Think Tank Supports Consolidating Mass. Pension Systems

A policy brief published by Pioneer Institute said such consolidation would save up to $25 million annually in labor costs and board-member stipends. Each local retirement system currently has a five-person board, where each member receives an annual stipend of $4,500 plus travel and other expenses. That’s $2.3 million in savings from no expenses other than the stipends.

“There is a huge disparity among the 105 systems in terms of staffing levels and number of beneficiaries served,” said Pioneer Institute Executive Director Jim Stergios. “Consolidation would streamline administration and improve transparency without compromising performance.”

Among the 103 local, regional and agency retirement systems (the other two systems are the state and teachers retirement systems), the median as of the end of 2011 was 524 beneficiaries per staff member. The state system, which generally outperforms its local counterparts, had 2,597 beneficiaries for each staff member.

Proponents of the current system said it preserves local autonomy and control. But the brief’s authors argue that local systems actually have limited discretion. Massachusetts law specifies uniform benefits, contribution requirements, accounting and funding structures for all public systems. When it comes to decisions that are made locally, like investment choices, eligibility for retirement and disability benefits and cost of living increases, the Group Insurance Commission, which manages health benefits for retired public employees, offers a model for how to incorporate input from all major stakeholders.

The report, “Do We Need Them? How Many Retirement Boards are Necessary to Provide Pension Benefits for Massachusetts Public Employees?,” can be downloaded from here.