Press Release

American Federation of Teachers, AFSCME file Lawsuit Against Puerto Rican Government for Mismanaging Public Service Workers Retirement Accounts

For Release: 

Thursday, November 15, 2018

Contact:

Oriana Korin
202-374-6103
Oriana.Korin@aft.org

SAN JUAN Today, the two unions representing teachers and other public employees in Puerto Rico—the American Federation of Teachers and the American Federation of State, County and Municipal Employees—filed a lawsuit on behalf of their members whose retirement accounts were allegedly mismanaged by the Puerto Rican government.

The action was filed in Puerto Rico’s Title III bankruptcy case. It seeks declaratory and injunctive relief for the workers, based on the commonwealth’s admission that it failed to implement the provisions of Puerto Rico Law 106 of 2017, a law that was supposed to create and protect individual defined-contribution retirement accounts for thousands of union-represented workers. By the commonwealth’s own admission, it—along with the Retirement Board of the Government of Puerto Rico., the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF), and their responsible officials—has failed to create and administer Law 106’s promised defined-contribution accounts, and instead has taken hundreds of millions of dollars of employee pension contributions and stashed more than $300 million in government accounts at Banco Popular that earn virtually zero interest.

The commonwealth has been aided and abetted in this violation of statutory and fiduciary duties by the Financial Oversight and Management Board and Banco Popular. As a result, thousands of public servants have been deprived of untold millions of dollars in interest and investment income that they should have been earning over the past year.

Defendants include the commonwealth; its governor; its chief financial officer and secretary of the treasury; the retirement system and its voting members; AAFAF and its executive director; the oversight board; and Banco Popular.

“A year after Hurricane Maria hit and devastated Puerto Rico, educators have made countless sacrifices to protect their kids and their classrooms. During that year, investors, bankers and bondholders have had much of their interests protected. Meanwhile, teachers thought their retirement money was also being protected and invested fairly, the way the retirement law promised. They were mistaken. We have learned that educator retirement funds have been sitting in Banco Popular bank accounts, collecting little or no interest, despite a statute that called for the money to be invested.

These dedicated educators were promised that their pension contributions would be protected and wisely invested. That trust was betrayed.

This lawsuit aims to protect the solemn promise made to teachers by the commonwealth when teachers invested their own money in their retirement accounts last year. It asks the court to compel the commonwealth to do what it was required by law to do last year: to set up teachers’ individualized retirement accounts and provide restitution for damages they’ve suffered as their money sat dormant at Banco Popular,” said Randi Weingarten, president of the American Federation of Teachers.

“We are taking legal action today because the disregard for Puerto Rican public service workers by the commonwealth and oversight board is both a violation of the law and a shameless attack on their freedom to retire with dignity. Without workers’ consent, the commonwealth handed their hard-earned money over to a bank chosen by government officials when the money should have been properly invested so that Puerto Rico’s working families could amass retirement savings. It is unconscionable that the oversight board turned a blind eye to the commonwealth’s failure to implement its July 1, 2017, mandate while the bank was unjustly enriched at the expense of hardworking Puerto Ricans.

Puerto Rico’s teachers, human service workers, public safety officers and thousands of others step up every day to make their communities safer and stronger. Public service workers don’t do their work to get rich; they do it because public service is a calling. They’ve kept fighting for Puerto Rico despite an unimaginable natural disaster and a fiscal crisis they didn’t create. For all the sacrifices they have made, and austerity measures imposed upon them, they deserve better than this betrayal. They deserve retirement security and basic respect," said Lee Saunders, president of the American Federation of State, County and Municipal Employees.

"The Government has the obligation to fulfill its responsibilities after enacting legislation, because those who pay the consequences of its negligence are, in this particular instance, teachers and public employees. Those new teachers that entered the system after 2014 only have a defined contribution plan for their retirement. And once again, the government violates the law, affecting the rights of those teachers. The government’s inaction with Act 106-2017 prevents teachers from receiving the interests that such contributions can generate. It is a huge damage to our members. It’s incredible that we have to go to court to force the government to comply with this obligation.  But teachers are not alone.  They have the Puerto Rico Teachers Association and the American Federation of Teachers on their side to defend them. The government will have to face us once again in the courts because we will do everything in our power to force it to comply. It is not fair that a bank is earning the interests that teachers should be earning. We demand from the government to create immediately these individual accounts and place them where they yield the greatest amount of interest possible.  Also, we urge government to start paying Social Security for teachers and to stop the intentions of the Financial Oversight Board to move active teachers to these defined contribution plans, since their retirement is protected by the 2014 Supreme Court ruling. No government should legislate or be allowed to impose statutes that lead our teachers to misery. We hope that with this action, the government will immediately comply with its obligation, saving the people of Puerto Rico and teachers the costs of another litigation”, said Dr. Aida Díaz, president of the Association of Teachers of Puerto Rico.

“We are taking this action to try to reclaim the rights of the employees and retirees represented by our union, who have the right under Act 106 of 2017 to have their personal contributions separated, ensuring them and establishing a new plan of defined contributions and separate accounts. These accounts, in accordance with the statute and the mandates of all of the Oversight Board’s fiscal plans, are exclusively funded through deductions from public employees’ own wages, and the accounts’ owners should be able to invest to accumulate the necessary retirement savings for their future financial support. These rights are being trampled by the Government, who has flagrantly violated this Law and its responsibility in handling money that doesn’t belong to it,” said Annette González, president of Servidores Públicos Unidos.

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The AFT represents 1.7 million pre-K through 12th-grade teachers; paraprofessionals and other school-related personnel; higher education faculty and professional staff; federal, state and local government employees; nurses and healthcare workers; and early childhood educators.