1

2 IN THE UNITED STATES DISTRICT COURT

 FOR THE DISTRICT OF PUERTO RICO

3 Case No. 17-BK-3283-LTS

 ----------------------------------------x

4 In re:

5 THE FINANCIAL OVERSIGHT AND MANAGEMENT

 BOARD FOR PUERTO RICO,

6

 as representative of

7

 THE COMMONWEALTH OF PUERTO RICO, et al.,

8

 Debtors.

9 -----------------------------------------x

 Case No. 17-BK-4780-LTS

1 0 -----------------------------------------x

 In re:

1 1

 THE FINANCIAL OVERSIGHT AND MANAGEMENT

1 2 BOARD FOR PUERTO RICO,

1 3 as representative of

1 4 THE PUERTO RICO ELECTRIC POWER AUTHORITY,

1 5 Debtor.

 ----------------------------------------x

1 6 May 10, 2023

 9:33 a.m.

1 7

1 8 VIDEOTAPED DEPOSITION of SHEVA LEVY,

1 9 held at the offices of Kramer Levin

2 0 Naftalis & Frankel LLP, located at 1177

2 1 Avenue of the Americas, New York, New York

2 2 10036, before Anthony Giarro, a Registered

2 3 Professional Reporter, a Certified Realtime

2 4 Reporter and a Notary Public of the State

2 5 of New York.

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Case:17-03283-LTS Doc#:24530-5 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 5 Page 1 of 44
1

2 A P P E A R A N C E S :

3

4 KRAMER LEVIN NAFTALIS & FRANKEL LLP

 Attorneys for the Ad Hoc Group of PREPA

5 Bondholders

 1177 Avenue of the Americas

6 New York, New York 10036

7 BY: NATAN HAMERMAN, ESQ.

 nhamerman@kramerlevin.com

8

9 KRAMER LEVIN NAFTALIS & FRANKEL LLP

 Attorneys for the Ad Hoc Group of PREPA

1 0 Bondholders.

 2000 K Street NW, 4th Floor

1 1 Washington, D.C. 20006

1 2 BY: MARK RUSSELL, ESQ.

 mrussell@kramerlevi.com

1 3

1 4 CADWALADER, WICKERSHAM & TAFT LLP

 Attorneys for Assured Guaranty Corp. and

1 5 Assured Guaranty Municipal Corp

 200 Liberty Street

1 6 New York, New York 10281

1 7 BY: WILLIAM J. NATBONY, ESQ.

 bill.natbony@cwt.com

1 8 GILLIAN BURNS, ESQ.

 gillian.burnes@cwt.com

1 9

2 0

2 1

2 2

2 3

2 4

2 5

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Exhibit 5 Page 2 of 44
1

2 A P P E A R A N C E S (Cont.)

3

4 QUINN EMANUEL URQUHART & SULLIVAN, LLP

 Attorneys for Syncora Guarantee, Inc.

5 51 Madison Avenue, 22nd Floor

 New York, New York 10010-1603

6

 BY: DEBRA O'GORMAN, ESQ.

7 debraogorman@quinnemanuel.com

8

 WEIL, GOTSHAL & MANGES LLP

9 Attorneys for National Public Finance

 Guarantee Corporation

1 0 1395 Brickell Avenue, Suite 1200

 Miami, Florida 33131

1 1

 BY: COREY BRADY, ESQ.

1 2 corey.brady@weil.com

 (via Zoom)

1 3

1 4 PAUL HASTINGS LLP

 Attorneys for Official Committee of

1 5 Unsecured Creditors

 N.E. 100, 1170 Peachtree Street NE

1 6 Atlanta, Georgia 30309

1 7 BY: WILLIAM WHITNER, ESQ.

 kwhitner@paulhastings.com

1 8 ERIC STOLZE, ESQ.

 ericstolze@paulhastings.com

1 9

2 0 PAUL HASTINGS LLP

 Attorneys for Official Committee of

2 1 Unsecured Creditors

 2050 M Street NW

2 2 Washington, D.C. 20036

2 3 BY: NICHOLAS A. BASSETT, ESQ.

 nicholasbassett@paulhastings.com

2 4 (via Zoom)

2 5

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Exhibit 5 Page 3 of 44
1

2 A P P E A R A N C E S (Cont.)

3

4

 PAUL HASTINGS LLP

5 Attorneys for Official Committee of

 Unsecured Creditors

6 200 Park Avenue

 New York, New York 10166

7

 BY: SHLOMO MAZA, ESQ.

8 (via Zoom)

9

1 0 O'MELVENY & MYERS LLP

 Attorneys for AAFAF

1 1 7 Times Square

 New York, New York 10036

1 2

 BY: MARIA BENITES, ESQ.

1 3 mbenitesgutierrez@omm.com

 GABRIEL OLIVERA, ESQ.

1 4 (via Zoom)

1 5

1 6 PROSKAUER ROSE LLP

 Attorneys for Official Committee of

1 7 Unsecured Creditors

 1 International Place

1 8 Boston, Massachusetts 02110

1 9 BY: LAURA STAFFORD, ESQ.

2 0

2 1

2 2

2 3

2 4

2 5

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Exhibit 5 Page 4 of 44
1

2 A P P E A R A N C E S (Cont.)

3

 PROSKAUER ROSE LLP

4 Attorneys for the Financial Oversight and

 Management Board as Representative for

5 PREPA

 Eleven Times Square

6 New York, New York 10036

7 BY: MARGARET A. DALE, ESQ.

 mdale@proskauer.com

8 JULIA ALONZO, ESQ.

 (via Zoom)

9 ELLIOT STEVENS, ESQ.

 (via Zoom)

1 0 HADASSA WAXMAN, ESQ.

