Mass. pension board to examine bonus proposal

State pension fund directors will take up a proposal next week that would provide larger bonuses for staff investment professionals, but also set more ambitious targets to qualify for those payouts.

Under the proposal, the number of top investment staffers at the state’s Pension Reserves Investment Management Board, or PRIM, eligible for 40 percent annual bonuses would expand to about a half dozen. Most financial staff who are not responsible for investments would have their potential bonus cut from 30 percent to 20 percent of their salary. At the same time, however, their base pay would increase.

Michael Trotsky, the $50 billion pension fund’s executive director, said the program would save money — about $350,000 a year — according to a summary he is expected to present to the full board Tuesday. The Globe obtained a draft copy of the presentation.


The compensation plan has sparked debate in committee meetings, according to people briefed on the discussions. State Treasurer Steve Grossman, chairman of the PRIM board, generally opposes pay increases at a time when the state is financially strapped. He also believes bonuses should not be paid if the fund drops during a particular year.

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“I continue to oppose paying bonuses following a year where the PRIM fund has lost money,’’ Grossman said in an interview. A compromise under consideration would defer bonuses in those years.

Grossman said he also wants bonuses to be tied to the fund’s annual return goal, which will be 8 percent next year, down from 8.25 percent. He criticized a move to cut the trigger for earning a bonus — managers now have to beat the benchmark by 0.75 percent, but PRIM staff is pushing to reduce that to 0.60 percent.

“I understand the need for incentives,’’ Grossman said. But, he added, “I don’t think we should make it easier to earn the full performance bonus.”

Trotsky and past executive directors have complained the pension fund faces hiring and retention challenges because pay is not competitive with private-sector finance jobs in the region. A consulting firm originally had suggested even higher bonuses than those proposed.


Under the plan, the range for base pay could rise dramatically for pension staff. Trotsky recently took on the additional position of investment chief for a $50,000 raise, bumping his total base pay to $295,000. His would be reviewed annually under the proposal and could rise as high as $445,000, based on a peer group study of similar pension funds. Pay ranges for other jobs within the state pension fund offices also could grow by tens of thousands of dollars annually.

If Trotsky were to earn his full 40 percent bonus next year, he would receive total compensation of $413,000.

Part of the savings Trotsky cites in his estimate for staff compensation appears to include his merged positions, which cut $195,000 in costs. But it’s widely recognized on the board that it won’t always be feasible for one person to fill both jobs.

In his summary, Trotsky said compensation currently totals 1.5 percent of the pension fund’s $300 million budget, and bonus payments account for 0.25 percent.

Beth Healy can be reached at