Entries by Iliya Atanasov

Forensic Mysteries from the MBTA Retirement Fund’s Actuarial Reports

This report documents significant deficiencies in the actuarial valuations produced by the Massachusetts Bay Transportation Authority Retirement Fund (MBTARF) since 1990. Analysis of about a quarter-century of data suggests that the MBTARF’s actuarial reports may have deviated considerably from the true cost of pension benefits. As of yearend 2015, the fund had an estimated unfunded liability of about $944 million.

Massachusetts Public-Pension Investment Reform

The commonwealth should set a five-year deadline for 102 public pension systems to transfer their assets to the Pension Reserves Investment Management (PRIM) Board, the management authority for the Massachusetts State Employee Retirement System (MSERS) and the Massachusetts Teachers Retirement System (MTRS).

Fixing the MBTA Retirement Fund: Reforming a Pension Fund in Crisis

This report examines the MBTA Retirement Fund’s unfunded liability and compares MBTA and state employee and employer retirement contributions. It recommends that the MBTA assess the feasibility of moving its employees out of the Social Security system and transfer investment management responsibility for its pension fund to the commonwealth’s Pension Reserves Investment Management board as initial steps toward terminating the MBTA Retirement Fund (MBTARF).

Tough Decisions Needed to End MBTA Gravy Train

In the past 15 years, the MBTA has paid Wall Street firms an estimated $236 million in interest after gambling on synthetic swaps. Such financial derivatives are rife with risk and were among the most significant contributors to the global financial crisis of 2008. The T’s reform-minded leadership would do well to trim these exposures, with an eye to eliminating them as soon as  practically possible. Doing the right thing won’t be easy. As Pioneer revealed in its February 2016 paper entitled “The Reckless Cost of MBTA Financial Derivatives,” the T built up and then doubled down on an irresponsible derivatives portfolio in the 2000s. Tempted by small upfront premiums offered by investment banks, MBTA managers made bets that interest […]

MassPensions.com Update on Public Retirement Systems

Pioneer Institute is releasing an update to MassPensions.com with new data from the Public Employee Retirement Administration Commission about the status of the 105 Massachusetts public pension systems at the beginning of 2014. Retirement boards have continued on their path of lowering assumed rates of return (ARRs) towards more reasonable levels. However, funding progress for most systems remained stilted, as 22 local boards extended their funding deadlines by up to eight years.

The Logic of Pension Valuation II: A Response to Andrew Biggs

For quite a few years now, public pension liabilities have been a growing concern for policymakers and public finance professionals. The methods used to value the liabilities are fundamentally important both for designing plan policies and for plan administration. They are an essential tool for budgeting because they help account for the costs of public services and create appropriate funding schedules for plan contributions to ensure the fiscal soundness of both the plan and its provider.

Market Rates of Return for Effective Financial Management

The discount rates used by defined-benefit pension systems to value their liabilities and to determine annual contributions have long been a point of concern and contention. Until 2014, governmental accounting standards required that pension funds use the assumed rate of return (ARR) on their portfolio as the discount rate for both management and reporting purposes. With the implementation of Statement 68 of the Governmental Accounting Standards Board (GASB), the ARR will be applied as a discount rate only on the portion of liabilities covered by existing assets, but it will remain a critical metric for many institutional investors.

The Good, the Bad and the Ugly Eight Patrick Administration Budgets Later

Has Massachusetts made progress towards providing a better quality of life for its residents while maintaining financial stability over the past decade or so? In July 2014, Governor Deval Patrick signed into law the eighth and final budget of his administration with only a few vetoes and recommendations to the General Court. Five years after the financial crisis, this is an opportune moment to review and reflect upon the fiscal state of Massachusetts and what has changed since the beginning of this governorship more than seven years ago.