 (via Zoom)

1 1

1 2

 PROSKAUER ROSE LLP

1 3 Attorneys for Financial Oversight and

 Management Board as Representative for

1 4 PREPA

 70 West Madison Street, Suite 3800

1 5 Chicago, Illinois 60602

1 6 BY: PAUL POSSINGER, ESQ.

 ppossinger@proskauer.com

1 7 JORDAN SAZANT, ESQ.

 (via Zoom)

1 8

1 9

 MASLON LLP

2 0 Attorneys for U.S. Bank National

 Association, in its Capacity as Trustee

2 1 90 South Seventh Street, Suite 3300

 Minneapolis, Minnesota 55402

2 2

 BY: JOHN DUFFEY, ESQ.

2 3 (via Zoom)

2 4

2 5

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Exhibit 5 Page 5 of 44
1

2 A P P E A R A N C E S (Cont.)

3

4

5

6

7

8

9

1 0

1 1

1 2

1 3

1 4

1 5

1 6

1 7 ALSO PRESENT:

1 8 MARCELO RIVERA, Videographer

 BRIAN SEPTON, Terry Group

1 9 BILL CRADDOCK, Concierge Tech (via Zoom)

 BOB BRASCH, Concierge Tech (via Zoom)

2 0 ROLANDO EMMANUELLI-JIMENEZ (via Zoom)

 ZOE NEGRON-COMAS (via Zoom)

2 1 JORDYN PAPERNY (via Zoom)

 SCOTT MARTINEZ (via Zoom)

2 2 JOSE FERNANDEZ (via Zoom)

 JESSICA MENDEZ-COLBERG (via Zoom)

2 3 RAFAEL ORTIZ MENDOZA (via Zoom)

 ANTOINETTE DeCAMP (via Zoom)

2 4 LIAW HUANG (via Zoom)

2 5

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Exhibit 5 Page 6 of 44
1 SHEVA LEVY

2 MR. STOLZE: I believe we

3 can pass the witness.

4 MS. DALE: Is there anybody

5 else in the room who's going to ask

6 the witness any questions? Is there

7 anybody on the phone who is going to

8 ask the witness some questions?

9 MS. COMAS: Yes.

1 0 MS. DALE: Who's that?

1 1 MS. COMAS: For the record,

1 2 Zoe Negron in representation of UTIER

1 3 and the retirement system.

1 4 MS. DALE: Hello.

1 5 MS. COMAS: Hi.

1 6 EXAMINATION BY

1 7 MS. COMAS:

1 8 Q Ms. Levy, I'm going to ask

1 9 you some questions about your work with

2 0 the Commonwealth pension system.

2 1 What was your role in the

2 2 Commonwealth pension-related matters?

2 3 A I assisted the board in

2 4 determination of estimates of the

2 5 financial impact of the plan of

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Exhibit 5 Page 7 of 44
1 SHEVA LEVY

2 adjustment on the Commonwealth plans.

3 And I've been assisting with estimates

4 related to PayGo costs under the

5 Commonwealth fiscal plan. And I have

6 assisted with the estimation of costs

7 associated with various other questions

8 that have come up, including various

9 bills that were proposed in the

1 0 legislature related to the Commonwealth

1 1 pension plans.

1 2 Q And your role in PREPA

1 3 pension-related matters, is it the same?

1 4 MS. DALE: Object to the

1 5 form of the question.

1 6 A Could you please rephrase

1 7 the question, please?

1 8 Q You're also involved, as we

1 9 are seeing here, in pension-related

2 0 matters for PREPA as an advisor to the

2 1 oversight board; is that correct?

2 2 A Yes.

2 3 Q Could you describe your role

2 4 in that matter?

2 5 A I've been estimating the

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Exhibit 5 Page 8 of 44
1 SHEVA LEVY

2 potential financial impact of the

3 proposed changes under the plan of

4 adjustment to costs associated with the

5 PREPA pension system.

6 Q From what you observed in

7 both of those processes, how does PREPA

8 ERS compare to the Commonwealth

9 retirement system?

1 0 MS. DALE: Object to the

1 1 form.

1 2 Q For example, in terms of

1 3 structure, is the PREPA ERS different

1 4 from the Commonwealth's?

1 5 A Could you rephrase the

1 6 question?

1 7 Q I can try.

1 8 Are you aware that PREPA ERS

1 9 is an independent trust?

2 0 A I have heard that legal

2 1 position has been taken.

2 2 Q Are you aware that PREPA ERS

2 3 is not part of PREPA?

2 4 A Yes.

2 5 Q Does that distinguish it

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Exhibit 5 Page 9 of 44
1 SHEVA LEVY

2 from the Commonwealth retirement system,

3 as far as you know?

4 MS. DALE: Objection to the

5 form. I don't know what we're

6 talking about.

7 A I was not given information

8 related to the legal prospective of the

9 Commonwealth plans.

1 0 Q I'll move on.

1 1 Did you have any role in the

1 2 preparation of PREPA's plan of

1 3 adjustment, the most recently filed

1 4 version?

1 5 A Could you please be more

1 6 specific?

1 7 Q Were you involved in the

1 8 development of the exhibits of the plan

1 9 of adjustment for PREPA regarding the

2 0 pension system?

2 1 A Yes.

2 2 Q Could you describe what

2 3 participation you had?

2 4 A I was asked to review the

2 5 changes that were made under the

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Exhibit 5 Page 10 of 44
1 SHEVA LEVY

2 Commonwealth plan of adjustment to the

3 Commonwealth pension plans and to

4 identify what the -- what changes to the

5 PREPA ERS pension plan would be

6 consistent with the changes made to the

7 Commonwealth pension plans.

8 Q Why were you asked to do

9 that comparison?

1 0 MS. DALE: What was your

1 1 understanding of the project? Is

1 2 that a better way to put it?

1 3 MS. COMAS: Yes. I can

1 4 rephrase it that way.

