Government EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS 
OVERVIEW OF OPERATIONS 
Presented to 
Committee on Finance 
30th Legislature of the United States Virgin Islands 
 
Presented by: 
Austin L. Nibbs, CPA, CGMA—Administrator 
 
Earle B. Ottley Legislative Hall 
Thursday, October 17, 2013 
St. Thomas, U.S. Virgin Islands 
FISCAL 
Government Employees’ Retirement System                                                                          October 17, 2013 
Annual Overview of Operations  
 
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GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM 
Annual Overview of Operations  
 
TABLE OF CONTENTS 
 
 
 
Introduction…… ................................................................................................................... 2 
Membership ......................................................................................................................... 3 
Contributions Received/Benefit Payments/Outstanding...................................................... 4 
Cost of Living Adjustment and Annual Bonus ..................................................................... 5 
Assets (Including Investments) ............................................................................................ 6 
Actuarial Valuation ............................................................................................................. 17 
Proposed Legislation (New and Amendments) ................................................................. 17 
Technology Update ............................................................................................................ 18 
Annual Financial Audit ....................................................................................................... 19 
Accomplishments for Fiscal Year 2013….......................................................................... 19 
Goals for Fiscal Year 2014 ................................................................................................ 21 
Summary ............................................................................................................................ 22 
 
Appendices 
Membership ......................................................................................................................... A 
Total Contributions Received/Benefit Payments/Outstanding ............................................ B 
Investment Fund .................................................................................................................. C 
Rental Income/Receivables ................................................................................................. D 
Loans ................................................................................................................................... E 
Unfunded Liability ................................................................................................................ F 
 
 
 
 
 
 
 
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GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM 
 
Annual Overview of Operations 
 
  
 
Good morning, Honorable Senator Clifford Graham, Chairman of the Committee 
on Finance, distinguished Committee members, other distinguished senators present in 
the chambers and good morning to all. I am, Austin L. Nibbs, Administrator of the 
Employees’ Retirement System of the Government of the Virgin Islands (GERS). I am 
pleased to appear before you to present the System’s Annual Overview of Operations. I 
would like to take this time to acknowledge members of my senior management team 
that are joining me today in the chambers. 
 
INTRODUCTION 
Enacted by the Third Legislature of the Virgin Islands on June 24, 1959 by Act 
479, the GERS was created as a defined benefit pension plan. On October 1, 1959, 
the System started operations and contributions by employees and the plan sponsor 
began. 
The statute that governs the operations of the GERS is Title 3, Chapter 27 and 
28 of the Virgin Islands Code. Employees are enrolled into the System the first day of 
service, as a condition of their employment. The objective is to encourage employees 
who enter the System to remain in the service of the Government by establishing 
an orderly means whereby those members who became superannuated or 
incapacitated as a result of disability may retire without suffering economic hardship. 
Unfortunately, this has not been the case because of the nine (9) unfunded mandates 
passed by prior legislatures, the Virgin Islands Economic and Stability Act of 2011 and 
subsequent layoffs. For this System to continue to meet its statutory obligations to its 
members, the System must be actuarially funded, and this body must take the 
necessary steps to pass a comprehensive pension reform bill incorporating GERS 
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Board of Trustees’ recommendations made in Bill No. 29-0099, and the Pension 
Taskforce Report. 
MEMBERSHIP 
We have attached Exhibit A which shows that the gap between the active 
members and the retirees and beneficiaries has decreased from a 1.14 to1 ratio in 
Fiscal Year 2012 to a 1.10 to1 ratio for Fiscal Year 2013. 
This drastic decrease in actives and increase in retirees is due mainly to the 
implementation of Bill No. 29-0123 (Act No. 7261 - The Virgin Islands Economic 
Stability Act of 2011 - VIESA), and significant layoffs. The active members have 
decreased from 10,731 at September 30, 2011 to 9,240 at September 30, 2013, and the 
retirees and beneficiaries have increased from 7,868 at September 30, 2011 to 8,362 at 
September 30, 2013. 
Based on the latest Certified Actuarial Valuation dated October 1, 2011:  
Active Members 
• The average age of active members was 45.7 
• The average years of credited service was 13.9 
• The projected average salary was $38,885 
• Vested members were 6,073 
 
Retired Members 
• The average age of retired members was 69.3 
• The average semi-monthly benefit was $1,117  
 
Beneficiaries 
• The average age of beneficiaries was 74.1 
• The average semi-monthly benefit was $345  
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TOTAL CONTRIBUTIONS 
 
We have attached Exhibit B which shows the total contributions received, the 
total deductions (benefits payments, refunds of contributions and administrative and 
operational expenses) and the total deficits in millions for the past 20 years through 
September 2013. 
 
The comparison reveals that in Fiscal Year 2012, the total contributions received 
are approximately $144.9 million less than the total benefits and expenses paid, 
resulting in a negative cash flow. For the 12 months period ending September 30, 2013, 
the total contributions received are approximately $101.4 million less than the total 
benefits and expenses paid, again resulting in a negative cash flow. This presents a 
challenge to the System because withdrawals have to be made from the portfolio to 
meet the deficits. Thereby, decreasing the already shrinking investment base.    
 
