The funds come from the General Fund of the Government of Puerto Rico. According to the latest Fiscal Plan certified by the Financial Oversight and Management Board (FOMB), dated January 27, 2022, the Pension Reserve is expected to build a fund amounting to more than $10 billion (annual contributions + return on investment) over a 10-year period. To give you an idea of the Pension Reserve’s potential scope, not even at their best did retirement systems in Puerto Rico have the $10 billion capitalization that the Pension Reserve is expected to have.

The Plan of Adjustment as confirmed by the U.S. District Court for the District of Puerto Rico requires the Government to contribute at least $175 million per year to the Pension Reserve. The contribution amount can be higher if the Government exceeds its projected revenue in any given year. If the Government fails to make its contributions, then the Benefits Council can go to the U.S. District Court to enforce compliance.

If the Government fails to make the required contributions in any given year, it would be breaching the terms of the Plan of Adjustment as confirmed by the U.S. District Court for the District of Puerto Rico. Therefore, the Benefits Council could file a complaint with the U.S. District Court for the District of Puerto Rico on behalf of the Pension Reserve Fund to claim payment of the established contributions. This way, the Court may order said payment and may establish the necessary penalties to compel the Government’s compliance with the provisions of the Plan of Adjustment.

No. The Pension Reserve and the Retirement System are two different entities with separate functions. On the one hand, the Pension Reserve is an agency of the Government of Puerto Rico created by statute, that manages the retirement benefits of public employees. On the other hand, the Pension Reserve was created under the Plan of Adjustment, it is a trust, and is a separate legal entity independent from the Government of Puerto Rico. The Pension Reserve was created to provide funding security to pension payments if the Government lacks sufficient revenue. The funds that will be held in the Pension Reserve will not be managed by the Government.

Retirees and active employees who are entitled to a defined benefits pension from the Government, Teachers, and Judiciary retirement systems will benefit from  THE PENSION RESERVE established to protect their pensions and prevent them from being at risk again.

According to current estimates, 220,050 people could benefit from The Pension Reserve. 

Employee Retirement System of the Government of PR – Employees appointed under Act No. 447 on or before March 31, 1990, or under Act No. 1 on or before December 31, 1999.

Teachers Retirement System – Teachers appointed under Act No. 91 on or before July 31, 2014.

Judiciary Retirement System: Judges appointed on or before March 14, 2022.

Government Employee Retirement System: Act No. 305 of September 24, 1999 (2000 Reform) / Act No. 3- 2013; Act No. 106-2017 (Defined Contributions). Appointed from December 1, 2000, onwards.
2017 (Aportaciones Definidas). Nombrados desde el 1ro de diciembre de 2000 en adelante.

Teachers: Act No. 160-2013 / Act No. 106-2017 (Defined Contributions). Appointed from August 1, 2014, onwards.

Judges: Appointed as of March 15, 2022.

For the first time in history, current and future retirees with defined retirement benefits will have a reserve that will help pay and secure their pensions when the Government is not able to meet pension payments due to an emergency (a hurricane, for example) or that revenue collections fall below projected levels. The Pension Reserve is funded by Government contributions and will be managed by the Investment Board. It is important for retirees to take an interest in The Pension Reserve, because the Pension Benefits Council will be the entity responsible for ensuring the Government’s compliance with the required contributions, as well as with the conditions and requirements to make withdrawals from the Pension Reserve funds as provided in the Guidelines, which are included in Plan of Adjustment confirmed by U.S. District Court for the District of P.R. Also, the Benefits Council appoints two of the five Reserve Board members. When the Financial Oversight and Management Board no longer exists, it will appoint three of the five members.

The Pension Reserve Fund is independent from the Government of Puerto Rico. Through the Benefits Council retirees and active employees will play an important monitoring role. According to the Guidelines, the Fund consists of two entities: the Benefits Council – composed primarily of elected retirees – and an Investment Board – composed of 5 experts, two who are appointed by the Council. The Guidelines further provide specific requirements and conditions that the Government must meet regarding funding, withdrawals, and usage.