Boston Herald: Atanasov: T’s ‘private’ pension board veers off track

Friday, April 11, 2014 Iliya Atanasov The MBTA Retirement Fund’s management has been aggressively spending taxpayers’ and retirees’ money to fend off attempts by the media and the Legislature to shine a light on its books. And the reason is becoming all too obvious. Earlier this year, senior executives testified before the Legislature’s Joint Committee on Public Service that the fund is not a public entity and exists for the sole benefit of current and future retirees. Hence, they say, it should not be subject to public oversight. Looking to find an amicable solution, legislators patiently kept asking what information the retirement board is trying to protect. They received no clear answer. The board’s actions strongly suggest that it is […]

Who’s Responsible for the MBTA Retirement Fund

It cannot have been a particularly merry Christmas for Stephen Crawford, spokesman for the MBTA Retirement Fund. In the run-up to the holidays, a series of Boston Globe articles recounted a potentially fraudulent $25 million loss at the pension fund, blatant conflicts of interest and repeated failures to follow standard accounting practices – not to mention an ever-expanding investigation by the state attorney general, Martha Coakley. Seemingly unbowed by the controversy, Crawford told the Globe: “The pension fund is fully capable of meeting its obligations to its retirees and beneficiaries. The trust is solely responsible for meeting that responsibility – not the commonwealth.’’ [quote align=”right” color=”#999999″]Whether Mr. Crawford intentionally misrepresented the facts, fell victim to years of disinformation about past […]

MA Retirement Systems in Critical Condition, Fiscal Risks Remain High

Expert Testimony: Several Retirement Systems in Critical Condition, Fiscal Risks to Remain High New accounting rules will demand higher pension contributions; unfunded retiree healthcare liabilities major long-term threat BOSTON – The unfunded liabilities of several retirement systems in the state may precipitate a number of local bankruptcies in the next economic crisis, unless managers adopt more fiscally prudent policies, according to testimony given by Pioneer Senior Fellow on Finance Iliya Atanasov Tuesday. Testimony before the Joint Committee on Public Service of the General Court of the Commonwealth of Massachusetts Regarding the Fiscal Condition of Local Retirement Systems “Defined-benefit pensions and other postemployment benefits for public employees in Massachusetts will cast a growing shadow on the fiscal health of the commonwealth for the […]

Testimony before the Joint Committee on Public Service of the General Court of the Commonwealth of Massachusetts Regarding the Fiscal Condition of Local Retirement Systems

Testimony before the Joint Committee on Public Service of the General Court of the Commonwealth of Massachusetts Regarding the Fiscal Condition of Local Retirement Systems provided in January 2014.

The Costs of Delaying the Funding of Public Pensions in Massachusetts

The purpose of this paper is to provide tools to quantify the costs of delaying the funding of pension obligations – those incurred in the aftermath of the financial crisis as well as projected costs more generally. Policymakers should be aware of these implicit costs when making budgetary decisions, and so should taxpayers, who ultimately are liable for what essentially amounts to a long-term financing cost for current spending.

The Logic of Pension Valuation: A Response to Robert Novy-Marx

In a recently published article,1 Robert Novy-Marx identifies what he believes are inconsistencies in the valuation methods espoused by the Governmental Accounting Standards Board (GASB). He advocates that current GASB methodologies for determining the discount rate be replaced by what some academic economists call a “fair-value” or “risk-adjusted” rate of return.

MassPensions: How Difficult Is Institutional Transparency?

This policy brief introduces the MassPensions data accessibility tool by Pioneer Institute. MassPensions is a website presenting in clear and convenient format key data about the state of public employees’ pensions in the Commonwealth of Massachusetts for the period 1985-2012. The low cost and fast turnaround of this project illustrate that government transparency is not always as complicated or expensive as it may seem.

First Do No Harm: The Impact of the Affordable Care Act on Massachusetts’ Medical Device Industry

This brief is one of many in a series from Pioneer Institute examining the direct effects of the PPACA on Massachusetts. The purpose of this report is to estimate the annual impact of the law’s tax on the 19 biggest medical device companies conducting business in Massachusetts.