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Btc’S ‘Great Pains’ To Protect Pension Fund

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Garfield 'Garry' Sinclair

• Confident no extra strain from latest retiree offer

• But unions voice fears for already-troubled fund

• Govt to pay first installment on $160m deficit

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company’s (BTC) chief executive has pledged it “went to great pains” to ensure its latest voluntary retirement offer does not further strain an already-troubled pension fund.

Garfield “Garry” Sinclair told Tribune Business the carrier had consulted with actuaries prior to unveiling its Enhanced Early Retirement Programme (EERP) to older staff members in a bid to prevent a further widening of the estimated $160m deficit in its original staff pension plan.

“We went to great pains to consult actuaries and ensure anything we were doing and offering, particularly to workers in the 51-plus and 30 years of service category..... we went to great pains with actuaries to ensure that we weren’t creating or widening the deficit that might exist,” he revealed.

Mr Sinclair sought to reassure as BTC union representatives voiced fears that the latest retirement exercise, which is targeting some 63 older employees and was supposed to close yesterday, could impose further strain on the company’s already-weak defined benefit pension plan that was closed to new staff when the communications carrier was privatised in 2011.

Bernard Evans, the National Congress of Trade Unions (NCTU) president, and former head of BTC’s line staff, told this newspaper that the frequent voluntary separation and early retirement packages offered by BTC since it was acquired by Cable & Wireless Communications (CWC) represented a “double whammy” for that pension fund.

He explained that those workers taking early retirement began drawing on the fund from the age of 50, some ten years earlier than the originally projected retirement age of 60, which meant there was a greater depletion of plan assets. And, on the other end, contributions to the fund were also much-reduced because BTC stopped making payments when these workers took early retirement.

It was revealed in late 2019 that the original plan has a near-$160m hole or deficit, meaning its assets are dwarfed by present and future obligations to BTC retirees. This now has to be plugged by Bahamian taxpayers, and Mr Evans expressed concerns that the latest early retirement initiative will simply worsen the plan’s condition.

“The more you put people out to pasture, the more you push them to draw from an already-troubled pension fund,” he told Tribune Business. “It’s putting the burden on the existing pension fund. It was designed for people getting to 60, but what happened is that the people impacted by these voluntary separations and early retirements are the ones feeding from the fund.

“And the more you push people off, the less contributions are made to the fund. It’s a Catch-22. I just spoke to the president of the retirees’ association, and they’re very concerned.” Mr Evans said all those targeted by BTC’s latest separation package, as older workers, are members of the original, now-closed pension fund and not the new defined contribution plan started under CWC’s ownership.

He added that while BTC pre-privatisation had been contributing sums equivalent to 19 percent of annual salaries to that pension fund for workers aged over 50, post-sale these payments had been cut to 10 percent.

“Our concern is that pretty much ever since the sale of BTC we’ve been forced to give up an average of ten years of employment that would take us up to the age of 60,” Mr Evans said. “More and more persons are being pushed out and are feeding from the same pension fund that’s already under-funded to the tune of $160m.

“We really have to be concerned. We have to be concerned about the burden on the pension fund. This is a very scary thing that we continue to watch. They keep going after employees who were there prior to the sale and have access to the old fund.

“All that burden is shifted to a pension fund that is haemorrhaging, and something needs to be done to shore up and guarantee that fund. There are more retirees feeding from the fund than active employees at BTC. There are triple the amount,” Mr Evans added.

“We’ve been clamouring to have a meeting with the trustee, Ansbacher (Bahamas), and to have studies done to ensure the health of the pension fund is good for five years, ten years.. whatever needs to be injected. We need to know the condition of the plan.”

Inaction by the former Ingraham and Christie administrations has forced the present government to commit Bahamian taxpayers to paying $20m per year for the next eight fiscal periods, starting in 2020-2021, to close the $160m shortfall created after its two immediate predecessors failed to live up to legally-binding obligations made when BTC was privatised in 2011.

As part of selling the majority stake in the government-owned operator to CWC, the then-Ingraham administration agreed to both close-off the defined benefit plan to new BTC employees and cover the deficit by injecting $39m into a so-called Feeder Trust.

The agreement also required the government to make annual “top-ups” to the plan as required to cover any future payments, but neither these injections nor the original $39m payment were ever made.

Former prime minister, Perry Christie, complained several times while in office about the liability the Ingraham administration had left him, at one point revealing that the deficit had reached $99m. Yet he, too, appears to have done nothing about it, and Bahamian taxpayers are now being asked to pick up another inflated bill caused by prior governments kicking the can down the road.

“As disclosed in the 2019-2020 budget communication, pursuant to the April 2011 shareholders’ agreement (SA) between the government and C&W, when the Bahamas Telecommunications Company (BTC) was sold to Cable & Wireless Communications (C&W) for $210m, the government was required to inject an initial $39m into a Feeder Trust and annual top-ups, as required, to fund future pension obligations relating to BTC’s defined benefit plan,” the 2019 Fiscal Strategy Report said.

“According to the recent actuarial assessment, the deficit in the plan is pegged at nearly $160m. To satisfy this legal obligation, the Government is proposing to do so over eight years, making annual contributions of $20m commencing in fiscal year 2020-2021.”

Marlon Johnson, the Ministry of Finance’s acting financial secretary, last week confirmed to Tribune Business that $20m had been allocated for this year’s payment in the 2020-2021 Budget and the Government aimed to make good on its commitments notwithstanding the fiscal fall-out from COVID-19.

“It’s in the Ministry of Finance’s budget head, and the plan is to make good on it and to start paying it down,” Mr Johnson said of the BTC pension deficit. “That’s the intent to continue to budget for it and meet the obligation.”

He added that the extent of COVID-19’s impact “may mean the Government has to revisit” the timing of such payments, but it would not forget obligations it has promised to meet and will ultimately pay them.

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