OUTSTANDING EMPLOYER CONTRIBUTIONS 
 
In a report dated June 12, 2013, our Actuary The Segal Company estimated that 
the potential missing employer contributions due to the System is approximately $47 
million as of October 1, 2011. This amount includes missing contributions from all 
employers including the autonomous agencies. The central government has disputed 
the amount. There are various reasons why the employer contributions were not 
remitted to the System. The major reasons for missing employer contributions are: 
• In prior years, employees coming into the government had a twelve (12) month 
period where they were not required to be members of the System. Beginning 
with the thirteen (13th) month, employee and employer contributions were 
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required based on the law to be remitted to the System, and this did not occur. In 
some cases, this continued for several years. 
•  Based on collective bargaining agreement negotiations, members received 
NOPAs based on negotiated salaries going back 2 -3 years. Although, the 
member is brought up to step, no employer contributions were paid retroactive to 
the effective date of the NOPA.  
 
The GERS has been trying to negotiate a Settlement Agreement with the 
Government of the Virgin Islands for the last ten (10) months regarding the 
missing employer contributions. To date, the GERS has been unsuccessful in 
doing so. 
 
The outstanding regular employer’s contributions (excluding delinquency fee and 
lost investment income) due to the GERS for Fiscal Year 2013 covering the 
period October 1, 2012 through September 30, 2013 are as follow: 
 
Agency 
Regular  
3% 
Total 
Water and Power Authority 
$0 
$916,190 
$916,190 
Juan Luis Hospital 
$2,501,443 
0 
$2,501,443 
Total Contributions Due 
$2,501,443 
$916,190 
$3,417,633 
 
 
COSTOF LIVING ADJUSTMENTS AND ANNUAL BONUS 
 
Title 3, Chapter 27, Section 730 (c) states that the annual increase in the case of 
a disability annuity shall be 1 percent per year, prior to the member’s attainment of age 
60 and 1.5 percent per year thereafter. On July 15, 2013, 247 annuitants on disability 
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were paid their annual cost of living adjustment (COLA), 113 received a 1 percent 
increase and 134 received an increase of 1.5 percent. The gross annual amount that 
was paid to this class of annuitants is $167,320. 
 
At the Board Retreat held in June 2012, the Board in accordance with Title 3, 
Chapter 27, Section 730, recommended in Bill No. 29-0099 to suspend the annual 
COLA indefinitely effective January 1, 2013 to non-disability annuitants. In the Pension 
Reform Taskforce Report on the Government Employees’ Retirement System, the 
Board’s recommendation was changed slightly to read; the COLA should not be given 
for five years except for persons with disabilities as established by the Virgin Islands 
Code and approved by the Government Employees’ Retirement System. The Taskforce 
Report further stated that this provision should be revisited after five years.       
 
Bill No. 28-0020 (Act No. 7080) provides for the Virgin Islands Lottery (VIL) to 
make an annual payment to the GERS by July 15th to be paid by September 30th.The 
bonus is given to annuitants and pensioners meeting the 60 years of age requirement, 
and having been receiving a service annuity for at least 1 year, and are eligible to 
receive a cost of living increase in the year in which the bonus payment is made. To 
date, we have received a total of $1,077,802.88 for the 1st, 2nd and 3rd quarters of Fiscal 
Year 2013 from the VIL. VIL has assured us that we will receive the 4th quarter payment 
by October 30, 2013. The payment will be paid before Thanksgiving to the annuitants 
and pensioners who are eligible to receive the bonus. 
 
ASSETS 
 
The assets of the GERS include the investment portfolios, cash and cash 
equivalents, real estate and the loans portfolio.  
 
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Investment Portfolio 
 
The investment fund portfolio is managed with the specific goal to grow the 
assets to meet the System’s pension liability and ensure a reliable cash flow that 
provides for the funding requirements of near-term pension obligations. To achieve 
these goals, the Board allocates the Fund’s assets to a variety of asset types and 
strategies in consultation with our in-house Investment Unit and Investment Advisor 
Meketa Investment Group. Generally, equity investments are included for their long-
term return and growth characteristics, and fixed income assets are added for their 
ability to control investments risk and provide for a reliable cash flow that meets the 
System’s funding requirements. The Fund’s successful long-term performance confirms 
the importance of asset diversification and controlling investment risk within each asset 
class. An integral part of the overall investment policy is the strategic asset allocation 
policy. The targeted strategic asset allocation is designed to provide appropriate 
diversification and balance expected total rate of return with the volatility of expected 
returns.  Specifically, the fund is broadly diversified across and within asset classes to 
limit the volatility of the total fund investment returns and to limit the impact of large 
losses on individual investments. Both traditional and nontraditional assets are 
incorporated into the asset allocation mix. 
 
