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Rico government considers pension bonds
Puerto Rico (Reuters) - Puerto Rico's Government Development Bank said
Tuesday it was considering a $500 million bond sale to help address an $8
billion unfunded liability in its public employee pension fund.
Hector Mendez, president of the
bank that acts as fiscal agent for the Commonwealth, said pension bonds
are part of a larger plan forwarded to the governor to shore up Puerto
Rico's pension fund, which provides benefits to the island's large public
Other steps Mendez has proposed
would require approval from the U.S. territory's Legislature. Those
include capping benefits and increasing the amount of contributions made
by both the government and employees.
contributions total 8.27 percent and government contributions amount to
9.27 percent. But the amount of funds generated leaves the pension fund
with a $50 million shortfall every year, according to Mendez.
The bank president, in an
interview, said the government and employee contributions should both be
increased to 10 percent to generate $60 million annually.
"If we put this (plan) in
place, it will solve the problem in the system," Mendez said.
Mendez said the plan, if
approved, would be implemented in 2005, after Puerto Rico's next
Puerto Rico is not alone among
U.S. debt issuers considering pension bonds as states address unfunded
liabilities in their pension systems.
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