1 5 Q What was your understanding

1 6 of the purpose of that?

1 7 A My understanding is that the

1 8 board wanted to treat the people in the

1 9 PREPA ERS pension plan in the same manner

2 0 that they treated the people in the

2 1 Commonwealth pension plans.

2 2 Q Regarding the treatment of

2 3 the pension claim in the plan of

2 4 adjustment, did you have any role in

2 5 that -- in the drafting of that

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Exhibit 5 Page 11 of 44
1 SHEVA LEVY

2 treatment?

3 A Could you rephrase the

4 question?

5 Q Have you seen the plan of

6 adjustment?

7 Let me start there.

8 A Not in its entirety.

9 Q Were you consulted on any of

1 0 the language included in the plan of

1 1 adjustment before its filing?

1 2 A Yes.

1 3 Q Were you consulted in the

1 4 language of what Class 3 for pension

1 5 claims would be?

1 6 A I was asked to confirm that

1 7 the language in the plan of adjustment

1 8 was consistent with how I was

1 9 understanding the board wanted to treat

2 0 that class.

2 1 Q Regarding --

2 2 MS. COMAS: Can we pull up

2 3 Exhibit 52?

2 4 Q Can you go to -- hold on a

2 5 second.

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Exhibit 5 Page 12 of 44
1 SHEVA LEVY

2 MS. COMAS: Can you scroll

3 down? Thank you. Up. Thank you.

4 Q Ms. Levy, can you explain to

5 me the difference between the two

6 scenarios in this exhibit?

7 MS. DALE: Are you asking

8 for the difference between Column A

9 and Column B?

1 0 MS. COMAS: Yes, I am.

1 1 A Column A represents an

1 2 estimate of the actuarially determined

1 3 contributions under a number of different

1 4 assumptions and inputs as described in

1 5 this document prior to the application of

1 6 the provisions of the plan of adjustment

1 7 that is explained to me.

1 8 And then Column B represents

1 9 an estimate of the amounts that would be

2 0 reimbursed to PREPA ERS from the PREPA

2 1 PayGo trust, beginning in 2025 and on,

2 2 based on the provisions of the plan of

2 3 adjustment. And in 2024, it includes an

2 4 amount needed to fund pension payments

2 5 until that first amount is provided to

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1 SHEVA LEVY

2 PREPA ERS in 2025. And then the amounts

3 prior to 2024 represent my understanding

4 of what PREPA ERS has received from the

5 Years 2018 through 2023.

6 Q Thank you.

7 You said that what is Column

8 A, the claim estimation is based on what

9 the payment would be without the

1 0 provisions of the plan; is that correct?

1 1 A The actuarially determined

1 2 contributions without the provisions of

1 3 the plan, yes.

1 4 Q Is that the same as the

1 5 actuarial liability of PREPA ERS?

1 6 A No.

1 7 Q Could you explain the

1 8 difference, please?

1 9 A The actuarial liability is

2 0 used to determine the actuarially

2 1 determined contribution. The actuarially

2 2 determined contribution in part reflects

2 3 a portion of the unfunded actuarial

2 4 liability to be funded in a given year.

2 5 Q Under this Column A also, do

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Exhibit 5 Page 14 of 44
1 SHEVA LEVY

2 these numbers reflect PREPA's

3 contribution debt?

4 MS. DALE: Objection to the

5 form of the question. If you

6 understand it, you could answer it.

7 A I understand that PREPA ERS

8 has made a claim related to debt from

9 PREPA. And Exhibit D is this Exhibit 52

1 0 identifies information that I relied on

1 1 from PREPA ERS to develop these

1 2 actuarially determined contributions in

1 3 Column A. I'm sorry. Appendix D, not

1 4 Exhibit D.

1 5 Q Can we go to Appendix D on

1 6 the Exhibit Share? If I'm understanding

1 7 on what here is Column B, actuarial

1 8 employee contribution, is that what

1 9 you're referring to?

2 0 A No.

2 1 Q What part of this appendix

2 2 is what was considered as part of that

2 3 debt that is claimed in the retirement

2 4 system?

2 5 A My understanding is the

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Exhibit 5 Page 15 of 44
1 SHEVA LEVY

2 retirement system claims that the

3 actuarially determined contribution

4 should have been the amount that was

5 contributed to the trust. And so

6 these -- these actuarially determined

7 contributions are developed to estimate

8 the claim on the basis that the ADC

9 represents the basis for the claim.

1 0 Q So the actuarially

1 1 determined contribution would be the

1 2 employer contributions that the

1 3 retirement system is claiming?

1 4 A For 2018 through the last

1 5 year of the last available Cavanaugh

1 6 Macdonald report, those are the amounts

1 7 that were determined by the system.

1 8 And then after that point in

1 9 time, those represent estimated

2 0 actuarially determined contributions,

2 1 based on -- I'm back on Column A of the

2 2 exhibit that we were looking at

2 3 originally.

2 4 Q In determining the ADCs, are

2 5 unpaid contributions included in the

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1 SHEVA LEVY

2 pension asset?

3 A For the purpose of this,

4 with the exception of the -- in the

5 footnote regarding the prior year --

6 inclusion of the prior year ADC, these

7 ADC amounts in this exhibit assume that

8 prior -- yes, include prior year ADCs in

9 the plan assets.

1 0 MS. COMAS: Can we return to

1 1 the Column A on the beginning of the

1 2 exhibit?

1 3 Q What is the impact on the

1 4 claim amount if the assets do not include

1 5 the unpaid contributions?

1 6 MS. DALE: If you know.

1 7 A I don't think I have

1 8 information readily available to answer

1 9 that question.

2 0 Q Would you be able to answer

2 1 in a general way if the claim would go up

2 2 or down?

2 3 A No.

2 4 Q Was that ever analyzed as

2 5 part of this exercise?

