Despite COVID-19, GovGuam Retirement Fund ‘prudently’ managed its investments

GovGuam Retirement Fund (PNC file photp)

The Office of Public Accountability (OPA) has released the Government of Guam
(GovGuam) Retirement Fund (Fund) financial statements, report on compliance and internal control, and the auditor’s communication with those charged with governance for fiscal year (FY) 2020.

Although the COVID-19 pandemic caused unprecedented volatilities in the financial markets, OPA reported that the Retirement Fund stayed focused on the long-term
investment horizon and prudently managed investments in both the DB and DC Plans.

The Fund closed fiscal year (FY) 2020 with a $17.8 million decrease in net position for
the Defined Benefit (DB) plan, and a $41.8 million significant increase in net position (net income) for the Defined Contribution (DC) plan. The Fund’s rate of return on its DB Plan investment portfolio was 4.33% in FY 2020 compared to 3.17% in FY 2019, resulting in an average rate of 8.02% since 1995.

The Fund determined that the COVID-19 pandemic is still expected to negatively impact the Fund’s investments and net position. However, the ultimate financial impact cannot be reasonably estimated at this time.

Although the Fund’s offices were closed from March 2020 to January 2021, services were still provided to the members and retirees with social distancing measures.

The unfunded liability decreased from $1.18 billion in 2018 to $1.16 billion based on the 2019 actuarial valuation.

The unfunded liability is the present value of the future benefits payable that are not covered by the actuarial value of assets as of the valuation date.

The actuarially determined contribution rate increased from 26.28% to 26.97%, which was due to the net recognition of investment gains and losses over the last three years. The increase was partially offset by some actuarial gains due to demographic experience that differed from the actuarial assumptions and changes adopted from the 2011 to 2015 experience study.