Law 7 drained $157 million from Retirement

On August 20, 2010, the Centro de Periodismo Investigativo documented how the Law 7 fiscal emergency continued “bleeding” the Administration of Retirement Systems (ASR) while the system’s deficit grew toward a possible collapse.

Actuarial reports as of June 30, 2009 placed insolvency at $17,100 million at ASR, $6,600 million at the Teachers Retirement System (SRM) and $273 million at Judiciary, with funding ratios of 9.8%, 24.7% and 15.6%. Board of Trustees minutes projected ASR would run out of net assets by 2014; Judiciary by 2015; Teachers by 2017.

A November 2009 minute detailed that, because of Law 7, the System stopped receiving $157 million in contributions. By May 2010 there were 830 pensions requested (701 already on payroll) and 2,507 contribution refunds. Héctor Mayol Kauffmann (ASR) summarized the effect: the Government saves the salary, but Retirement pays the pension “until death.”

The Accounts Receivable Report as of June 30, 2010 put at $254 million the debt of municipalities, corporations and agencies (municipalities $89 million; 39 corporations $85 million, with ASEM as a major debtor). To ease liquidity, ASR had issued in 2008 three bond issues for $3,000 million with UBS as a lead player; CPI placed the resulting debt at about $2,900 million over 50 years, with bondholder service of $167 million a year (toward $217 million in 2021).

Lost contributions / actuarial deficit ≠ adjudicated theft. Bond issue ≠ works disbursement. Federal lawsuit over UBS ≠ judgment.

Source: Centro de Periodismo Investigativo. https://periodismoinvestigativo.com/2010/08/ley-7-le-tumbo-157-millones-a-retiro/