Unfunded Liabilities

This study illustrates why issuing pension obligation bonds (POBs) to refinance $360 million of the MBTA Retirement Fund’s (MBTARF’s) $1.3 billion unfunded pension liability would only compound the T’s already serious financial risks.

In a new brief, Pioneer shows that whistleblowers’ 2015 claims that the MBTA Retirement Fund (MBTARF) has been underreporting its unfunded pension liabilities was correct. In their study, Boston University Professor Mark T. Williams and Bernie Madoff whistleblower Harry Markopo­los outlined three specific ways in which the T pension fund was misrepresenting its liability, by a total of $280 million. At the time, MBTARF vigorously refuted the validity of the findings, but a new Pioneer brief presents in-depth analysis vindicating Williams and Markopolos.

Despite several reform bills targeted at the Commonwealth of Massachusetts’s public pension system in recent years, the unfunded actuarial accrued liability (UAAL) has continued to rise and is drawing closer to a crisis level.

This report finds that Massachusetts' 102 local systems (84 municipal, 12 regional and 6 “special” such as MHFA and Massport) have average per-member administrative costs that are at least triple those of the Massachusetts State Employees’ Retirement System (MSERS), with many that are far higher.

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.

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).

This report illustrates that had MBTA Retirement Fund (MBTARF) assets been placed in the Massachusetts state pension fund at the end of 2000, their value would have been an estimated $902 million greater by 2014 and T pensions would have been about fully funded.

Earned sick leave for T employees ranges from 12 to 15 days per year depending on an employee’s classification. Unused days accumulate into employees’ sick leave balances. The purpose of this analysis is to determine how the MBTA’s sick leave policies impact retirement payouts and how that compares to state employee benefits.

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.

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.