Performance  
 
As shown in Exhibit C, as of June 30, 2012 and June 30 2013, the market values  
 
of the portfolio were $1,007.6 billion and $960.9 million respectively, which represents a  
 
decrease of $46.7 million. To meet obligations, $150.7 million was withdrawn from the  
 
Fund. The Fund earned income of $24.4 million and had a gain in the portfolio of $79.5  
 
million. The System’s aggregate assets performance as of June 30, 2013 (Fiscal YTD)  
 
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is 5.3 percent. The aggregate performance since inception of the portfolio on July 1,  
 
1981 is 9.3 percent.  
 
We note that the market value of the Fund at July 31, 2013 and September 30,  
 
2013 was approximately $980 million and $976.2 million respectively. 
 
 
Over the last year ending July 31, 2013, continued Middle East turmoil,  
 
European debt issues and uncertainty in the Emerging Markets had not slowed returns  
 
within the equity markets. Corporate earnings growth fueled positive returns.   
 
Conversely, rising interest rates yielded negative returns within the debt markets’ which    
 
caused many to flee debt investments.  The U.S. stock market, as represented  
 
by the S&P 500 index, returned 21.6 percent.  Also, the international market, as  
 
represented by the MSCI EAFE index, returned 23.5 percent.  As a result, the Fund’s  
 
domestic and international allocations returned 27.9 percent and 24.6 percent  
 
respectively.  The Fund’s fixed income allocation declined 0.3 percent.  The Fund in the  
 
aggregate earned a return of 13.6 percent.  
 
Restructuring 
The System will continue its commitment to a disciplined investment strategy that 
focuses on long-term results.  Our mission is to promote long-term financial security for 
our membership while maintaining the stability of the Fund.  The System’s investment 
fund is presently managed by 11 investment managers. In August 2013, the Board 
added 1 new manager and terminated 7 investment managers (6 equity managers and 
1 bond manager) for underperformance. Approximately, $416.4 million were 
transitioned from these managers and invested in index strategies. Indexing is a 
“passive” form of fund management that has been successful in outperforming most 
actively managed funds. The portfolio is constructed to match or track the components 
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of a market index, such as the Standard & Poor’s 500 Index. The primary advantage of 
investing in these strategies is to provide broad market exposure, low operating 
expenses and low portfolio turnover.  
One of the new index strategies comprise of Treasury Inflation Protected 
Securities (TIPS) are considered an extremely low risk investment since they are 
backed by the U.S. government.  Their par value rises with inflation, as measured by 
the Consumer Price Index, while their interest rate remains fixed. TIPS are indexed to 
inflation in order to protect investors from the negative effects of inflation. The estimated 
savings in management fees due to the restructuring is expected to be $1.4 million. 
Outlook  
Corporate earnings growth, in which the developed markets have benefitted, may  
 
come under pressure in the short to medium-term.  Fortunately, the GERS has recently 
 
allocated to the emerging markets.  As corporate earnings slow in the developed  
 
markets, investors may look to the emerging markets as more of a value proposition.   
 
Our reallocation to emerging markets may have come at an opportune time.   
 
There are a few upcoming events that may create turbulence within the financial  
 
markets going forward.  The potential U.S. Fed taper, Fed Chairman change, debt  
 
ceiling debate, and an attack on Syria all contain potential destabilizing effects.  Any  
 
one or combination of these events can cause a severe downdraft.  We are confident  
 
that the recent changes made to the fund, including TIPS and Emerging Market  
 
Equities, will help the Fund navigate through these uncertain times. 
 
 
Title 3, Section 12, Chapter 27 of the Virgin Islands Code gives the Board of 
Trustees the authorization to invest in an Alternative Investment Program. Alternative 
investments are private market (non-publicly traded) investments in domestic and 
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international venture capital and special equity. The Alternative Investment Program is 
designed to enhance the total Fund performance by generating a long-term rate of 
return greater than the assumed actuarial rate of 7.5 percent. GERS seeks to support 
investing within the Virgin Islands community to influence job creation and/or retention, 
wage prosperity and economic expansion. To date, GERS has invested in three types 
of alternative investments, private equity, real estate and special situations (local 
investments). 
 
Private Equity 
Mesirow Financial Private Equity Fund 
 
On July 31, 2008, the Board of Trustees approved Mesirow Financial Private 
Equity Fund as an alternative investment and committed a total of $25 million to the 
Fund ($15 million in Fund IV and $10 million in Fund V). As of September 30, 2013, 
investments made toward the commitment for Fund IV was $10.8 million with 
distributions of $1.7 million. Fund V investments made toward the commitment were 
$4.4 million with distributions of $452 thousand. The System has a limited partnership in 
both funds. 
 
Real Estate 
(A) 
GERS Complexes 
 
The System owns: 
• The three story complex on St. Thomas which is the official 
headquarters of the GERS. The tenants are the Division of Personnel, the 
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Department of Justice and ResCare (Job Corp).This property was appraised 
at $8.4 million on January 10, 2012. 
• The new complex on St. Croix which houses the St. Croix operations. 
This property was appraised at $2.8 million on August 15, 2012. 
• The former GERS St. Croix office building and the adjacent building 
which is occupied by the Casino Control Commission. Both properties 
were appraised on August 15, 2012 at $400,000.00 and $500,000.00 
respectively.  
 