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1 SHEVA LEVY

2 A I was not asked to calculate

3 the claim on any other basis.

4 Q Does that Column A claim

5 estimate include the administrative fee

6 load?

7 A Not that I recall.

8 Q Do you have an understanding

9 why it would be included?

1 0 A My understanding is the

1 1 expected return on assets for the ADC is

1 2 assumed to be net of expenses. And

1 3 therefore, my recollection is that it's

1 4 not included as an adjustment.

1 5 Q What would be the impact of

1 6 having included it?

1 7 A I don't know.

1 8 Q Would you be able to say

1 9 generally if they would go up or down?

2 0 A No.

2 1 Q Was that ever part of your

2 2 analysis?

2 3 A No.

2 4 Q If we could go a little bit

2 5 lower on the exhibit to Footnote No. 4 --

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1 SHEVA LEVY

2 A Okay.

3 Q -- where it says inside of

4 the parentheses, "ADC excludes cost of

5 funding underpayment of prior ADCs," can

6 you explain what that refers to?

7 A Yes.

8 Q Please explain.

9 A Any receivable contributions

1 0 that are reflected on Appendix D related

1 1 to preplan of adjustment periods are

1 2 included in the plan assets, meaning they

1 3 are assumed to have already been

1 4 contributed. And therefore, the

1 5 actuarially determined contribution

1 6 excludes the cost of funding that amount

1 7 prospectively.

1 8 Q What would be the effect of

1 9 including those amounts, the impact?

2 0 A I don't know.

2 1 Q Would you be able to say

2 2 generally if it would go up or down?

2 3 A I would expect it to go up.

2 4 Q Can we move down to Appendix

2 5 E ?

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1 SHEVA LEVY

2 A Yes.

3 Q Thank you.

4 In the third bullet in the

5 claim amount determination, if we could

6 zoom in on that, inside of that

7 parentheses where it says "including

8 receivable contributions as described in

9 Appendix D," you see that?

1 0 A Yes.

1 1 Q Can you explain what that

1 2 means?

1 3 A It's my understanding that

1 4 PREPA ERS's actuary in developing the

1 5 actuary determined contributions included

1 6 in the plan assets receivable

1 7 contributions as described in Appendix D.

1 8 And those are the amounts that were

1 9 reflected in the years noted in that

2 0 bullet.

2 1 Q Can you define receivable

2 2 contributions?

2 3 A An amount that is expected

2 4 to be paid in the future.

2 5 Q What would be the impact on

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1 SHEVA LEVY

2 Column A estimates if the receivable

3 contributions were not included in the

4 asset?

5 A I don't know.

6 Q Would you be able to say

7 generally if it would go up or down?

8 A With the exception of the

9 preplan of adjustment amounts, which I

1 0 said before would go up, I don't know.

1 1 MS. COMAS: I'm going to ask

1 2 to pull up Exhibit 53 and go down to

1 3 Exhibit 5 of this exhibit.

1 4 Q You mentioned earlier that

1 5 you were not asked to calculate the claim

1 6 amount in any way, other than under the

1 7 Column A, ADC and, B, assumptions of the

1 8 plan of adjustment.

1 9 Could you explain what the

2 0 purpose of the calculation of this

2 1 exhibit was?

2 2 A This exhibit was developed

2 3 to help assess the costs beginning in

2 4 2024 of funding future PREPA ERS costs,

2 5 estimated based on the current plan asset

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1 SHEVA LEVY

2 values under two scenarios. One, if the

3 prior year ADCs are funded immediately

4 and, One, if they are funded gradually

5 over time.

6 Q Thank you.

7 What is your understanding

8 of why this -- let me rephrase the

9 question.

1 0 Why was that the case?

1 1 MS. DALE: Objection to the

1 2 form.

1 3 A Could you rephrase the

1 4 question?

1 5 Q What is your understanding

1 6 of why you were asked to prepare these

1 7 scenarios?

1 8 A My understanding is that the

1 9 board was trying to assess the cost today

2 0 of freezing the ADC, of contributing the

2 1 ADC going forward.

2 2 Q Why does this scenario not

2 3 include the debt in the assets?

2 4 MS. DALE: Sorry.

2 5 Ms. Negron, what was the question?

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1 SHEVA LEVY

2 Q Why does this scenario not

3 include the contribution debt in the

4 assets?

5 MS. DALE: Which scenario

6 are we talking about, please?

7 Exhibit 5?

8 MS. COMAS: Yes. Exhibit 5.

9 MS. DALE: There's two

1 0 scenarios; right? I'm confused as to

1 1 your question.

1 2 MS. COMAS: One second. I'm

1 3 just revising my notes from this

1 4 statement.

1 5 Q With regard to Scenario A of

1 6 Exhibit 5, why doesn't it include the

1 7 contribution debt?

1 8 A That's the instructions I

1 9 was given and the request from my client

2 0 is to what numbers they wanted to see.

2 1 Q With regard to Scenario B,

2 2 is that the same answer?

2 3 A Yes.

2 4 Q My clients, we're talking

2 5 about the oversight board?

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1 SHEVA LEVY

2 A Correct.

3 Q Thank you.

4 MS. COMAS: We could put the

5 exhibit down. Thank you.

6 Q Regarding the PREPA PayGo

7 trust, were you involved in the

8 development of the funding structure for

9 the PREPA PayGo trust in the plan?

1 0 A I was involved in

1 1 discussions where members of the board

1 2 discussed it.

1 3 Q To questions of counsel

1 4 previously, you stated that the PayGo

1 5 trust would have a separate administrator

1 6 from PREPA ERS; is that correct?

1 7 A Yes.

1 8 Q Do you have an understanding

1 9 as to why?

2 0 A The way it was explained to

2 1 me, there were plan-related

2 2 responsibilities that were different from

2 3 PREPA ERS's current responsibilities.

