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Massachusetts Pensions

While the state and its retirement systems have taken steps to accelerate pension funding and started bringing some actuarial assumptions to sensible levels, the condition of most systems is perilous.

There are three broad reasons for this negative assessment:

(1) contributions still are below GASB-recommended levels and are bound to remain so for the foreseeable future;

(2) assets have barely recovered to pre-recession levels, even as liabilities have continued to grow; and

(3) plans and funding are not stress-tested and there are very limited fiscal reserves to meet the next economic recession.

Help Us Protect MA State Pensions

Pioneer has scored and ranked systems on their funding deadline. Rather than the absolute date of the expected full funding, we will be grading systems on a rolling basis from the year of record of each data point.

We consider systems with less than four years on their liability amortizations essentially fully funded (right column). On the other end of the spectrum are systems with more than 20 years remaining, which includes the state and teachers’ retirement boards with a 2036 target.


Scoring Funding deadlines

     Remaining Years to Full Funding

Score

     Less than 4

A

     4-9

B

     10-15

C

     16-20

D

     More

F

Study Estimates $27 Million In Savings Annually From Consolidation of
Public Pensions

April 19, 2017

Local retirement systems generate heavy costs, larger fiduciary risks

BOSTON – Massachusetts’s 102 local pension systems typically report administrative costs that are much higher than those of the Massachusetts State Employees’ Retirement System (MSERS), according to a new study published by Pioneer Institute.


In “The Bay State’s Public-Pension Complex: Costly and Unaccountable,” Dr. Iliya Atanasov finds that the 102 local systems (84 municipal, 12 regional, and 6 “special” systems such as the Massachusetts Housing Finance Agency and Massport) have average per-member administrative costs that are at least three times those of the MSERS.  Many are far higher.

“Hyper-expensive agency funds like those of Massport and the Massachusetts Housing Finance Agency should be folded into the state system,” said Pioneer Executive Director Jim Stergios. “The legislature should also allow communities to vote with their feet and join the state system because of the huge savings.”

In 2012, MSERS administrative (non-investment) costs were $51 per member.  At the other end of the spectrum, the MHFA retirement board reported spending $971 per member on non-investment costs in a single year.  Dr. Atanasov estimates that consolidating the fragmented public pension systems into the MSERS would save taxpayers at least $27 million annually.

Savings will also be realized because local systems tend to have higher investment costs.  From 2008 to 2012, MSERS investment-expense ratios were between one and six basis points below the estimated average of the local systems. A single basis point corresponds to millions of dollars every year. Local systems which did not invest with the state pension-investment fund frequently paid fees much higher than that average.

“Since Massachusetts law requires communities to make up for any pension funding gap,”...CLICK HERE TO READ MORE