Revival of GERS Loan Program Set for October Launch; Legislative Proposals Aim to Ensure Competitive Interest Rates

October 2024 marks a significant milestone for Government Employees Retirement System (GERS) members, as they may soon have the opportunity to access personal loans up to $10,000, a move nearly a decade in the making. This initiative comes to fruition through sustained legislative efforts, notably spearheaded by Senator Kenneth Gittens in 2016 with Act 7880. This act mandated the revival of a previously suspended loan program, which, after years of legal challenges and discussions, received a green light from the GERS board with a $20 million starting fund.

Senator Milton Potter recently introduced Bill 35-0196 to the Senate Committee on Budget, Appropriations and Finance. This bill aims for a swift resumption of the GERS loan program by setting a deadline of September 30, 2024. It proposes the removal of an 8 percent interest rate cap on personal loans and seeks to limit the system’s liability to $75,000. According to Potter, eliminating the fixed interest rate cap would grant GERS the flexibility to adjust rates based on current market conditions, aligning it with standard practices of loan institutions.

Dwane Callwood, the senior chairperson of the GERS Board of Trustees, supports the proposed bill, emphasizing its importance in ensuring the long-term viability of the GERS. He clarified that introducing the loan program at this juncture, with an 8 percent interest rate, represents a strategic move following a careful assessment of previous legislation and current financial landscapes.

The loan program will initially be open to active GERS members who have contributed for at least two years, with plans to extend its reach to retirees, despite current legislation not explicitly providing for their participation. This decision underscores a commitment to inclusivity and support for all members of the GERS community.

Senators expressed varied concerns during the committee meeting, ranging from the program’s sustainability during financial downturns to the criteria for setting interest rates. Senator Marvin Blyden inquired about the program’s resilience, to which Callwood responded with optimism, highlighting the guaranteed income the program would generate. Meanwhile, Senators Samuel Carrion and Ray Fonseca voiced apprehensions about the potential for rate increases, emphasizing the need for affordability.

Despite these concerns, Callwood reassured that the current 8 percent rate is deemed appropriate, with flexibility for future adjustments to remain competitive. However, committee chair Senator Donna Frett-Gregory cautioned against direct competition with local banks, advocating for reasonable loan rates that protect both the retirement system and its members.

In a move towards clarity and consensus, Senator Potter agreed to refine the bill’s language regarding interest rates. This gesture, coupled with unanimous support from lawmakers, paved the way for the bill’s progression to the Committee on Rules & Judiciary, marking a pivotal step towards enhancing financial support for government employees in the Virgin Islands.