2 4 And it was contemplated that somebody

2 5 else would handle those responsibilities.

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1 SHEVA LEVY

2 Q Do you know what

3 responsibilities those were?

4 MS. DALE: This was

5 testified to earlier today. But if

6 you can remember what you said,

7 please say it again.

8 A Determining the amount of

9 contribution that needs to be made to the

1 0 PREPA PayGo trust based on the terms of

1 1 the plan of adjustment, reviewing the

1 2 amounts of reimbursements requested by

1 3 PREPA ERS for consistency with the

1 4 provisions of the plan of adjustment.

1 5 Those are the two that come to mind.

1 6 Q Do you have an understanding

1 7 of why a separate administration is

1 8 necessary for those responsibilities?

1 9 A No.

2 0 Q Were any other mechanisms

2 1 considered for the funding of the pension

2 2 reform?

2 3 MS. DALE: I guess you could

2 4 answer that yes or no.

2 5 A Yes.

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1 SHEVA LEVY

2 Q Which ones?

3 MS. DALE: I'm just going to

4 caution the witness that if

5 considerations about other mechanisms

6 that were considered for the funding

7 of pension reform were as a result of

8 communications with counsel and/or

9 the board in consultation with

1 0 counsel, then you should not -- I

1 1 would direct you not to answer those

1 2 questions because I think it would be

1 3 revealing either deliberative process

1 4 or potentially work product. But if

1 5 you have knowledge of other

1 6 considerations that were thought

1 7 about that don't relate to either

1 8 counsel for those communications,

1 9 then you could answer the question.

2 0 A I'm going to decline to

2 1 answer that question.

2 2 Q I'm sorry.

2 3 Can you repeat?

2 4 MS. DALE: She's not going

2 5 to answer that question because it

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1 SHEVA LEVY

2 relates to communications with

3 counsel.

4 MS. COMAS: So the question

5 was which ones. And that's what's

6 not going to be answered?

7 MS. DALE: Yes.

8 Q Did you analyze whichever

9 mechanisms were considered?

1 0 A I don't recall.

1 1 Q As part of the plan of

1 2 adjustment, the PayGo trust was created

1 3 for the sole benefit of PREPA ERS.

1 4 Do you understand what that

1 5 entails?

1 6 MS. DALE: Object to the

1 7 form.

1 8 A Could you rephrase the

1 9 question?

2 0 Q What does it mean that the

2 1 PREPA PayGo trust is created for the sole

2 2 benefit of PREPA ERS?

2 3 A My understanding is that the

2 4 trust was created to reimburse PREPA ERS

2 5 for pension payments in accordance with

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1 SHEVA LEVY

2 the provisions of the plan of adjustment

3 and for no other purpose.

4 Q Does the mechanism of the

5 PayGo trust presuppose that PREPA ERS

6 would pay the pension benefits first and

7 be reimbursed for them after?

8 A That is my understanding.

9 Q Do you have any

1 0 understanding why that is the way that

1 1 the mechanism was set up?

1 2 A That was the preference of

1 3 the board. I don't know that I have the

1 4 full picture of why they chose that --

1 5 why they chose that approach.

1 6 Q Thank you.

1 7 Regarding the reform of the

1 8 pension system, did you play a role in

1 9 the development of that pension reform?

2 0 A Could you be more specific

2 1 as to which reform?

2 2 Q The reform that's included

2 3 in the plan of adjustment. Give me one

2 4 second.

2 5 MS. COMAS: I have a

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1 SHEVA LEVY

2 technical question for Exhibit Share

3 usage.

4 THE CONCIERGE TECH: Sure.

5 MS. COMAS: If I want to

6 mark an exhibit, I just move it to

7 the marked exhibit folder?

8 THE CONCIERGE TECH: I have

9 access to your private folder. So if

1 0 you like, I'll just name the folder

1 1 and mark the next exhibit.

1 2 MS. COMAS: Give me one

1 3 second to locate it. The one that is

1 4 labeled Exhibit G, pension reform,

1 5 inside the Fernandez folder.

1 6 THE CONCIERGE TECH: This

1 7 will be Exhibit 63.

1 8 (The above-referred-to

1 9 document was marked as Exhibit 63 for

2 0 identification, as of this date.)

2 1 Q Have you ever seen this

2 2 document?

2 3 MS. DALE: We're looking for

2 4 it. We only have it on the screen.

2 5 MS. COMAS: Okay.

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1 SHEVA LEVY

2 MS. DALE: Yes. I think we

3 should access it here, I guess. It's

4 right there. So I don't know to the

5 extent that you want to manipulate

6 this.

7 THE WITNESS: I know which

8 exhibit it is.

9 MS. DALE: We're going to

1 0 keep going. So ask your question.

1 1 This is again Exhibit 63.

1 2 A Can you repeat the question,

1 3 please?

1 4 Q Do you recognize this

1 5 document?

1 6 A Yes.

1 7 Q Did you have any role in the

1 8 development of this document?

1 9 A Yes.

2 0 Q Could you describe that

2 1 role?

2 2 A Yes.

2 3 Q Let me rephrase that.

2 4 Please describe that role.

2 5 A I reviewed this document to

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1 SHEVA LEVY

2 confirm that it was consistent with my

3 understanding of how the board wanted to

4 reform the pension system.

5 Q When you say how the board

6 wanted to reform the pension system, you

7 mean to make it consistent with the

8 Commonwealth pension system?

9 A As it relates to the amount

1 0 of -- what the individual plan

1 1 participants would receive, the

1 2 provisions that impact those amounts,

1 3 yes.

1 4 Q Were you involved in any of

1 5 the provisions that affect the active

1 6 participants of PREPA ERS?

1 7 A Like you said, I reviewed

1 8 those to confirm that they were

1 9 consistent with the Commonwealth pension

2 0 plans.

