MBTA's retirement plan pays off for two
Ex-officials get pension, work government jobs
By Andrea Estes, Globe Staff | August 21, 2007
Two former top officials at the MBTA are taking advantage of the generous terms of the agency's retirement plan, which allow employees to begin receiving a full pension at an early age, while simultaneously collecting six-figure salaries in other government jobs.
Former MBTA general manager Michael Mulhern, 48, who became executive director of the MBTA Employees Retirement Fund after retiring, takes home more than $350,000 a year: a salary of about $225,000 and a pension of about $130,000.
James Rooney, 49, a former deputy manager at the MBTA, now makes $255,000 as executive director of the Massachusetts Convention Center Authority, while drawing an MBTA pension of more than $70,000.
If they were employees covered by the state pension plan, they would have qualified for much less. To get a full pension, most state employees must wait until they are 65, but MBTA workers can receive a full pension after 23 years of service, regardless of age.
If they had retired from the state, Mulhern would have qualified for a $35,000 pension and Rooney just $3,000, and they would have faced strict limits on how much they could earn in a government job.
As the MBTA struggles to pay its bills and has been forced to raise fares three times in six years, some specialists say the pension plan is a fringe benefit the state can no longer afford. The T receives one-fifth of every sales tax dollar paid in Massachusetts.
"These benefits are utterly astounding," said Michael J. Widmer, president of the Massachusetts Taxpayer Foundation. "I've never heard of anything like this. The combination of benefits may well be the richest in America. There is absolutely no way that the T can maintain this kind of benefit structure and not eventually fall into effective bankruptcy."
Mulhern and Rooney did not return calls seeking comment for this report.
Because of the secrecy shrouding the MBTA Retirement Fund and the state's employee privacy policies, it is difficult to assess how many retired MBTA employees are receiving both a full pension and a full salary from another job. Retirement officials refused Globe requests to provide any information about members, how much its managers are paid, or how its assets are invested or spent.
But according to records provided by the MBTA, which operates independently from the retirement fund, nearly 900 MBTA workers have retired over the past five years with the 23 years of service necessary to receive an unreduced pension. At least one employee, John P. Barry, who retired last year as an MBTA rail-repairer and is now Mulhern's deputy at the retirement fund, is collecting a pension of about $40,000 and a salary of around $150,000 a year, according to the pension formula included in the T retirement plan and a former retirement board official. Barry also did not return calls for comment.
MBTA retirees are allowed to boost their pension still further by taking advantage of another unusual provision of the plan. Unlike state employees, retiring MBTA employees are allowed to convert their accrued sick days, which they can carry over from year to year indefinitely, into pension credit. Retirement fund officials declined to reveal the formula used to convert sick days into years of service or to say whether this was a perk that Mulhern, Rooney, or Barry had used.
The T plan is generous in other ways. Employees must contribute 4 percent of their salary to the retirement fund, according to MBTA spokesman Joe Pesaturo, while most state workers must pay 9 percent on the first $30,000 of their salary and 11 percent on the remainder.
There are also no restrictions on the amount of money MBTA retirees can earn if they return to work in the public sector. State workers are severely limited: They can earn no more, salary and pension combined, than the current salary of the job they retired from. Regardless of their new salary, they are allowed to work only 960 hours a year.
MBTA retirees also receive free health insurance for life, regardless of when they retire, while state retirees continue to contribute toward the cost of their medical insurance, either 15 or 20 percent, depending on when they retired.
Despite the sales tax dollars that fund the rail system and the nearly $40 million a year the MBTA puts into the pension plan, the fund is not considered a public entity, a position that was affirmed by the Supreme Judicial Court after the Globe filed suit in 1993, seeking access to records. Based on this status, officials at the retirement fund said recently that they did not have to provide details about the salaries of their employees or the pensions they pay retirees. Mulhern and Barry's salaries were provided by a former fund official.
At the same time, the fund managers assert that the plan is public when it comes to oversight by the federal government. The Department of Labor regulates private pension plans, but the fund officials argue they are exempt from the federal law.
While the plan may be generous to employees who work long enough to collect a pension, shorter-term employees do not fare as well, a spokesman for the retirement fund said. MBTA employees who leave with less than 20 years of service and are younger than 55 receive nothing, except a refund of their contributions.
State employees can collect some level of pension after just 10 years of service if they are 55 or have 20 years of service, regardless of their age. Under federal law, employees for private companies must be allowed to qualify for a benefit after no more than six years of service.
According to a specialist in public pension systems, the provisions of the MBTA pension plan are not unheard of in public systems around the country.
But Hank Kim, executive director of the National Conference on Public Employee Retirement Systems, said most plans try to match the federal standards on benefit eligibility.
"There is no standard for normal retirement age," he said. "Some have a fixed age. Some have years of service plus age, and others have just age. It's well within the range of how pension funds in the public sector have defined normal retirement age."
In addition, he said, there is no reason why an employee who retires shouldn't be able to take a second job without any reduction in pension. "If the employee and employer have made the contributions to cover the retirement of the person, if you seek additional employment there is no actuarial reason why your pension ought to be reduced," he said.
Rooney's retirement from the MBTA and his quest for a pension were the subject of public controversy at the time.
When Rooney, who was hired as an MBTA track laborer in the 1970s, became chief financial officer of the Massachusetts Turnpike Authority in 1994, he was considered to be on loan and allowed to continue accruing pension credit for MBTA service while working for the Turnpike Authority.
When he left the Turnpike Authority nearly two years later to take a job as Mayor Thomas M. Menino's chief of staff, he was eight months shy of 23 years.
He negotiated with the MBTA Retirement Board, which allowed him to pay into the fund and receive the eight months he needed to qualify for a benefit.
However, the MBTA Carmen's Union demanded that all other employees be allowed to buy extra service. More than 600 employees took advantage of the rules change, costing the MBTA more than $2.8 million, according to press reports at the time.
Rooney, who was employed by the city of Boston before the Convention Center Authority, is also working his way toward a sizable second pension.
If he stays in the public sector until he turns 65, he will qualify for another benefit equal to 60 percent of his final pay.
