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MBTA retirement fund needs independent review, group says

Michael Mulhern stepped down as executive director of the MBTA pension fund last year.Suzanne Kreiter/Globe Staff/File 2016

The Pioneer Institute, a Boston think tank, is calling on the MBTA’s fiscal control board to commission an independent audit of the $1.5 billion pension fund for transit workers.

In a paper scheduled for release Tuesday, the right-leaning institute criticized the findings of a consultant’s report paid for by the retirement fund last year. That report, by FTI Consulting, rebutted a number of criticisms of the pension fund’s management raised in 2015 by Wall Street whistle-blower Harry Markopolos and Boston University finance professor Mark Williams.

“FTI Consulting dismissed or ignored a number of legitimate red flags,’’ said Pioneer research director and former state inspector general Greg Sullivan, calling that report “narrow in scope.”


He is urging Massachusetts Bay Transportation Authority officials and the T’s fiscal control board to hire an independent actuary to review the pension fund’s financial records, he said.

Andrew Farnitano, a spokesman for the MBTA pension board, declined to comment on the Pioneer report because executives there had not yet seen it.

The Markopolos-Williams analysis called into question the retirement fund’s accounting standards and oversight, estimating that the fund was overstating its financial health by as much as $470 million.

MBTA pension officials denied those findings but proceeded to address some of the issues raised in the report, including updating its mortality tables and lowering its assumed rate of investment return.

The pension fund has been in a period of upheaval since December 2013, when it was revealed that it had lost $25 million in a bankrupt hedge fund whose troubles it had failed to disclose for more than two years.

Since then, Governor Charlie Baker has named three new “management” trustees to the fund’s board and has signed a new public records law that requires the pension fund to follow the same rules as other retirement funds for public workers.


Michael Mulhern, the pension fund’s executive director, stepped down in August and has not yet been replaced. The Baker administration is pressing the T pension fund to move investment of its assets to the larger state pension fund.

The new Pioneer report looks closely at how three Louisiana pension funds reacted when they, too, lost money in the same bankrupt hedge fund, run by Fletcher Asset Management. The Louisiana pensions disclosed in 2011 that they had been unable to withdraw money from the fund, prompting an investigation of Fletcher by federal securities regulators.

Beth Healy can be reached at beth.healy@globe.com. Follow her on Twitter @HealyBeth.