Governor Charlie Baker said his administration will recommend to the Legislature next year that the MBTA retirement fund be managed by the larger state pension system, amid a growing shortfall in funds.
Baker, in a State House address Wednesday on reforms to the transit system, said the T pension system is in “freefall,” losing $89 million a year in assets.
Last year, the $1.5 billion system’s unfunded liabilities jumped $126 million, to nearly $942 million, according to a financial report released this week. The fund’s future obligations to retirees are growing faster than its investment returns, requiring larger contributions by the state and taxpayers, as well as employees.
“We believe the T’s pension system cannot survive as a standalone entity,” Baker said in his remarks. He said his administration would ask the Legislature when it returns in January to permit the fund to be managed by the state workers’ Pension Reserves Investment Management board.
The Baker administration has been taking steps to improve oversight of the pension fund as part of its broader overhaul of the transit system and cost-cutting efforts. The average employee who is eligible to retire today from the T will have contributed $47,000 to the pension fund over his or her career, and can receive $1.1 million in pension benefits, according to transit authority records.
After a recent round of reforms, Baker said, new employees contribute $67,000. “Still a huge problem,’’ Baker said.
The T’s pension is organized as a private trust. Its dealings have been mostly private for decades, despite tens of millions of dollars in funding by taxpayers each year.
Steve Crawford, a spokesman for the T’s pension board, said in a statement regarding Baker’s comments, “The fund is always willing to examine anything that might improve performance.”
Baker last month signed into law a new broad public records bill that requires the pension fund for 11,700 Massachusetts transit workers to make its records public. Days later, the fund’s executive director, Michael Mulhern, announced plans to resign, after a decade on the job.
The MBTA pension fund has come under intense scrutiny over the past few years, after a $25 million hedge fund loss it failed to disclose in a timely fashion and a critical report last year by Wall Street whistleblower Harry Markopolos.
The pension board said a consultant’s report refuted the allegations in the report by Markopolos and Boston University finance professor Mark Williams.
However, the fund has made some changes in the wake of the report to more accurately reflect its financial obligations, such as updating old mortality assumptions and lowering the fund’s target rate of return. The fund also had been assuming that 100 percent of the employees are male.