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Report proposes major overhaul of retirement benefits for new MBTA employees

A new report from the Pioneer Institute is critical of the MBTA’s pension benefits. Kayana Szymczak for the Boston Globe/file 2013/Boston Globe

A Boston think tank is proposing an overhaul of retirement benefits the Massachusetts Bay Transportation Authority offers new employees in a bid to cut costs and bring the transit workers’ pensions in line with those of other state employees.

In a report released Thursday, the right-leaning Pioneer Institute proposes moving management of retirement funds for new employees from the $1.5 billion MBTA Retirement Fund to the state pension system.

The authors also recommend the MBTA study leaving the federal Social Security system. While Massachusetts is one of seven states in which public employees do not contribute to Social Security, transit workers and the MBTA do contribute to it, as well as to a pension plan. In fiscal year 2016, the MBTA contributed $34 million to Social Security, according to the report.


But pulling out of Social Security may not be legally possible, and even if it is, the Boston Carmen’s Union, Local 589 — which represents MBTA workers — says it would oppose the move.

“The union believes this is an issue now precluded by federal law,” said Cayenne Isaksen, a spokeswoman for the local, in a statement. She said the design of the pension plan presumes additional benefits from the federal program.

A spokesman for the T declined to comment. A spokesman for the MBTA pension fund was not immediately available to comment on the Pioneer report.

The transit system’s pension fund is under pressure from Governor Charlie Baker to move its management to the larger state pension fund.

In July, when Baker first floated the idea publicly, pension fund spokesman Steve Crawford said the board was “willing to examine anything that might improve performance.”

Gregory Sullivan, Pioneer’s research director and coauthor of the new report, said reworking benefits for new employees would help address the MBTA’s growing liabilities. In the last 10 years, the pension system’s unfunded obligations have surged from $49 million to more than $1 billion, Pioneer said.


“As the [MBTA pension’s] financial condition continues to worsen, state taxpayers are on the hook even though there is little transparency and no state oversight of the fund,” Sullivan said in a statement.

State public employees contribute between 9 and 14 percent of their paychecks to their retirement funds, while the state kicks in 12.1 percent, according to Pioneer.

MBTA employees contribute about 12 percent of their salaries toward retirement, including both pensions and Social Security, Pioneer said; the MBTA contributes 22.2 percent.

Pioneer has been a regular critic of the MBTA pension fund, citing its lack of transparency, deteriorating finances, and generous benefits.

Beth Healy can be reached at Follow her on Twitter @HealyBeth.