MBTA, union face pension fund difficulties
By State House News Service | June 28, 2016, 6:56 EDT
BOSTON — Already struggling to close a structural budget deficit and improve service, the MBTA on Monday turned its attention to the drain retirees are putting on the T’s pension fund.
The T’s pension fund, which is overseen by board members representing unions and management, needs to achieve returns of about 6 percent to avoid losing value, according to MBTA Chief Administrator Brian Shortsleeve, who said that rate of return on investment might not be likely in future years.
The market value of the pension fund’s assets is $1.49 billion, while its unfunded liability totals $1.07 billion, according to Shortsleeve, who said MBTA retirees are younger than retirees at other major public pension systems.
The average age of MBTA retirees is 69.2 years old and they outnumber the 5,868 active members of the MBTA retirement system. The State-Boston Retirement System, the Massachusetts Teachers’ Retirement System and the Massachusetts State Employees Retirement System all are older on average – ranging from 71.3 years old to 73.1 years old – and are outnumbered by active members, according to Shortsleeve’s presentation.
The assets of the retirement fund have dropped over the past three years as contributions and investments returns have been outpaced by benefit payments, according to Shortsleeve. Last year the fund lost about $89 million in value, he said, and over the past decade the asset value has decreased by about 13 percent.
“The MBTA retirement system is in a crisis and the Legislature has to address this,” Greg Sullivan, research director of the Pioneer Institute, told the MBTA Fiscal and Management Control Board on Monday.
The Pioneer Institute has recommended the MBTA Retirement Fund – considered private even though it invests taxpayer dollars – be wrapped into the state’s $60.4 billion public pension fund, overseen by the Pension Reserves Investment Management Board.
While hoping to achieve concessions from MBTA unions on the amounts workers contribute to the retirement fund, Shortsleeve suggested the state pension board could oversee investments while still keeping the pot of investment dollars separate from the state fund.
“We’re certainly not going to actively negotiate in public,” Shortsleeve told reporters when asked what the T was willing to concede.
Shortsleeve told the control board he had confidence about some meaningful discussions with T union officials on the issue.
“I know there’s a desire to engage on this right now,” Shortsleeve said.
— Written by Andy Metzger
Copyright State House News Service