Rents and utility payments received and outstanding Year-to-Date 
(September 2013) are shown in Exhibit D and summarized below: 
 
Category 
YTD Total 
Received  
YTD Total 
Arrearage 
 
Rents  
 
$679,063 
 
$195,498 
 
Electricity 
 
$477,377 
 
$487,597 
 
 
 (B) 
Land  
 
Estates Hoffman and Nullyberg 
 
In 2006, the System purchased 120 acres of land at Estates Hoffman and 
Nullyberg on the east end of St. Thomas. The Development Committee has 
proposed a mixed use development consisting of a conference and 
entertainment center, hotel, 108 units for assisted living and 105 single family 
lots. A public hearing was held by the DPNR on July 12, 2011 on the proposed 
zoning map amendments from A-1 (Agricultural District) to R-3 (Residential 
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Medium Density) with a use variance for general and professional offices and 
from A-1 to R-2 (Residential Low Density-One and Two Family). A hearing was 
held on October 26, 2011 before the Committee of the Whole on the rezoning. At 
that hearing, a challenge was made by a member of the New Herrnhut Moravian 
Church as to rightful ownership to a portion of the property. On January 23, 2012, 
a meeting was held with officials of the church and their attorney. No evidence of 
ownership of the property was provided to the GERS. To date, we have not 
received a response from the church or their attorney. 
 
The rezoning of the Estate Hoffman/Nullyberg property (Bill No. 29-0223) 
was approved during the final session of the Committee of the Whole of the 29th 
Legislature. However, the Governor vetoed the rezoning because of 
discrepancies between the DPNR report and the language in the Bill. This 
measure is still pending before the 30th Legislature.  
 
 
The property was appraised at $3.5 million on October 15, 2012. 
 
 
 
Estate Coakley Bay 
 
 
In October 2010, the System purchased 170 acres of land at Estate 
Coakley Bay on the east end of St. Croix for $5 million. After more than two years 
of consultation with our architects/engineers, Jaredian Design Group, the GERS 
Development Committee which consists of Trustees of the Board, determined the 
best use of the property is to develop a Planned Area Development (PAD)  
consisting of a mixture of single family residential lots, independent living for the 
elderly and commercial space. The goal of the GERS is to develop this property 
in a way that will allow St. Croix to grow economically while preserving its 
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environmental and cultural assets. A public hearing was held in St. Croix on 
December 11, 2012 and the rezoning hearing before the Committee of the Whole 
was held on July 24, 2013 in St. Croix. The Legislature passed Bill No. 30-183 on 
August 7, 2013, and it was approved by the Governor on August 23, 2013. 
 
 
The property was appraised at $5.9 million on June 22, 2010. An updated 
appraisal of the property is pending. 
 
(C)   Havensight Shopping Mall 
 
The Havensight Shopping Mall was purchased on June 30, 1993, for $32 
million. Since 1993, this property has grossed in excess of $100 million in 
revenues and the System has earned a return on its investment in excess of $67 
million. The Property was appraised at $66.6 million on January 27, 2010. An 
updated appraisal of the property will be done after the completion of the road 
construction in the surrounding areas. 
 
The Board is currently in negotiations with the West Indian Company 
(WICO) to continue managing the Mall. 
 
Special Situations 
Seaborne Airlines 
 
On December 4, 2009, a loan in the amount of $3,300,000 was closed with 
Seaborne Virgin Islands, Inc. The term of the loan is 5 years. On November 2, 2012, 
Seaborne refinanced its loans and received an additional $1,500,000 with an interest 
rate of 6.25 percent per annum. The original principal indebtedness on the Term Note 
was amended and restated to be $2,300,000 with an interest rate of 6.25 percent per 
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annum on the unpaid balance. The original principal indebtedness on the Convertible 
Note was amended and restated to be $1,000,000 with an interest rate of 8.25 percent 
per annum.  
 
At the end of July 2013, there were changes in Seaborne’s leadership, 
management team and the Board of Directors. Its operations have expanded from 
primarily a seaplane and Twin Otter local operation to regional operation with a 34 seats 
Saab carrier. The GERS will have two seats on the newly constituted five members 
Board. Negotiations are still ongoing with the new management regarding the 
restructuring of the loans. 
 
Renaissance Carambola Beach Resorts and Spa 
 
On December 8, 2009, a loan in the amount of $15,000,000 was closed with 
Carambola Northwest, LLC at a term of 5 years. 
 
On November 2, 2012 a final Disposition Agreement was executed with 
Carambola Northwest, LLC. By executing the Disposition Agreements, the Carambola 
property was immediately turned over to the GERS. This action was taken as a result of 
Carambola defaulting on its principal and interest payments. A Board and Bylaws have 
been established for Carambola Northwest, LLC. The Board meets monthly. The 
required financial audits and legal due diligence and completion of the renovation of the 
remaining rooms and repairs are ongoing. When the audits are completed, we will 
advise our members and the general public on the details and the future of this 
investment. The Marriott Flagship and Franchise Agreement continue to remain in 
place. 
 