2 1 MS. DALE: Ms. Negron, when

2 2 it's convenient, we need to take a

2 3 break. We've been going for about an

2 4 hour and almost 20 minutes. So just

2 5 when it's convenient for you.

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1 SHEVA LEVY

2 MS. COMAS: I think now

3 would actually be a convenient time

4 if the witness needs a break.

5 THE VIDEOGRAPHER: The time

6 is 5:15 p.m. We're going off the

7 record.

8 (A short recess was taken.)

9 THE VIDEOGRAPHER: The time

1 0 is 5:26 p.m. And we're back on the

1 1 record.

1 2 Q Can we pull up the exhibit

1 3 again, Exhibit 63? Can we go down to

1 4 page 3 of 6?

1 5 A Yes.

1 6 Q Ms. Levy, were you involved

1 7 in the development of the retirement

1 8 eligibility provisions of the proposal?

1 9 MS. DALE: Of the plan of

2 0 adjustment?

2 1 MS. COMAS: Of this exhibit.

2 2 A I was involved in

2 3 identifying for the board which

2 4 provisions would be needed to mirror the

2 5 eligibility provisions under the

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1 SHEVA LEVY

2 Commonwealth plan of adjustment.

3 Q Can we go down to the next

4 page? Do you see the row that says

5 "elimination of minimum benefit"?

6 A Yes.

7 Q Were you involved in the

8 development of that row?

9 A I was involved in

1 0 identifying that this would be consistent

1 1 with how the Commonwealth plan of

1 2 adjustment treated the minimum benefit.

1 3 Q Would the same be true for

1 4 the elimination of the use of sick leave

1 5 to purchase credit towards a merit

1 6 pension?

1 7 A Yes.

1 8 Q Would the same be true for

1 9 the row of bonus payments?

2 0 A There was no funeral bonus

2 1 for the Commonwealth. So the board

2 2 provided guidance on how to handle the

2 3 funeral bonus. And then the same is true

2 4 with respect to the other aspects of that

2 5 row that I was -- I provided input on

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1 SHEVA LEVY

2 provisions that would be consistent with

3 the Commonwealth plan of adjustment.

4 Q Would the same be true for

5 the row of employee contributions?

6 A Yes.

7 Q The same be true for the row

8 of implementation of defined contribution

9 accounts?

1 0 A Yes.

1 1 Q What is your understanding

1 2 of the basis for implementing defined

1 3 contribution accounts?

1 4 A Could you please rephrase

1 5 the question?

1 6 Q What is your understanding

1 7 of why the exhibit implements defined

1 8 contribution accounts for mobilized

1 9 employees?

2 0 MS. DALE: Objection to the

2 1 form of the question.

2 2 A My understanding is that

2 3 this is -- this treatment here of having

2 4 mobilized employees and PREPA employees

2 5 participate in the plan is consistent

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1 SHEVA LEVY

2 with the treatment under the Commonwealth

3 plan of adjustment.

4 Q Is the same true for the

5 elimination of cost of living

6 adjustments?

7 A Yes.

8 Q Is the same true for death

9 benefits?

1 0 A Yes.

1 1 Q Is the same true for post

1 2 retirement death benefits?

1 3 A Yes.

1 4 Q Is the same true for

1 5 disability benefits?

1 6 A Yes.

1 7 Q Thank you.

1 8 Would you say that the basis

1 9 for establishing a defined contribution

2 0 plan for PREPA employees was to make it

2 1 consistent with the Commonwealth

2 2 retirement system?

2 3 A That is what I was told.

2 4 Q Is the same true of

2 5 eliminating all employer contributions to

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1 SHEVA LEVY

2 the retirement system?

3 MS. DALE: Objection to the

4 form of the question.

5 A Could you please repeat the

6 question?

7 Q The fact that PREPA will no

8 longer be providing employer

9 contributions to this defined

1 0 contribution plan, is that also based on

1 1 making it consistent with the

1 2 Commonwealth retirement system?

1 3 A I'm not aware of PREPA

1 4 currently making contributions to any

1 5 defined contribution plan. But the

1 6 provision of having only employees

1 7 contribute to the defined contribution

1 8 plan is consistent with the treatment

1 9 under the Commonwealth plan of

2 0 adjustment.

2 1 Q What is your understanding

2 2 of why the board wanted to make PREPA ERS

2 3 consistent with the Commonwealth

2 4 retirement system?

2 5 A I don't know. That was

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1

2 their policy decision.

3 MS. COMAS: I have no

4 further questions.

5 MS. DALE: Does anybody else

6 want to question the witness on

7 rebuttal or -- I don't know. More

8 questions for the witness? Looks

9 like a no. I think we could go off

1 0 the record then.

1 1 THE VIDEOGRAPHER: The time

1 2 is 5:33 p.m. We're going off the

1 3 record.

1 4 (Time noted: 5:33 p.m.)

1 5

1 6 ___________________

 SHEVA LEVY

1 7

1 8

1 9 Subscribed and sworn to

2 0 before me on this _______day

2 1 of _______________________, 2023.

2 2

 __________________________________

2 3 NOTARY PUBLIC

2 4

2 5

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Case:17-03283-LTS Doc#:24530-5 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 5 Page 37 of 44
I PRELIMINARY - FOR DISCUSSION 

PREPA Pension Claim and Recovery 

January 27, 2023 

Note: PREPA ERS liquid assets are depleting. Unaddressed, available funds may be less than 

expected benefit payments within a year. 

CONFIDENTIAL FOMB PREPA 00020082 

January 27, 2023 

Note: PREPA ERS Iiqi 

hi. 

than 

Exhibit 

0052 

5/10/2023 

CONFIDENTIAL FOMB PREPA 00020082 

REDACTED

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Exhibit G

SUMMARY OF PENSION REFORM

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Exhibit G Page 1 of 6

Exhibit 

0063 

5/10/2023 

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TERMS FOR MODIFICATION OF PREPA ERS OBLIGATIONS

To avoid creating future pension liabilities and to stabilize the system for the benefit of future 

retirees and ratepayers, the PREPA ERS plan benefit accrual shall be frozen upon the Effective 

Date of the Plan of Adjustment (the “POA Effective Date”). 

