YOU’RE FOOTING THE $118M BILL SO THEY CAN … RETIRE BY 50
More than 1 in 5 pensioners is under 50 as fund struggles
More than one in every five MBTA pensioners retired before age 50 as the state increasingly has to pick up the tab on the T’s troubled pension fund that’s running big deficits even in the current strong market, a Herald analysis shows.
“It’s a few retirees who are being subsidized by the Massachusetts taxpayers,” said Mark Williams, a Boston University finance professor who tracks the MBTA Retirement Fund. “They’re eating two bites at the apple, plus they get to work at another job.”
That’s referring to the situation caused by the T’s longstanding “23-and-out” policy, which didn’t put a retirement age on its workers — it just required 23 years of service, at which point they could grab the pension, eventually become eligible for Social Security, and pick up another gig at the same time.
That’s what led to 22% of the 5,626 people receiving T pensions having cashed out under age 50, according to a review of MBTA Retirement Fund data. The average T pensioner is 55.8 years old.
The retirement fund has floundered deeper into fiscal danger, last year reporting $2.91 billion in liabilities versus $1.45 billion in assets. The fund said no new data is available about that breakdown at this point. It falls on the state to fill the annual shortfall, which resulted in the MBTA budgeting $118.2 million to keep the retirement fund afloat for the current fiscal year. That’s up from $102.9 million in fiscal year 2019 and $93.8 million the previous year. That’s now more than half of the total yearly payout, which is upward of $201 million, per the data.
The T didn’t respond to a request for comment. Asked about the pension fund’s solvency, a spokesman noted that the returns were particularly strong last year at more than 17%.
Williams said the inevitable economic downturn carries a huge risk for T employees and pensioners.
“A couple bad markets, and boom — the pension is gone … At the current outflow rate, by 2030, the pension’s done — kaput,”
Williams told the Herald, saying that his analyses point toward a $150 million-plus required MBTA contribution to float the fund in the next few years. “Those pensioners are left with nothing, and those employees are left with nothing.”
The number of youthful retirees has dropped in recent years. In 2019, 13 of 141 retirees were under 50. In 2018, it was 24 of 201, and the year before it was 25 of 303. Back in the 2000s, there were at times upward of 60 or 70 people retiring each year who were under 50.
The state Legislature ended the 23-and-out policy in 2009 — but pension-based changes are only for future employees, so it’s only people hired since then for whom the new policies apply, which require 25 years and sets a retirement age at 55.
But Pioneer Institute transportation watcher Charlie Chieppo said, “The change is around the margins … what you have is a widening gap every year.”
Chieppo added, “The fix ultimately is to move the MBTA employees onto the state pension plan, but getting there is going to be very hard.”