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V.I. Property Tax Revenue Anticipation Note 
 
On November 14, 2011, the GERS entered into a loan agreement with the 
Government of the Virgin Islands (GVI) in the amount of $13 million at an interest rate of 
4.91 percent and a maturity date of December 15, 2016. The security for the note is the 
pledged real property tax receipts from the delinquent real property tax receivables, 
including penalties and interest for tax years prior to and including 2005, totaling 
approximately $36 million. The GVI is current on the note. As of September 23, 2013, 
the GERS has received $5,902,523 of which $4,956,964 is principal and $945,559 is 
interest. The balance on the note is $8,043,036. 
 
We note that the GVI and the GERS are negotiating a Settlement Agreement to 
use any excess collection of property taxes to pay the missing employer contributions 
that are due to the GERS. 
 
Life Settlements 
The Attilanus Fund I, L.P. 
  
On August 15, 2006, the System invested $50 million in a limited partnership 
(The Attilanus Fund which was formerly known as the Atticus Fund I, L.P.). The 
partnership purchases senior life insurance policies for individuals age 65 and older and 
have an expected life expectancy of 5 to 7 years. A senior life settlement provides cash 
payment in exchange for the assignment of an ownership interest in the life insurance 
policy insuring the life of an individual. 
  
The partnership agreement is effective through December 31, 2017 and could be 
extended for an additional two years. In 2008 because of the restructuring of the 
portfolio, the System received a distribution in the form of a return of capital totaling $8.2 
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million. The estimated fair value of the limited partnership at September 30, 2011 was 
$43 million.  Due diligence on the Fund and also an investment valuation is currently 
being done by an outside consulting firm to determine the fair value of the Fund at 
September 30, 2012.  
 
Loans  
 
The System provides personal, auto, land and mortgage loans to qualified 
members and retirees. During Fiscal Year 2013, the loan portfolio generated revenues 
(interest income) to the System in excess of $9 million.  
  
At June 30, 2013, there were 8,598 units in the loans portfolio with a total value 
of $142.3 million as shown in Exhibit E. 
 
On October 27, 2008, the Board of Trustees passed Resolution No.15-2008 
which changed the down payment for mortgage and land loans from 10 percent to 5 
percent. 
 
On April 19, 2012, the Board of Trustees passed Resolution Nos.7-2012 and 8-
2012 which changed the mortgage rates effective October 1, 2012. The rates were 
adjusted as follow: 
• 30 year mortgage rate from 8.00 percent to 5.75 percent, 
• 15 year mortgage rate from 8.00 percent to 5.00 percent, and 
• Land purchase mortgage rate from 8.00 percent to 5.00 percent. 
 
 
On September 23, 2013, we implemented the provision in Title 3, Chapter 27 
Section 717(b) (14) which makes available the maximum personal loan of $50,000 to 
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retirees who qualify. The application requirements are available in our offices and on 
our Website.  
 
ACTUARIAL VALUATION INFORMATION 
  
Title 3, Chapter 27, Section 718 (a) of the Virgin Islands Code mandates that the 
Employees’ Retirement System of the Government of the Virgin Islands be financed on 
an “actuarial reserve basis”. An “actuarial reserve basis” generally means that the 
retirement benefits are funded during employees active years of employment so that by 
the time they retire, the benefits would have been fully funded in advance of their 
retirement date. The actuarial valuation, which is conducted by the System’s Actuary, 
determines the contribution rate necessary to meet the cost of benefits being accrued 
and a corresponding amount to pay down a portion of the unfunded liabilities. A 
schedule of the unfunded actuarial accrued liability and the funded ratios from fiscal 
years 1998 through 2012 is presented as Exhibit F. 
 
An actuarial valuation is performed every two (2) years. The last valuation was 
completed as of October 1, 2011. The valuation for Fiscal Year 2013 is ongoing and will 
be completed in a few months. 
 
 
We note that in June 2013, the Fund’s assumed actuarial rate was reduced from 
8 percent to 7.5 percent, retroactive to October 1, 2011. 
 
 
 
PROPOSED LEGISLATION AND AMENDMENTS 
New legislation and amendments were submitted to the 29th Legislature in 2011 
and 2012 which resulted in Bill No. 29-0099. During the 29th Legislature, GERS testified 
four (4) times before the Committee on Government Operations, Energy and Veteran’s 
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Affairs, and two (2) times before the Committee on Rules and Judiciary. However, the 
Bill was not voted out of the Rules Committee to the floor before the 29th Legislature 
ended. Subsequently, a Pension Reform Taskforce and Advisory Committee were 
created by the Governor and a report titled “The Road to Reform– Pension Reform 
Taskforce Report of the Government Employees Retirement System” was published on 
April 29, 2013. We note that 98 percent of the GERS Board of Trustees’ 
recommendations that were included in Bill No. 29-0099 were included in the Taskforce 
Report.  
We recommend incorporating the Taskforce’s recommendations and the 
amendments and changes to the Reform Act of 2005 that were submitted by the GERS 
to the 29th Legislature as a comprehensive pension reform bill. 
 
