K255 million in unfunded liabilities is still owed by the State to the Defence Force Retirement Benefit Fund (DFRBF) by the State.
Trustee and manager of the DFRBF, Comrade Trustee Services Limited (CTSL), says they are currently working hard to ensure the unfunded liability is paid this year.
Once the unfunded liability is settled by the State, CTSL can pay out Papua New Guinea Defence Force personnel who have surpassed the retirement age but have not been retrenched due to the their unfunded liability.
CTSL revealed during the announcement of the DFRBF’s 2020 Financial Performance that the State still owed K255 million to the DFRBF in unfunded liability.
Last the year CTSL secured from the State K34 million in which K18 million was used to pay retirees from 2018 to January 2020.
Statutory Manager, Sitiveni Waleilakeba, said with the assistance of the PNG Defence Force Commander, Gilbert Toropo, they managed to secure three times more than their annual allocation.
“Our normal allocation is about K9 million to K12 million a year. We were able to collect K34 million last year that is purely from the effort that we took and the approach we took to ensure that we collect more. So we collected almost three times more than what our normal allocation that the State gives us every year. So that was a win-win for us because we were able to bring in more money and bulk of that money was used to retire people who were over 55 but not able to retire. There were some left over from 2018, we retired the whole of those who were supposed to retire in 2019, and the first quarter of 2020. So these enabled us to clear all their areas,” said Waleilakeba.
“So this year we are hoping that we get the same route to ensure that we collect more, or collect the whole of the unfunded in our books. Right now at this point in time, the State owes us K255 million in unfunded liabilities. That’s the amount that we are trying our very best this year to make sure that its paid to us.”
CEO, Charlie Gilichibi, said under the unfunded liability, members affected will lose on the real value of interest rate generated by the Fund at the end of the year.
Gilichibi said the loss of interest claim to the State on unfunded liability still does not represent what the members could have earned if the DFRBF had the funding.
For 2020, CTSL announced a profit of K24.65 million and a 5% Crediting Rate for members.
“In realty there is an erosion of value for our members when the K255 million is sitting with the state. If we have it, it will be earning much more than it being sitting with the state. Members do claim on loss of interest and we invoice the Treasury Department, but that loss in interest is not the same as if we had the money up front and we put it in some really good fixed income that’s generating really good returns,” said Gilichibi.
Waleilakeba said the unfunded liability issue also affects the PNGDF annual Budget, and they are working closely with the PNGDF Commander to ensure a win-win for them.
“If you look at it it’s a double whammy, the people who are supposed to retire are still in the barracks, they get free water, free power, free everything, but it affects the budget of the Defence Force,” said Waleilakeba.
“So those members have now got their funds, and now retired, and they have left the force, tere is no direct cost for the military. So the people who are supposed to be going upward, they can now take over those amenities from the retirees. The effort we put here, that’s why we involve purely the effort of the commander to do this because it affects him as well. So it’s been a good journey last year and we hope to achieve more on that front this year.
CTSL says it intends to ensure the unfunded debt is settled to avoid a similar situation in which the State owes Nambawan Super Limited over K2 billion in unfunded liability.
“While the debt is still small, we want to clear it because we do not want to end up like Nambawan Super, it becomes a major issue for the Government, because now they owe K2.2 billion. But they started very small. So this is the effort we are putting in to ensure that we address it quickly so that this thing does not build up to that type of money, because then the Government will find it difficult to address it because the money has increased to billions,” said Waleilakeba.