarding our Retirement Fund (Fund) to your attention. Transparency is critical, and you deserve to be fully informed about our challenges and the necessary actions to safeguard our future.
A Looming Financial Crisis
During his address at the opening of the Fono in January, Governor Pulaali’i Pula warned of a projected $55 million budget shortfall for FY-2025, which includes a $9 million debt owed to ASGERF. This figure could be even higher if outstanding obligations from agencies such as ASPA, ASTCA, ASCC, LBJ Hospital, and Feleti Library are not included in the $9 million debt.
Currently, contributions are being used to fund ongoing monthly benefits rather than being invested, forcing the Fund to draw more than usual from its investment portfolio when contribution arrears build up. This practice stifles growth and weakens the Fund’s long-term sustainability.
Furthermore, the Trump administration’s restrictive spending policies have already resulted in local job losses, with more anticipated. The potential impact on federally funded education, healthcare, and social service programs in the territory remains uncertain. However, one thing is clear, the territory’s economy will be significantly affected, leading to reduced tax revenues that help fund ASG’s matching contributions to the Fund.
Governance and Management Failures
Recent Senate hearings have exposed serious governance failures within the Fund, including:
Conflict of Interest: The Senate President and the Senate legal advisor simultaneously serve as the Fund’s chairman and legal advisor, respectively. This dual role compromises governance, weakens oversight, and undermines objective decision-making.
Lack of Board Meetings: No board meeting has been held since late October or early November. As a result, critical decisions—such as the recent reintroduction of the bill to remove the cap on local investments—were made without proper board review. Instead, the chairman, legal advisor, and acting director acted independently of the board.
Unclear Legal Framework: The Senate’s discussion of the cap on local investments failed to clarify whether the legal limit is 10% or 17%, a critical issue that must be addressed. Secondly, Senator Togiola has argued (to be confirmed) that ASG’s matching contributions to the Fund are government assets. If this interpretation prevails, ASG could claim these assets to offset its unpaid contributions, posing a serious risk to Fund stability. This requires urgent legal clarification from Fono attorneys, the Governor’s legal advisors, and the Attorney General.
Eliminating Key Safeguards: The proposed removal of the cap on local investments threatens critical safeguards that protect benefit payments from disruption. Senator Togiola rightly pointed out that certain guardrails must be included in the law to safeguard the Fund. Securities investments (stocks, bonds, money markets) can be liquidated readily to meet benefit obligations. In contrast, local investments in government and businesses may take much longer to recover the investment and return on investment. Any amendment to the retirement fund law must be thoroughly vetted along with the Fund’s investment policy.
Questionable Contribution Increases: If I recall correctly, the actuary recommended a contribution rate of 16%, yet the law mandates 20%. This discrepancy suggests a breakdown in communication between the ASGERF, the previous administration, and the Fono. This must be addressed and corrected.
Failure to Engage Investment Managers: The Fund’s trustees are legally required to meet regularly with its investment managers and consultants. However, since I joined the board in early 2022, we have not met regularly with our several investment fund managers except the lone contracted investment consultant, whose contract is now expiring, if not already. Meanwhile, the financial markets are changing and trending south from their positive positions in 2023 and 2024.
Overall, the Fund lacks proper governance and management. Something must be done about it.
The Path Forward
There is only one viable course of action for ASGERF members: Formally organize and actively shape the policies governing the Fund. You do not need to wait for elections in two or four years to make your voice heard. With strength in numbers, you can influence public policy now.
Signed,
Fuiavailili Keniseli Lafaele