Any amendments or new legislation that will change Title 3, Chapters 27 and 28 
may require changes to the V3 System, and will be a cost to the GERS. Therefore, we 
recommend that this body appropriate a minimum of $2 million for the GERS that 
should be made available until expended to defray the cost of changes to the software. 
TECHNOLOGY UPDATE 
 
On March 12, 2012, we rolled out the first phase of the new Benefits and Loans 
Integrated Software System (V3 application). Last year, we reported that we had 
experienced many challenges especially with the posting of the deduction files. We are 
happy to report that we have been receiving and posting the deduction files timely, with 
the exception of the Juan F. Luis Hospital and Medical Center. All functionalities of the 
new system are not operating at 100 percent. There are still many hurdles to complete 
with the reconciliation of the output and some reprogramming of the software. 
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The first phase of the Member Self Service (MSS) and Employee Self Service 
(ESS) modules went live on March 15, 2013. This function gives all members the ability 
to access the self-service portion of the software. Members now have the ability to view 
and make changes to their information to include demographics, update addresses and 
contacts, view and download their participant’s (contributions) account, and retirees can 
view and down load their pay stubs.  
The second phase of the self service is expected to be available during the 2nd 
quarter of fiscal year 2014, and will include the email functionality where members will 
be able to apply for ACH transactions online.  
The third phase will incorporate e-form capability and is expected to become 
operational during the 3rd quarter of fiscal year 2014. 
 
ANNUAL FINANCIAL AUDIT 
 
The System’s most recent certified financial statements are as of September 30, 
2011. The fieldwork for the Fiscal Year 2012 financial audit is completed. The audit 
report is expected to be issued by the middle of November 2013.  
 
ACCOMPLISHMENTS 
Our major accomplishments for Fiscal Year 2013 were: 
• The fieldwork for the Fiscal Year 2012 Annual Certified Financial Audit has been 
completed.  The financial statements will be issued very shortly.  
• We increased the retirees and beneficiaries direct deposit participation from 91 
percent at June 30, 2012 to 94 percent at September 30, 2013. 
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• We held a Board Retreat on St. Croix, June 12th – 14th, 2013 which was 
extremely successful. The purpose of the retreat was to bring the trustees and 
staff together to engage in frank discussion about pressing issues affecting the 
System. Some of the topics discussed were: the Governor’s Taskforce 
Recommendations and Impact to the Fund, Missing Employer Contributions, 
New GASB Rules and Impact on the Actuarial Valuation, Governance, Ethics 
and Compliance and Securities Litigation. 
• We approved the System’s formal Investment Policy Statement. 
• We implemented performance reporting for our investment managers. 
• We completed the evaluation of the Life Settlement (Alternative Investment).    
• We completed the Certified Actuarial Valuation for the period ended September 
30, 2011. 
• We reduced the utility (electrical) cost at the GERS Complex in St. Croix.     
• We completed major replacement of the air conditioning and elevator equipment 
at the GERS Complex in St. Thomas. 
•  We completed the Record Retention, Capital Assets, Customer Service, 
Personnel and Procurement policies for submission to the Policy Committee for 
review and approval by the Board. 
• We cross-trained the Manager of Loan Processing in the St. Croix office to 
perform all functions as her counterpart in St. Thomas. 
• We included the Managers of Loan Processing and the Mortgage Officers to 
present at the Pre-retirement Workshops. 
• We closed seven (7) mortgage loans since the Board decreased the interest 
rates. 
Government Employees’ Retirement System                                                                          October 17, 2013 
Annual Overview of Operations  
 
21 
 
• We finalized the agreements and procedures with the insurance company and 
executed a MOU with the Division of Personnel – Health Insurance Fund to 
administer retiree loans in excess of $10,000. 
• We successfully implemented on September 23, 2013, the newly increased 
maximum of $50,000 for the Retiree Personal Loan up from the previous 
$10,000.  
 
GOALS FOR FISCAL YEAR 2014 
• We will complete a comprehensive long range Strategic Plan for the System with 
the assistance of the University of the Virgin Islands.  
• We will issue the Fiscal Year 2013 Annual Certified Financial Statements and 
Annual Report by April 15, 2014.  
• We will complete the September 30, 2013 Certified Actuarial Valuation by the 2nd 
quarter of Fiscal Year 2014. 
• We will reduce the backlog of prior service requests by 50 percent.  
• We plan to achieve an overall 99 percent direct deposit participation for the 
annuitants and pensioners payroll.  
• We will continue to provide system-wide customer service training in order to 
decrease the number of complaints reported by the members.  
• We will complete the full implementation of the member and employer self-
service modules. 
• We will continue to provide the necessary education through workshops and 
social media to assist our members with planning for retirement and managing 
their retirement funds.  
Government Employees’ Retirement System                                                                          October 17, 2013 
Annual Overview of Operations  
 
22 
 
• We will continue to work to implement the Supplemental Contribution Program. 
• We will continue to improve the technology infrastructure to support the internal 
and external operations of our new systems, and reduce the outstanding issues 
surrounding the new V3 benefits and loan system by 50 percent. 
• We will continue to address energy saving measures in our older buildings, to 
include installation of solar systems.  
• We will begin the due diligence and planning on final determination on the 
development of Estate Hoffman/Nullyberg on St. Thomas and Estate Coakley 
Bay on St. Croix. 
• We will encourage members in the St. Croix district to apply for mortgages with 
the System. 
• We will seek to obtain an IRS Determination Letter. 
 
