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MBTA pension fund directors defend exemptions from public records laws


By Matt Murphy


STATE HOUSE — The head of the MBTA Retirement Fund on Tuesday defended the management practices and performance of the pension system in the face of questions from lawmakers seeking to increase transparency and hold the secretive retirement system more accountable to the public.

The pension fund, which manages the retirement accounts of employees at the Massachusetts Bay Transportation Authority, has been under scrutiny for years for closely guarding information about its assets, investments and policies and procedures, despite significant public resources dedicated to the pensions of MBTA employees through the transit agency.

Michael Mulhern, the executive director of the pension fund and a former MBTA general manager, told the lawmakers holding an oversight hearing on the fund that the retirement board is a private entity, but officials are willing to work with the Legislature to improve transparency where possible.

“I think it’s a fair statement you’ll see much more information down the line,” Mulhern said.

The Joint Committee on Public Service, co-chaired by Rep. Aaron Michlewitz and Sen. William Brownsberger, held the oversight hearing on Tuesday in response to criticism about the management and benefits levels at the fund and the lack of public knowledge about the fund’s operation. Brownsberger sponsored a bill last year to subject the fund to public records laws, but the effort has been rebuffed by the fund’s board and lawmakers now admit it may not be enforceable.

For a video report on the hearing, go to:

“Our goal is to create the transparency the public and the members rightly expect from the fund and how to do that that recognizes the legal uniqueness of this fund,” Brownsberger said at the outset of the hearing.

Michlewitz struck a similar tone of cooperation to start the hearing, telling the fund’s officer and lawyers, “We want the Legislature to be a partner with the T pension fund going forward.”

Mulhern went through a history of the pension fund dating to the 1940s when the private operators of the transit system ceded control to the state. When the Legislature declined to offer public pensions to MBTA employees, the retirement fund was set up as a private entity that was formalized in a trust agreement in 1948.

“This fund is a private fund administered by a private group on behalf of the MBTA retirees pursuant to a collectively bargained agreement negotiated with management,” said Jack Brennan, a former senator and consultant to the fund.

Tom Kiley, counsel to the retirement fund and well-known Beacon Hill ethics attorney, referred to two Supreme Judicial Court decisions from 1993 that held the MBTA retirement fund was a private organization and therefore not subject to the Ethics Commission or the public record law. “The fund exists for the exclusive benefit of its members,” Kiley said.

Kiley said his firm in 1992 completed a three-year process of creating ethics guidelines for the fund’s employees that relied, in part, on the state’s conflict of interest law, and has since updated the policy multiple times. Mulhern said the fund also has policies around privacy and training and has worked to improve the information available on its website.

In addition to concerns about setting a precedent for a private entity to submit to public records requests, fund officials said investment managers are disclosed annually, but the details of the investments are not. Carl Valvo, another attorney for the fund, said there are times the MBTA retirement fund is able to negotiate rates on its investments that would not be offered if the rates were to be publicly disclosed.

Rep. Carole Fiola, a Fall River Democrat, asked the pension fund panel bluntly what exactly they were concerned about disclosing.

“Balance is always required when you are talking about transparency and privacy. I don’t necessarily want everyone in the world to know my private financial information. I’m sure the members feel the same way,” Kiley said. He said the pension fund, in particular, holds information on individual members that should remain private.

Brownsberger said he has learned a lot since last year when he proposed to subject the retirement fund to public records laws. “They are definitely a unique creation legally and we have to recognize that and work with that,” he said after the meeting.

The Belmont Democrat, however, said he sees an opportunity to negotiate cooperatively with the board and the union to reach a level of transparency that satisfies everyone involved and makes available the types of investment and actuarial information that can shed light on the fund without exposing personal member information. The fund already reports its membership to the MBTA annually, which is disclosed publicly, and that should be posted on the state’s Open Checkbook website, Brownsberger said.

“I think we need to work together with everybody who is concerned about disclosure, both from a taxpayer’s perspective and an agency perspective, to develop an approach that works and I see the potential for doing that,” Brownsberger said.

The MBTA retirement fund posted a 16.19 percent return on its investment in 2013, a more than $200 million gain for the fund that pays out pensions to retired transit workers. That figure takes into account a $25 million loss in a Fletcher Asset Management investment sold to the fund by its former director Karl White.

Mulhern said the fund is currently funded at 68.1 percent, a decline from 95 percent prior to the economic meltdown in 2008 and 2009. The fund, he said, is rebounding with losses from the recession smoothed over five years, and the system has also taken steps protect against long-term liabilities by increasing the eligibility to 55-years-old and 25 years of service.

Officials also defended the qualifications of its two managers and 10 staff members, explaining that all but one of the 10 on staff have bachelor’s degrees and four have advanced degrees. “It’s a highly professional staff and one that’s totally dedicated to the members, despite some of the media reports,” Mulhern said.

Iliya Atanasov, the author of a critical study of the MBTA pension fund published by the Pioneer Institute, questioned whether the fund could be counted on to serve the best interests of taxpayers so long as its board is controlled by union members with little expertise in finance and MBTA officials like General Manager Jonathan Davis and MassDOT board member Janice Loux, the chair of the retirement fund board.

“They have long been complicit in the conspiracy of privacy,” Atanasov said.

James M. O’Brien, president of the Boston Carmen’s Union Local 589 and a member of the retirement fund board, criticized the Pioneer Institute report as one “filled with inaccuracies” from a group that is not independent and funded by business interests like the Koch brothers.