Following is a summary of the terms of the Plan’s freeze of further defined benefits of under the 

PREPA ERS. 

The modifications listed herein modify the obligations of PREPA and any other government 

employer whose employees continue to participate in the PREPA ERS defined benefit plan to fund 

the benefits provided by PREPA ERS as established in regulations by the Governing Board of the 

Puerto Rico Electric Power Authority on July 1, 1945 and all subsequent amendments through the 

POA Effective Date, and are to be adhered to in the administration of PREPA ERS benefits by 

PREPA ERS. Administrative procedures not addressed below (such as rounding procedures in 

determining ages and service of participants) should be consistent with past practices.

PREPA employees participate under a defined benefit (DB) formula that is either supplemental to, 

or coordinated with, Social Security. This applies to all active participants of PREPA ERS 

(“Member” or “Members”), regardless of title or job classification or employer. Members will 

retain the benefits they have accrued up to and including the POA Effective Date; provided, 

however, that any future cost of living adjustments shall be eliminated pursuant to the POA, as 

any right to such future adjustments is not an accrued benefit and will not be an accrued benefit as 

of the POA Effective Date. Benefits accrued from and after the POA Effective Date shall be based 

on contributions and earnings in new segregated defined contribution retirement accounts under 

Act 106-2017 funded by employee contributions. As a result, employees will have the certainty 

that their contributions and investments will be safeguarded for the future, ensuring retirement 

security. 

Definitions 

Covered 

Participants

These terms pertain to the freeze of DB accruals of all active participants in PREPA ERS 

(including Mobilized Employees as described below)

Retirement 

eligibility age

Retirement Eligibility Age is the age at which a member may commence receipt of a monthly 

pension benefit.

Retirement benefit The Retirement Benefit is the amount of benefit payable to a member each month.

Creditable service Total of member and previous services that is credited for a pension.

Mobilized 

Employees

Former PREPA employees who have transferred or current PREPA employees who will transfer 

to Commonwealth instrumentalities in connection with a Public Private Partnership (“P3”) 

transaction. Mobilized Employees shall only receive Creditable Service for periods of 

employment with the Commonwealth to the extent that such service is provided under applicable 

law, and then only through the POA Effective Date.

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Average 

compensation

The average of the 3 highest annual base salaries, limited to $50,000 for members hired after 

1/1/1993.

Timing

Freeze Date PREPA ERS pension benefit accrual freeze becomes effective upon the POA Effective Date

Provisions of the proposal

Treatment of 

accumulated 

employee 

contributions

Participants retain a vested right to receive the accumulated employee contributions in accordance 

with the PREPA ERS plan document in lieu of the retirement, death, disability or termination 

benefits applicable under PREPA ERS. 

Retirement 

Eligibility prior to 

the Freeze Date

Prior to the Freeze Date, participants will retain the following eligibility for retirement under 

PREPA ERS:

• Participants hired before January 1, 1993: Age 60 or attainment of 20 years of service

• Participants hired on or after January 1, 1993: Age 60 with 5 years of service, age 65, 20 

years of service, or attainment of age 50 with 30 years of service

Retirement 

Eligibility after the 

Freeze Date 

Beginning on the Freeze Date, participants will become eligible for retirement under PREPA ERS 

upon reaching the following age / service combinations:

• Participants hired before January 1, 1993:

o Participants who have attained either Age 60 or 20 years of Creditable service as 

of the Freeze Date will be eligible to retire at any time.

o Participants not having attained either age 60 or 20 years of Creditable service at 

the Freeze Date will be eligible to retire based on age at the Freeze Date based 

on the following table:

 Attained Age at 

Freeze Date

 Retirement Eligibility Age after 

Freeze Date

 57 and up  61

 56  62

 55 and under  63

• Participants hired on or after January 1, 1993:

o Participants who have attained age 60 with 5 years of Creditable service, age 65, 

or 20 years of Creditable service at the Freeze Date will be eligible to retire at 

any time

o All other participants will be eligible to retire once having either a) attained age 

65 or b) the date the participant would have attained both i) 5 years of service 

assuming the freeze had not happened, and ii) the age based on the following 

table:

 Attained Age at 

Freeze Date

 Retirement Eligibility Age after 

Freeze Date

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 57 and up  61

 56  62

 55 and under  63

Elimination of 

minimum benefit

The $180 monthly minimum benefit for participants will be eliminated for participants retiring 

on or after the Freeze Date.

Elimination of use of 

sick leave to 

purchase credit 

towards a merit 

pension

For separations of service or retirements occurring on or after the Freeze Date, Creditable service 

will be determined as of the Freeze Date and will not increase in the future. Prior to the Freeze 

Date, sick leave could be converted at retirement to service towards a merit annuity at a rate of 1 

month for 15 days of accumulated sick leave time. After the Freeze Date, accumulated sick leave 

time will not be credited towards the pension benefit nor will any ability to purchase service be 

implemented. Applications to retire submitted prior to the plan confirmation date requesting 

application of sick time to purchase service will be honored.

Bonus payments Summer and Christmas bonuses will be eliminated for retirements after the Freeze Date. Onetime funeral bonus will be retained.

Bonus payments will not be impacted for retirements occurring prior to the Freeze Date.

Employee 

Contributions

Employee contributions to PREPA ERS plan will cease as of the Freeze Date.

Implementation of 

Defined 

Contribution 

Accounts

Mobilized employees will participate in the Commonwealth Defined Contribution (DC) accounts 

described under Act 106-2017 (Act 106). New DC accounts under a DC plan with the same 

provisions as Act 106 will be established for current PREPA employees.

