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SAN JUAN, Puerto Rico (AP) â¿¿ Puerto Rican officials on Wednesday proposed what they called "severe" cost-saving measures designed to help rescue one of the U.S. territory's public pension systems that is on the brink of collapse.
Treasury Secretary Melba Acosta called for increased employee contributions, a higher retirement age and reduced benefits and monthly pensions for certain workers.
"The problem is very severe and the problem is very large," she said. "We have to take quick and forceful action."
The proposal was endorsed by Javier Ferrer, president of the Government Development Bank of Puerto Rico, who said it urgently needs to be approved by the legislature.
"The reality is that the government does not have the resources to keep contributing additional funds to the system," he said.
The plan would raise employee contributions from about 8 percent to 10 percent, and increase the retirement age from 58 to 65 for some workers and from 65 to 67 for others. It also would transfer certain employees from a defined-benefit plan to a hybrid plan that included a defined contribution component.
Acosta and Ferrer also want to reduce bonuses and medical plan contributions, but say minimum monthly pensions should rise from $400 to $500.
The proposal is to be submitted to legislators this week. Gov. Alejandro Garcia is expected to sign it if lawmakers approve the plan.
Acosta said that even if the plan is approved as it currently stands, the Caribbean island's nearly depleted general fund would still have to contribute $100 million a year for several decades to ensure the pension system keeps operating.
The announcement comes amid stern warnings from economists and credit rating agencies that the pension system is buckling under a more than $37 billion unfunded liability. Experts previously recommended that the government reduce benefits, raise the retirement age and increase contributions from current employees.