Study Warns Of Delays In Funding Mass. Pensions

The current timetable for fully funding the state's pension system could wind up costing Massachusetts taxpayers an extra $26 billion over time, according to a study.

The Pioneer Institute, a Boston-based think tank, said Wednesday that a 2010 law that pushed back the deadline from 2025 to 2040 for fully funding the system would free an estimated $12 billion in payments that would have been made through 2025.

But the study also found the delay would result in more than $38 billion in additional contributions from 2025 to 2040.

"State leaders need to understand fully the implications of extending these deadlines," said Iliya Atanasov, the study's author. "Taxpayers may end up paying in more than three times the amount that was freed up by the move."

Atanasov also said the state and teachers' pension funds assume an 8 percent return, but an anticipated rate of about 6 percent fits better with long-term data, provided that benefits are at least partially protected against inflation.

Gov. Deval Patrick's administration and legislative leaders agreed this week to accelerate the timetable with a goal of fully funding the system by 2036 instead of the 2040 timetable currently required by law.

The new schedule calls for pension contributions to increase by 10 percent in each of the next three fiscal years.

Secretary of Administration and Finance Glen Shor said the state expects to dedicate nearly $1.8 billion for scheduled pension contributions for the fiscal year that begins July 1.

This article was originally published on January 15, 2014.


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