SUMMARY 
Mr. Chairman, the purpose of the actuarial valuation which was completed for 
Fiscal Year 2011 and presently being updated for Fiscal Year 2013, was to determine 
whether the assets and contributions were sufficient to provide the prescribed benefits 
of the plan. The answer is a resounding “no”. For Fiscal Year 2012, the plan has an 
estimated actuarial accrued liability of $2.9 billion, an estimated actuarial value of assets 
of $1.3 billion, resulting in an estimated unfunded actuarial accrued liability of 
approximately $1.6 billion, resulting in a funded ratio of 45.28%.  
The GERS and Pension Reform Taskforce Report recommendations are 
designed to make changes to the plan benefits structure and contribution rates in some 
Government Employees’ Retirement System                                                                          October 17, 2013 
Annual Overview of Operations  
 
23 
 
form or the other. If these recommendations are not implemented, the plan is projected 
based on actuarial assumptions to become insolvent by 2023. 
The purpose of the Pension Reform Act of 2005 was to slow down the bleeding 
to the System. This was a novel thing that was done. However, because of various 
reasons the measures were not implemented until 3 – 4 years later. We now must move 
swiftly and make the necessary changes to the plan benefits structure and the 
contribution rates that represent shared sacrifices across the board from all 
stakeholders. 
 
The GERS affirms its place in the territory’s economy by providing a stable 
source of stimulus through the annuity payments to the retirees and beneficiaries and 
loans to its members. The GERS remains committed to ensure that our members 
experience a stress free retirement process and a secure retirement. 
 
I would be remised if I did not commend the Member Services staff and the staff 
of the Payroll Servicing Unit for making sure that our annuitants and pensioners have 
access to their annuity payments on the 15th and the last day of each month. Also, I 
would like to extend a heartfelt thank you to all the employees of the GERS for the hard 
work that they have done over the past 5 years during the reorganization of the System 
and the implementation of the new technologies. 
 
There are many who have accused me of spreading “doom and gloom” about the 
status of the System. I do not know how more persuasive I can be to sound the clarion 
call that the System is not healthy. The GERS is not unique. The majority of pension 
systems in the United States and other parts of the world are experiencing similar 
problems. Our recommendations are not made in a vacuum. We draw from the 
experiences of other pension systems and the recommendations from our experts.  
Government Employees’ Retirement System                                                                          October 17, 2013 
Annual Overview of Operations  
 
24 
 
Some see a billion dollars investment portfolio and feels that it will never be 
depleted in my lifetime. You may recall in 2008, the portfolio decreased from a high of 
approximately $1.3 billion to a low of approximately $800 million. Also, the System 
withdraws approximately $150 million annually from the portfolio to fund annuity 
payments and operations. In Fiscal Years 2010, 2011 and 2012, the System collected 
approximately $91.2 million, $99.2 million and $144.9 million less respectively in 
contributions. The contributing base has decreased from $120.3 million in Fiscal Year 
2009 to $104.4 million in Fiscal Year 2012.  
Bill No. 29-0099 which included the System’s proposed legislation and 
amendments, died in the 29th Legislature because it was introduced in a political year, 
just sixty (60) days before the November 2012 elections.  At the final meeting of the 
Rules Committee just two (2) weeks before the election, the sponsor of the Bill 
mentioned on the floor that the votes were not there to move Bill No. 29-0099 out of 
Committee to the full body. We ask that the 30th Legislature show the progressive 
leadership that is required at this time without fear of pressure from interest groups and 
political ramifications, and do the right thing. Pass a comprehensive pension reform bill 
that will ensure the sustainability of the System for the next thirty (30) years through 
2043.  
 
On October 29th, it will be six (6) years since I have been at the GERS. We met 
challenges which at that time seem to be insurmountable and we have overcome many. 
Our goal is to continue to work diligently and tirelessly, in accordance with the law and 
our fiduciary duty, to turn this System around by proposing the necessary 
recommendations to change the benefit structure of the plan and identifying sustainable 
revenue streams to fund the annual cash shortfall. The plan sponsor must be held 
Government Employees’ Retirement System                                                                          October 17, 2013 
Annual Overview of Operations  
 
25 
 
accountable to live up to its responsibility to ensure that the Plan is financed on an 
“actuarial reserve basis”. In actuality, the plan sponsor has diverted approximately $1.6 
billion over the years in funding to the System to fund General Fund operations. 
 