Elimination of Cost 

of Living 

Adjustments 

(COLAs)

The COLAs that have been historically granted every three years will not be continued past the 

Freeze Date. Future COLAs will be eliminated. Previously granted COLAs will continue to be 

honored.

Benefits that have been previously increased by historic COLAs will not be reduced and COLAs 

prior to the Freeze Date will be honored.

Death benefits Terminations due to death will receive a refund of accumulated employee contributions.

Post Retirement 

Death Benefits

For retirements occurring on or after the Freeze Date, the benefit will be payable as a lifetime 

annuity. If the participant elects at retirement to receive an annuity with a 30% survivorship 

benefit at the annuitant’s death, the amount paid during the employee’s lifetime will be the 

actuarial equivalent of the life annuity. The plan actuarial equivalence (i.e. mortality and interest 

rate) will be determined consistent with the determination of other optional forms of payment 

under the plan.

Disability benefits Effective on the Freeze Date, participants who become disabled will be eligible to either:

a. Receive a retirement benefit if the retirement eligibility criterion are otherwise met,

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b. Receive a deferred pension if over 10 years of service has been accrued (payable 

identically to the benefits owed a vested terminated member), or 

c. Receive a refund of accumulated employee contributions

Specific implications 

on Retirement 

Benefit 

Retirement benefits will continue unchanged from those currently provided by PREPA ERS 

until the Freeze Date. Provisions for retirements occurring after the Freeze Date are as follows:

a. Minimum benefits will no longer apply to future retirees.

b. The freeze eliminates the ability to purchase additional service using unused sick or 

vacation time or by other means. Applications to retire submitted prior to the POA 

Effective Date requesting application of sick or vacation time to purchase service will be 

honored.

c. Participants who were hired prior to January 1, 1993 who attained 25 years of Creditable 

Service as of the Freeze Date receive a life annuity equal to 2.5% of Average 

Compensation determined as of the Freeze Date times years of service at the Freeze Date 

(up to 30 years). If benefits are coordinated with Social Security, the benefit will be 

adjusted from ages 65 to 80 by reducing the benefit by $40 per each year of Creditable 

Service at the Freeze Date (up to 30 years). 

d. Participants hired prior to January 1, 1993 who had not attained 25 years of Creditable 

Service as of the Freeze Date will receive a benefit of 1.5% of Average Compensation 

determined as of the Freeze Date per year of Creditable Service as of the Freeze Date plus 

an additional 0.5% of Average Compensation determined as of the Freeze Date per year 

of Creditable Service as of the Freeze Date beyond 20 years. If the commencement date 

of the member’s benefit is prior to age 60, the benefit shall be the actuarial equivalent to 

the age 60 benefit.

e. Participants hired on or after January 1, 1993 who attained 30 years of service as of the 

Freeze Date will receive a benefit equal to 75% of the Average Compensation determined 

as of the Freeze Date. The 75% factor will be further reduced for retirements prior to age 

55 are as follows:

Age at retirement Benefit Multiplier

50 62.5%

51 65.0%

52 67.5%

53 70.0%

54 72.5%

f. Participants hired on or after January 1, 1993 who had not attained 30 years of Creditable 

Service as of the Freeze Date will receive a benefit of 1.5% of Average Compensation 

determined as of the Freeze Date per year of Creditable Service as of the Freeze Date plus 

an additional 0.5% of Average Compensation determined as of the Freeze Date per year 

of Creditable Service as of the Freeze Date beyond 20 years. If the commencement date 

of the member’s benefit is prior to age 60, the benefit shall be the actuarial equivalent to 

the age 60 benefit.

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Funding Structure Pensions will continue to be paid from the current pension trust (i.e. PREPA ERS). The funding 

structure of PREPA ERS will shift from a funded model to pay-as-you-go (PayGo). PREPA ERS 

will be reimbursed for PayGo payments to the extent provided in the Plan with funds sufficient 

to do so that PREPA will contribute to a new trust to be established pursuant to the PREPA plan 

of adjustment (the “PREPA PayGo Trust”). The assets of the PREPA PayGo Trust will be held 

in trust for the sole benefit of PREPA ERS. 

Assets in the PREPA Paygo Trust, including investment returns, will be used to reimburse the 

PREPA ERS for the annual PayGo and appropriate administrative expenses, to the extent PREPA 

ERS is entitled to such reimbursement under the POA. Any withdrawals from the PREPA Paygo 

Trust will require approval of the PREPA PayGo Trust Board of Trustees and shall only be used 

by PREPA ERS to fund the payment of PayGo made consistently with the DB plan as modified 

by the POA.

Negotiated benefits in addition to PREPA-ERS benefits

Negotiated Benefit 

Description

Benefits will be paid to participants if their termination from active service at PREPA results 

from any of the following:

• Physical or mental disability

• Retirement or termination upon meeting age or service requirements of PREPA ERS

• Death of an active member

Benefits are only payable in a single instance and a participant who returns to work is not 

eligible to receive any additional benefit from these provisions

Negotiated Benefit 

Amount

• Retirement, disability or general passing: $7,000

• Death related to employment duties: $20,000

• Death related to employment duties specific to a Power Line Technician or in job 

positions specifically identified as eligible for special annual risk compensation: 

$50,000

• Physical disability resulting from employment duties: $8,000

Impact of Freeze on 

Negotiated Benefit 

Amounts

One-time benefits described under this formula are not impacted by the pension freeze

Case:17-04780-LTS Doc#:3297-7 Filed:03/01/23 Entered:03/01/23 23:36:32 Desc:

Exhibit G Page 6 of 6

imm 0 

Case:17-03283-LTS Doc#:24530-5 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 5 Page 44 of 44