The funds come from the General Fund of the Government of Puerto Rico. According to the Fiscal Plan certified by the Fiscal Oversight Board (JSF) on January 27, 2022, it is expected that, over 10 years, the Pension Reserve will develop a fund (annual contributions plus investment returns) exceeding $10 billion. To give a sense of the potential scale of the Pension Reserve, the retirement systems in Puerto Rico, even at their peak, never reached the $10 billion capitalization expected for the Pension Reserve.

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.

No. Neither the Pension Benefits Council nor the Pension Reserve Trust has the capacity or legal authority to increase pensions or restore retirement benefits, or to use the funds in the Reserve for that purpose. Any increase or restoration of retirement benefits require legislation and the express authorization of the Federal Court pursuant to the Puerto Rico Government’s Plan of Adjustment. 

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 (Defined Contributions). Appointed on or after December 1, 2000.

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

Judges: Appointed as of March 15, 2022.

Retirees who have not yet transitioned to the PayGo System payroll: If you are a participant of Law 70 of July 2, 2010, Law 211 of December 8, 2015, or any other existing or future legislation that incentivizes retirement, where: (a) former employees are still receiving their retirement benefit through their employer’s payroll, and (b) have not yet transitioned to the PayGo System payroll, they are not eligible to participate in the Pension Reserve Fund. Once they transition to the PayGo System payroll, they will be able to vote and be nominated to the Pension Benefits Council.

For the first time in history, current and future retirees with defined retirement benefits have a reserve that will help pay and provide security for their pensions if the government were unable to pay pensions due to an emergency (for example, a hurricane) or if revenues fall below projections. This fund is financed by contributions from the Government and is overseen by an independent Investment Board. It is important for retirees to take an interest because the Benefits Council is the entity responsible for ensuring that the Government makes the contributions as established in the Plan of Adjustment confirmed by the Federal Court, and for reviewing the Government’s requests to withdraw funds from the Pension Reserve. In addition, the Benefits Council currently appoints two of the five members of the Reserve Board, and once the Fiscal Oversight Board no longer exists, it will appoint three of the five.

The Pension Reserve is an entity independent from the Government of Puerto Rico, where retirees play an important oversight role. In accordance with the Pension Reserve Fund Regulations, there is a Benefits Council—composed primarily of retirees—and an Investment Board made up of individuals with relevant experience. The Regulations also specifically establish the requirements and conditions the Government must meet regarding funding, withdrawals, and the use of funds.

The Benefits Council: composed of nine members (five retirees—two from the Central Government Retirement System, two from the Teachers’ Retirement System, and one from the Judiciary Retirement System—and one active employee elected to represent retirees and employees, all serving four-year terms; one member appointed by AFSCME/Servidores Públicos Unidos; one member appointed by the Governor of Puerto Rico; and one member appointed by the Fiscal Oversight Board). The Benefits Council is responsible for ensuring that the Government complies with annual deposit requirements, appointing two members of the Investment Board, and authorizing withdrawals in accordance with the requirements established in the Pension Reserve Trust Regulations. The Council must also publish an annual report at the end of each fiscal year. Additionally, the Benefits Council has the authority to sue and be sued in Federal Court in the event of noncompliance with the Pension Reserve Trust Regulations. The Benefits Council: composed of nine members (five retirees—two from the Central Government Retirement System, two from the Teachers’ Retirement System, and one from the Judiciary Retirement System—and one active employee elected to represent retirees and employees, all serving four-year terms; one member appointed by AFSCME/Servidores Públicos Unidos; one member appointed by the Governor of Puerto Rico; and one member appointed by the Fiscal Oversight Board). The Benefits Council is responsible for ensuring that the Government complies with annual deposit requirements, appointing two members of the Investment Board, and authorizing withdrawals in accordance with the requirements established in the Pension Reserve Trust Regulations. The Council must also publish an annual report at the end of each fiscal year. Additionally, the Benefits Council has the authority to sue and be sued in Federal Court in the event of noncompliance with the Pension Reserve Trust Regulations.

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.

In accordance with the Pension Reserve Fund Guidelines, in 2023 a Transitional Council was appointed consisting of nine (9) members, selected as follows: five (5) retirees by the Official Committee of Retirees (COR); two (2) members by AFSCME; one (1) member by the Government; and one (1) member by the Fiscal Oversight Board (FOMB).

That council developed and implemented an election process to select the retired employees and the active employee of the Government of Puerto Rico who will serve on the Benefits Council for a four (4)-year term, from among the eligible voters who participate in the pension reserve.

The next elections will be held in 2027.

The Pension Reserve Fund Regulations provide that the members of the Benefits Council elected by retirees and active employees must be participants in the Pension Reserve, because they receive a defined pension or annuity under the Government of Puerto Rico’s PayGo system. They must also be residents of Puerto Rico. The beneficiaries of these individuals and the Executive Director of the Retirement Board under Act 106-2017, will NOT be eligible.

Elections will be held every four (4) years. The first election was in 2023, and the next one is expected to be in 2027.  

In accordance with the Guidelines, the Pension Benefits Council must notify its intention to conduct elections through a public notice of the Election Process, beginning with the Nomination process. The Guidelines also establish that an election regulation must be approved before the process begins.  

Pursuant to Section 1.3 of the Guidelines, the Pension Reserve Trust and the Pension Benefits Council will exist until sixty (60) days after all funds have been withdrawn as provided in the Guidelines, or until all pension benefits of the retirees participating in the Reserve have been paid in full—whichever occurs first. It is expected that the Government will continue paying pensions to current retirees and to active employees entitled to a lifetime pension for approximately another fifty (50) years.