The MBTA’s largest union is challenging an independent arbitrator’s decision that would reshape the rules of the MBTA’s $1.66 billion retirement system, including slashing the pensions of those who retire before the age of 65.
In the latest chapter of a years-long stalemate between the T and the Boston Carmen’s Union Local 589, the union on Friday asked a state judge to toss the late-August ruling, arguing that it “throws the entire pension into a state of financial chaos.”
The arbitrator’s decision has not taken effect. A union official also said it is not binding if both sides agree to vacate it or renegotiate.
The Carmen’s Union and MBTA officials both said Monday that they are still in discussions over a final pension agreement, and the union’s president framed the lawsuit as an “interim measure” while they engage in what he called “productive” talks.
Still, after more than four years of negotiations over a pension agreement, it’s unclear what exact changes could come to the MBTA’s retirement fund, where the number of retirees has long outpaced the amount of workers paying into it, and MBTA officials have long pressed for sweeping changes.
As of the end of last year, the fund’s unfunded liability hovered at more than $1.3 billion, and, despite changes that went into effect a decade ago to stem what were considered lavish retirement perks, younger retirees have continued to flow into the retirement system, creating more financial pressure.
The MBTA itself is also in a state of financial and operational crisis, and is badly in need of an infusion of employees into a roughly 6,000-person workforce that federal transportation officials said has too few people to operate the subway service or to manage long-term projects.
The Aug. 26 arbitrator ruling promised what even T officials considered dramatic changes for the agency and its employees. The T and the union turned to the independent arbitrator after determining in April 2020 that they had hit an impasse after nearly two years of negotiations over their pension agreement. The last four-year agreement expired in mid-2018, but its terms remain in effect.
The arbitrator’s decision included a series of changes, most notably in lifting the age at which a retiree would collect an “unreduced” pension. Under the ruling, workers who opt for early retirement — in this case, before the age of 65 — would have 6 percent deducted from their pension benefit for every year of retirement before the age of 65.
Currently, anyone who is 55, and has at least 25 years of service, qualifies for a so-called normal monthly pension, calculated at 2.46 percent of the average of a person’s three consecutive highest-earning years, multiplied by the number of years of service.
Many others still qualify under the T’s old “23 and out” retirement provision — since eliminated by the Legislature — that allowed workers to collect substantial pensions and free health care after 23 years on the job, regardless of age. But a pension agreement at the time delayed by more than three years when its elimination took effect, ensuring that only those hired on Dec. 6, 2012 or after were bound to new requirements.
Both the T and the union interpreted the arbitrator’s change to apply immediately for any active worker under the age 60 or those who still have more than five years of service remaining before they’re eligible for retirement. In other words, any worker who had 18 years of service or was at least 60 on Aug. 26 would not be affected.
The ruling also would set a new cap on the annual salary that could be used to calculate pension benefits, setting it at $150,000. (The previous agreement set it at $200,000 for any year after Jan. 1, 2002.) Meanwhile, it would also retroactively increase any pensions that were in effect on June 30, 2018 by 3 percent.
In early September, MBTA officials said that they would work with the union on “refining the agreement,” but General Manager Steve Poftak at the time cast the arbitrator’s ruling as a positive development, calling it a step toward “ensuring the long-term viability of the pension plan.”
“While the announcement of the arbitrator’s ruling might appear rushed and last-minute, the crisis the ruling addresses was decades in the making,” Poftak wrote on Sept. 2.
But the Carmen’s Union quickly promised to fight the decision, telling its members in the days after that it believed the ruling was “unconstitutional” and that it would seek “legal remedies to rectify the changes established by the arbitrator’s ruling.” Union leaders said they also intended “to seek a negotiated resolution with the MBTA and anticipate a satisfactory resolution.”
In a complaint filed Friday against the MBTA, the union warned of catastrophic effects should the decision be implemented.
It charged that the pension system would lurch into “a state of financial chaos,” and that the ruling “leaves members and pension administrators alike unable to determine when they may retire and how much money they will receive.”
Jim Evers, president of the Boston Carmen’s Union Local 589, said in a statement that the union and MBTA management are still in discussions “about various administrative matters regarding benefits.” They met as recently as Friday, he said.
“The court filing was an interim measure intended to ensure the parties had time to continue that productive dialogue and to establish the necessary framework that would help retention, riders, the community, and workers,” Evers said.
The T, too, indicated the two sides are still at the table. Joe Pesaturo, a T spokesman, said after the arbitrator’s decision, the T “stepped up negotiations” with the union to reach a final agreement because it understood “the impact the dramatic nature of the changes would have on MBTA employees.”
“The MBTA is strongly committed to working closely with union leadership to refine the pension agreement and ensure the long-term viability of the pension plan for current employees, as well as future generations of T workers,” Pesaturo said.