Mr. Chairman, this concludes our presentation. We are prepared to respond to 
any questions the Committee may have on the operations of the GERS.  
Fiscal Year
Active 
Members
Retirees & 
Beneficiaries
Ratio of Actives to 
Retirees
Total 
Members
1982
8,914
1,360
6.55 to 1
10,174
1987
10,466
2,338
4.47 to 1
12,804
1991
11,766
2,901
4.05 to 1
14,677
1993
11,642
3,473
3.35 to 1
15,115
1994
12,116
3,751
3.23 to 1
15,867
1995
11,493
4,438
2.58 to 1
15,931
1997
11,572
4,682
2.47 to 1
16,254
1999
10,763
6,212
1.73 to 1
16,975
2001
9,303
5,581
1.66 to 1
14,884
2002
11,352
5,938
1.91 to 1
17,290
2003
10,555
6,052
1.74 to 1
16,607
2004
9,362
6,258
1.49 to 1
15,620
2005
9,967
6,484
1.54 to 1
16,451
2006
9,841
6,731
1.46 to 1
16,572
2007
11,207
6,811
1.65 to 1
18,018
2008
11,122
7,050
1.58 to 1
18,172
2009
11,085
7,134
1.55 to 1
18,219
2010
11,117
7,497
1.48 to 1
18,614
2011
10,731
7,868
1.36 to 1
18,599
2012
UA  9/30/12
9,366
8,151
1.14 to 1
17,517
2013
UA  9/30/13
9,240
8,362
1.10 to 1
17,602
UA = Unaudited
Exhibit A
The overall membership in the System for FY 2013 at September 30, 2013 is shown in the table below:
Fiscal Year
Total Contributions
Benefits Payments & Expenses
Surplus/Deficit
1994
61.7 
46.7 
15.0 
1995
74.9 
64.6 
10.3 
1996
71.7 
73.3 
(1.6)
1997
74.3 
80.0 
(5.7)
1998
71.9 
91.6 
(19.7)
1999
71.7 
95.4 
(23.7)
2000
70.2 
103.7 
(33.5)
2001
69.1 
121.2 
(52.1)
2002
80.1 
133.0 
(52.9)
2003
82.1 
138.0 
(55.9)
2004
84.9 
142.6 
(57.7)
2005
81.9 
153.0 
(71.1)
2006
99.3 
161.0 
(61.7)
2007
96.6 
170.5 
(73.9)
2008
112.8 
184.7 
(71.9)
2009
120.3
193.9
(73.6)
2010
117.1 
208.3
(91.2)
2011
123.8
223.0
(99.2)
2012
(Unaudited)
104.4
249.3
(144.9)
2013
(Unaudited)
95.4
196.8
(101.4)
Exhibit B
Exhibit C
RENTAL ACTIVITY
Entity
September 2013 
Rental Collection
September 
2013 Electric 
Collection
Rental YTD
Electric YTD
Rental Arrearage
Electric 
Arreage
Dept of Justice
$
-
$
28,180 $
444,756 $
324,580 $
74,126 $
474,108
Division of Personnel
$
-
$
-
$
127,974 $
143,048 $
86,295 $
13,489
Dividion of Personnel Library
$
35,077
First Bank
$
258
$         207 $
3,094 $
1,267
$
-
$
-
ResCare (Job Corps)
$
-
$
679 $
19,233 $
8,482
$
-
Casino Commission
$
84,006
Total
$
258
$
29,066 $
679,063 $
477,377 $
195,498 $
487,597
Exhibit D
LOAN PORTFOLIO
BALANCES AT  JUNE 30, 2013
LOAN CATEGORY
CURRENT 
INTEREST RATE
UNITS
DOLLAR VALUE
Personal - Active
8.00 
5,724
100,531,536.03
Personal - Retiree
8.00 
2,653
35,117,538.53
Auto
8.50 
14
104,521.40
Land
5.00 
30
720,086.28
1
st Priority Mortgage
5.00/5.75
176
5,829,152.99
2
nd Priority Mortgage
6.00/6.75
1
7,976.00
TOTALS
8,598
142,310,811.31
Exhibit E
UNFUNDED LIABILITY
Year
(a)
Actuarial
value of assets
(b)
Unfunded 
actuarial accrued 
liability (UAAL)
Actuarial accrued 
liability
(a) + (b)
Funded
Ratio
(a)/(c)
1998
1,078,291,775
307,300,371
1,385,592,146
77.82%
1999
1,255,210,822
518,608,964
1,773,291,625
70.78%
2000
1,330,089,822
525,608,964
1,855,698,786
71.68%
2001
1,342,894,336
731,727,064
2,074,621,400
64.73%
2002
1,337,676,064
815,884,419
2,153,560,483
62.11%
2003
1,346,906,862
921,669,858
2,268,576,720
59.37%
2004
1,360,288,336
977,502,024
2,337,790,360
58.19%
2005
1,366,982,183
1,088,574,553
2,455,556,736
55.67%
2006
1,421,093,035
1,236,571,529
2,657,664,564
53.47%
2007
1,509,244,380
1,241,138,878
2,750,383,258
54.87%
2008
1,530,604,789
1,310,218,726
2,840,843,515
53.88%
2009
1,534,899,736
1,397,261,661
2,932,161,397
52.35%
2010
1,505,970,212
1,513,059,673
3,019,029,885
49.88%
2011
1,448,926,591
1,719,110,906
3,168,037,497
45.74%
2012
Estimated
1,327,038,907
1,603,758,454
2,930,797,361
45.28%
Exhibit F