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Agreement clears way for state to help manage T pension fund

MBTA workers
MBTA workers Suzanne Kreiter/Globe Staff/Globe staff

The state pension system moved a step closer to managing some of the MBTA’s troubled retirement fund, after MBTA workers and the transit authority struck an agreement to allow some money to be invested by managers for the larger state fund.

The fiscal control board of the Massachusetts Bay Transportation Authority voted Monday to add the state retirement fund as a potential manager of some or all of the $1.5 billion MBTA pension fund.

The move came days after the Boston Carmen’s Union, which represents more than 6,000 MBTA employees, voted to amend its trust agreement to add the state’s Pension Reserves Investment Management Board as one of multiple managers for the MBTA pensions.

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Governor Charlie Baker and other administration officials have long pushed for the MBTA to transfer oversight of the fund to the state, which the union has resisted.

The fund covers nearly 5,400 active MBTA employees and more than 6,800 retirees. Analysts have warned that the fund’s unfunded liability of more than $1 billion could bring down the system in a decade without urgent reforms.

There are more retirees currently collecting benefits than workers contributing to the system. According to a retirement fund report, the MBTA paid out $209 million in benefits in 2017. Many of its employees can retire after 23 years of service, while more recent hires can retire at 55 after 25 years.

Over the past decade, the amount of money the transit agency has funneled into the privately run trust has ballooned from $30 million in fiscal 2007 to $103 million this fiscal year. That figure accounts for nearly 23 percent of the authority’s payroll expenses.

MBTA officials warned in November that the pension contribution could grow to $137 million within three years, depending on the fund’s performance.

Baker applauded the agreement and Monday’s vote.

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“Governor Baker continues to support efforts to improve the performance of the MBTA pension system to benefit employees, retirees, and taxpayers, and thanks union leadership and the [fiscal control board] for taking these important steps in the right direction,” said Terry MacCormack, a spokesman for Baker.

In 2017, the Legislature passed a measure pushed by Baker that would allow — but not mandate — the state’s pension board to manage investments by the T retirement fund.

Brian Shortsleeve, a member of the MBTA Fiscal and Management Control Board and former general manager of the T, also commended the union for its role in the deal, which the MBTA’s pension board is expected to approve. “This is an important step forward for the MBTA pension, something that long term will be a big win for employers, retirees, and taxpayers,” he said.

The agreement on inviting the state to help manage the MBTA pension fund came after months of negotiations between the transit authority and the Carmen’s Union about the T’s contributions to the pension fund. The last four-year agreement expired in mid-2018.

Steve Crawford, spokesman for the MBTA Retirement Fund board, said he was uncertain whether the board would vote on the pact at its next meeting, scheduled for July 19.

Jim Stergios, executive director of the Pioneer Institute, said the move shows members of the Carmen’s Union “now recognize the precarious condition of their pensions.”

James O’Brien, president of the union and a pension board member, emphasized the state would be one of several managers and not given complete control of the T fund. “We are committed to maintaining the long-term viability and success of the MBTA Retirement Fund for MBTA employees,” O’Brien said in a statement.

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Nearly one-third of MBTA employees who retired last year were under age 55, and dozens were in their 40s, including two who receive pensions greater than $60,000. Many MBTA workers can potentially collect pensions for longer than they were employed at the authority.

More than 1,200 retirees receiving an MBTA pension, about 22 percent, began collecting the benefit before they turned 50. In April, officials said the MBTA had 500 current employees eligible to retire because they had worked there for more than 23 years.

Any state management, however, would face a daunting math problem. Even a perennially robust return on investments would go only so far to close the financial gap. In 2017, for example, the pension fund’s unfunded liability grew 13 percent, despite good performances by its investments.


Beth Healy and Adam Vaccaro of the Globe staff contributed. Brian MacQuarrie can be reached at brian.macquarrie @globe.com; Aidan Ryan at aidan.ryan@globe.com.