The Benefits Council: Composed of 9 members (5 retirees – 2 from the Government Employee Retirement System, 2 from the Teachers’ Retirement System, and 1 from the Judiciary Retirement System – and 1 active employee, who will be elected to represent both retirees and employees for a 4-year term; 1 member appointed by AFSCME/Servidores Públicos Unidos; 1 member appointed by the Governor of Puerto Rico, and 1 member appointed by the FOMB). The Benefits Council will ensure the Government’s compliance with annual contributions, appointing two members to the Investment Board’s, and authorizing fund withdrawals in accordance with the requirements provided in the Guidelines. Furthermore, the Benefits Council must issue an annual report at the end of each fiscal year. The Benefits Council may sue (and be sued) in the U.S. District Court for the District of P.R. Court in the event of noncompliance with the provisions of the Guidelines.

The Investment Board: Composed of 5 professionals appointed for a 6-year term (2 designated by the Benefits Council, 2 designated by the Governor of Puerto Rico, and 1 designated by the FOMB) with extensive experience and expertise in economy/finances and/or investment management. The Board invests and manages the funds held in the Pension Reserve to make pension payments to retirees, as well as submitting periodic investment performance reports to the Benefits Council. The Board must also issue an annual report at the end of each fiscal year. The Investment Board, which has a fiduciary duty and is subject to the Puerto Rico Government Code of Ethics, will also be able to sue (and be sued) in the U.S. District Court for the District of P.R. Court in the event of noncompliance with the provisions of the Guidelines.

To afford the funds in The Pension Reserve a reasonable amount of time to grow through investments, the Government may not withdraw any Pension Reserve funds until after 2032, pursuant to the Guidelines, except in a case of force majeure, such as a hurricane, when revenues may fall and there is not enough cashflow to make pension payments. All Government requests for fund withdrawals will have to be approved by the Benefits Council, on the recommendation of the Investment Board.

According to the confirmed Plan of Adjustment, the purpose of the money deposited in the Pension Reserve is to provide security to pension payments under the PayGo system, which are normally paid by the General Fund. Therefore, the Government cannot use this money for any purpose, such as making payroll payments, paying Government operational expenses, or covering the cost of enacted laws.

No, any amendment to the Guidelines must be submitted to and approved by the U.S. District Court for the Court of P.R. The Government of Puerto Rico, the Benefits Council, and the Investment Board may, jointly or independently, request an amendment to the Guidelines, but the other parties can object if there is no consensus.

As provided in The Pension Reserve Guidelines, a Transitional Council composed of 9 members was initially created to, among other things, develop and execute an election process to elect the 5 retired employees and 1 active Government employee who will be joining the 9-member Pension Benefits Council for 4 years. The Official Committee of Retired Employees (COR, for its Spanish acronym) appointed 5 retirees to the Council, while Servidores Públicos Unidos/AFSCME appointed two members, and the Government and the FOMB appointed one member each.

The Pension Reserve Trust Guidelines provide that Benefits Council members elected by retirees and active employees must be beneficiaries of the Pension Reserve, in other words must receive or be entitled to defined pension benefits under the PayGo system. They must also be Puerto Rico residents of Puerto Rico. Their beneficiaries, as well as active members of the Retirement Board under Act 106-2017, WILL NOT be eligible.

El Periodo de Elecciones comienza el 18 de agosto de 2023 con el envío por correo postal de las papeletas a más de 200,000 Votantes Elegibles (retirados y empleados activos que tienen derecho a recibir una pensión vitalicia del Sistema de Retiro Central, Sistema de Retiro para Maestros o Sistema de Retiro para la Judicatura), y termina el 15 septiembre de 2023.

Among its responsibilities, the Transitional Council must implement a program to inform and educate retirees on the nomination process and eligibility requirements, candidate certification requirements, and provide details regarding when and how the voting will take place. To accomplish this, the Transitional Council will use digital platforms (website and social media), printed daily newspapers, and in-person meetings in accordance with the provisions of the Pension Reserve Guidelines.