MBTA Retirement Fund Careening Off The Tracks?

Printed from: https://newbostonpost.com/2017/04/05/mbta-retirement-fund-careening-off-the-tracks/

BOSTON — A new Pioneer Institute study claims that the Massachusetts Bay Transportation Authority has dramatically underestimated its retirement pension obligations, which the Hub-based think tank has pegged at being underfunded by at least $200 million in administrative expenses alone between 1991 and 2015.

Authors of the study, titled “Forensic Mysteries from the MBTA Retirement Fund’s Actuarial Reports,” say they analyzed 25 years’ worth of data and found that the MBTA Retirement Fund’s “actuarial reports may have deviated considerably from the true cost of pension benefits.”

“The time is long overdue for the MBTA to conduct an independent actuarial valuation of the MBTA Retirement Fund,” Jim Stergios, Pioneer’s executive director, announced in a prepared statement Wednesday. “The Massachusetts legislature should empower the state pension watchdog to conduct the fund’s valuations.”

The study cites “incomplete member data” provided by the MBTA and alleges that “the handling of administrative expenses could be the most blatant violation of reasonable actuarial practices encountered in the MBTARF’s valuation reports.”

The study alleges that a pattern of pension contribution shortfalls have “been nothing short of devastating” when it comes to the overall pension plan’s health.

The study also points the finger at the MBTA’s stewardship of its retirement fund, which it determined had “enabled MBTA management to grant pension increases instead of pay raises while leaving the plan insufficiently funded.”

Michael Mulhern, a former MBTA general manager, is also named in the report, which identifies the last two “pension hikes” as occurring under his watch in 2002 and 2007, after which he changed positions to become the MBTARF’s executive director, “reaping millions of dollars in salary and a third pension.”

Mulhern stepped down from that post last August.

In February a Boston Globe report found that Mulhern earned $2.2 million since 2009 “including $216,329 in 2016, when he worked just seven months.”

Mulheron rose to a position of prominence within the MBTA after beginning his career as a bus driver.

In conclusion, Pioneer’s report calls on Governor Charlie Baker — who has appointed five members to an MBTA Fiscal Management and Control Board — “to obtain the reliable information needed to make effective decisions about how taxpayer dollars are spent.”

The report also recommends that the MBTA Retirement Fund sever its ties with Buck Consultants, the Boston-based consulting firm that has acted as the fund’s actuary, which it singles out for having continued to use “dated mortality tables,” a reference to how Buck Consultants determined employee life expectancy.

“When the actuary would finally update mortality assumptions, it often happened on the basis of already obsolete standards,” the report concluded.

As average lifespans have increased, so has the liability of pension plans, because more will have to be paid out to recipients since they tend to live longer than their predecessors. But older mortality tables assume shorter lifespans.

As of deadline MBTA spokesman Joe Pesaturo had not yet responded to a request for comment.

Read the report:

Forensic Mysteries — MBTA Pensions by Evan on Scribd