Comparing Retirement Benefits for MBTA and other State Employees

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Pioneer’s latest report, A $49 Million Sweetheart Deal: How MBTA Employee Unused Sick Perk Enhances Pensions, illustrates how MBTA employees are taking advantage of a 1975 arbitrator’s decision to reap substantial retirement benefits through their unused sick days. The report further illuminates the incredible sums of money being spent at the MBTA on salaries and benefits compared with other state agencies and Massachusetts municipalities, bringing more attention to the fiscal mismanagement taking place at the MBTA.

Additional data analysis done by Pioneer’s Greg Sullivan using data from the National Transit Database (NTD) shows just how much better pensions can be for MBTA employees.  Comparing retirement benefits for both MBTA and regular state employees given equal salaries and equal numbers of sick days used shows that an MBTA employee retiring at the age of 55–after making an annual salary of $100,000 and accumulating 150 sick days—would come away with $1.88 million worth of benefits over the course of their retirement. In contrast, a regular state employee with the same retirement age, annual salary and accumulated sick days would get $1.136M. This adds up to a total difference of over $700,000, assuming 25 years collecting retirement benefits. (See Figure 1.)

Figure 1: Retirement Benefits Comparison ($100,000 salary)

Fig 1 Better

A second example, using employees earning $70,000 having accumulated 81 sick days, also reveals a noticeable discrepancy in benefits.  In this example, also assuming 25 years’ worth of retirement benefits, the MBTA employee would collect lifetime benefits of $1.3 million, compared with $791,862 for a regular state employee. (See Figure 2.)

Figure 2: Retirement Benefits Comparison ($70,000 salary)

Fig 2 Best

These data points are indicative of long-running disparities between MBTA and other municipal employees. As Pioneer reported last year based on court arbitration documents, MBTA employees earn significantly more than their municipal counterparts across multiple job categories. Much of this wage gap is the result of precedents established by periods of interest arbitration dating back multiple decades, and it has proven nearly impossible to get arbitrators to take action to try and change this course.

As it currently stands, the MBTA appears to be handicapped by various interest arbitration decisions forcing the Authority into a bad deal. Combined with all the other well-publicized issues plaguing the MBTA’s finances, the authority simply cannot afford to continue providing retirement benefits to its employees that are so far superior to those received by their counterparts in the rest of the state. Real, comprehensive reform is necessary in order to set the MBTA back on a stable financial course, and addressing the unequal retirement packages earned by its employees is a good place to start.

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