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MBTA officials voiced concern about rising pension costs in arbitration hearings more than a year ago, according to a document released Wednesday that a union chief involved in the proceedings said was "out of date" because its provisions never took effect.
The Pioneer Public Interest Law Center, an arm of the business-backed Pioneer Institute think tank, on Wednesday published a 37-page arbitration award stemming from deliberations over the pension agreement between the T and Carmen's Union Local 589, its largest employee union.
The document penned by arbitrator Elizabeth Neumeier recounts testimony union and MBTA officials offered in a series of hearings between Oct. 7, 2021 and Jan. 31, 2022. During that process, Neumeier wrote, MBTA retirement fund actuary David Driscoll projected that the agency's pension costs are projected to surpass $220 million by 2038, reflecting nearly a third of the T's operating revenue -- a sharp increase over the 14 percent of operating revenue that went to pension costs in 2018.
MBTA Chief Financial Officer Mary Ann O'Hara testified that "pension funding could cause the MBTA to be insolvent over that time period," the arbitrator wrote.
However, the arbitration award dated Aug. 26, 2022 never went into effect. As MBTA Senior Director of Labor Relations Ahmad Barnes detailed at a board meeting last month, both parties decided to vacate the document and struck their own agreement increasing pension benefits. Talks are ongoing about implementation.
"The commentary in the old arbitration paperwork was based on old data, a funding mechanism that is now out of date, and false assumptions that the public would tolerate further austerity measures like those put in place by the prior administration," Carmen's Union President Jim Evers said in a statement Wednesday.
He added, "As long as MBTA management hires enough workers to keep the MBTA reliable and safe, which is what riders and workers want and deserve, there will be no issues with the retirement funds."
In a press release focusing on the severely underfunded MBTA Retirement Fund (MBTARF), Pioneer noted that unlike in the state retirement system, basic tenets of the MBTARF, such as employer and employee contributions and retirement age, are negotiated by the parties.
The MBTARF has been in free fall in recent years, they stated. In 2007, pension costs accounted for 9 percent of payroll, but by 2021 they had risen to 24 percent. Despite this dramatic funding increase, the funded ratio fell from 75 percent in 2009 to 54 percent in 2021, with a $1.4 billion unfunded liability.
The arbitrator ruled that for MBTA employees under 60 years old with five or more years of service, the age for receiving a full pension will be raised to 65. Pensions would be reduced by 6 percent per year for each year before 65, which will save over $12 million annually.
Previously, MBTA employees hired before December 6, 2012, could receive a full pension after 23 years of service, regardless of age. The policy is one of the main reasons why the system has more retirees collecting pensions than employees paying in.
T spokesperson Joe Pesaturo said the since-spiked arbitration award would have been "unacceptable to the Union and would have a detrimental impact the Authority's hiring efforts in this challenging labor market" and touted the agreement MBTA and union officials reached in its place. "The agreement reached between the MBTA and its largest Union is a foundational step towards achieving workforce stability in the near and long term," Pesaturo said.
WBUR previously reported on the arbitration award Tuesday.
SHNS/Franklin Observer
