{"id":15905,"date":"2025-06-25T09:17:23","date_gmt":"2025-06-25T13:17:23","guid":{"rendered":"https:\/\/www.gcdev3.com\/mwra\/?p=15905"},"modified":"2025-06-25T09:17:23","modified_gmt":"2025-06-25T13:17:23","slug":"june-2025-board-briefs-staying-on-track-for-pension-funding-by-2030","status":"publish","type":"post","link":"https:\/\/www.gcdev3.com\/mwra\/june-2025-board-briefs-staying-on-track-for-pension-funding-by-2030\/","title":{"rendered":"June 2025 Board Briefs: Staying on Track for Pension Funding by 2030"},"content":{"rendered":"<p>This month\u2019s Board Brief is about the latest update on MWRA\u2019s pension funding progress. At the June 2025 Board of Directors meeting, MWRA Deputy Director, Finance\/Treasurer Matt Horan shared the latest on the Authority\u2019s pension funding progress. While the most recent actuarial review revealed a few bumps in the road, MWRA is still firmly on pace to fully fund its pension system by 2030, a key milestone that protects retirees and helps avoid future rate shocks.<\/p>\n<p><strong>What\u2019s the pension system, and why does it matter?<\/strong><\/p>\n<p>The MWRA pension system sets aside money to pay current and future retirement benefits for employees. Think of it like a retirement savings plan, but on a much bigger scale. Over time, MWRA and the employees contribute to the fund and invests those dollars so there\u2019s enough to cover promised benefits as employees retire.<\/p>\n<p>But because investment returns can fall short, or employee demographics shift (like more people retiring or living longer), the fund doesn\u2019t always keep up. When the savings fall behind what\u2019s needed, that shortfall is called the actuarial unfunded liability. MWRA pays this down over time using a structured schedule, kind of like making monthly payments to pay off a loan. That schedule is called amortization and is developed by a professional actuary.<\/p>\n<p><strong>What changed this year?<\/strong><\/p>\n<p>In January 2025, MWRA\u2019s actuary ran the numbers and found that the unfunded liability had grown by about <strong>$21.3 million<\/strong>. Why? Four main reasons:<\/p>\n<ul>\n<li>Investment returns came in lower than expected<\/li>\n<li>Wages grew faster due to inflation<\/li>\n<li>More employees retired than projected<\/li>\n<li>People are living longer (great news, but it costs more!)<\/li>\n<\/ul>\n<p>That increase nudged the system\u2019s funding ratio down from 89% to 87%\u2014a small drop, but one that calls for attention.<\/p>\n<p><strong>Why is 2030 such a big deal?<\/strong><\/p>\n<p>Massachusetts law sets some important rules for how pension systems like MWRA\u2019s must be funded. Right now, MWRA follows a flexible timeline under Section 22D of state law, which allows the Retirement Board to adjust the payment schedule each year based on current conditions.<\/p>\n<p>But if the full funding date slips beyond 2030, MWRA would fall under stricter rules in Section 22F. That version locks in two big constraints:<\/p>\n<ol>\n<li>Annual pension payments <strong>can never decrease<\/strong><\/li>\n<li>The payment amount <strong>can\u2019t grow by more than 4% per year<\/strong><\/li>\n<\/ol>\n<p>Those may sound like reasonable limits, but in practice, they make it harder to respond to economic changes, like a sudden downturn. And PERAC, the state\u2019s pension regulator, has made it clear they wouldn\u2019t allow MWRA to extend its schedule beyond 2035 without a compelling reason.<\/p>\n<p><strong>What\u2019s MWRA doing about it?<\/strong><\/p>\n<p>To stay ahead of the curve, MWRA is planning to go above and beyond the legally required payment in FY26. The Draft Final FY26 budget includes:<\/p>\n<ul>\n<li><strong>$18.3 million<\/strong>: the required pension contribution (known as the <strong>Actuarially Determined Contribution<\/strong>, or ADC)<\/li>\n<li><strong>$8.0 million<\/strong>: an <strong>optional prepayment<\/strong> to reduce the unfunded liability\u2014$2.3 million more than originally proposed<\/li>\n<li><strong>$6.5 million<\/strong>: additional optional payments planned for both FY27 and FY28<\/li>\n<\/ul>\n<p>This isn\u2019t a new strategy. MWRA also made a <strong>$5.2 million extra payment in FY25<\/strong>, showing a consistent commitment to reducing long-term costs. These early payments are a bit like making a bigger down payment on a house\u2014it lowers the total amount you have to finance and results in smaller monthly bills later on. \u00a0What is new, is that the PERAC Actuary is allowing MWRA to include future optional payments into its funding schedule. This change recognizes MWRA\u2019s demonstrated history of making additional payments and how this new schedule would benefit our long-term rate management strategy.<\/p>\n<p>In fact, the current plan is expected to generate approximately $20 million in long-term actuarial savings and keep MWRA on track to hit the 2030 deadline.<\/p>\n<p><strong>Where does the money go?<\/strong><\/p>\n<p>The MWRA Retirement Board is expected to invest these extra funds in the PRIT Core Fund, a professionally managed investment pool run by the state. PRIT offers strong long-term returns, low fees, and broad diversification\u2014exactly the qualities you want in a pension portfolio.<\/p>\n<p>As noted in the Advisory Board\u2019s <em>Comments &amp; Recommendations<\/em> report from May 2025, we\u2019ve long supported increasing MWRA\u2019s investments in PRIT as a smart and efficient way to manage risk and reduce costs.<\/p>\n<p><strong>And beyond 2030?<\/strong><\/p>\n<p>PERAC has confirmed there\u2019s <strong><em>no legal requirement<\/em><\/strong> to be fully funded by 2030\u2014but if MWRA chooses to extend the schedule past that date, the system would immediately fall under the tighter Section 22F rules. That would limit MWRA\u2019s ability to adjust payments in response to future conditions.<\/p>\n<p>Could MWRA extend the schedule in a crisis? Yes, if markets crash again like they did in 2008 or 2022, the Retirement Board could vote to extend the timeline. But that option is best saved for an actual emergency, not used preemptively. If MWRA were to \u201clock into\u201d the Section 22F rules now, it would have fewer tools available later.<\/p>\n<p>That\u2019s why the current approach, staying aggressive while there\u2019s still flexibility, is widely seen as the most responsible path. It strengthens the system now, protects ratepayers down the line, and preserves options for the future.<\/p>\n<p><strong>Paying Ahead Pays Off: Keeping the Pension Promise<\/strong><\/p>\n<p>The pension system isn\u2019t just a line item in the budget\u2014it\u2019s a long-term promise to MWRA employees. By pairing required contributions with strategic prepayments, MWRA is not only staying on course for full funding by 2030 but also reducing long-term costs for ratepayers. Smart investments and disciplined planning are making good on that promise, delivering financial stability today while securing retirements for tomorrow.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This month\u2019s Board Brief is about the latest update on MWRA\u2019s pension funding progress. At the June 2025 Board of Directors meeting, MWRA Deputy Director, Finance\/Treasurer Matt Horan shared the [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":15907,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[36,1],"tags":[61],"class_list":["post-15905","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog-post","category-general","tag-board-briefs","has-thumbnail"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.gcdev3.com\/mwra\/wp-json\/wp\/v2\/posts\/15905","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.gcdev3.com\/mwra\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.gcdev3.com\/mwra\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.gcdev3.com\/mwra\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.gcdev3.com\/mwra\/wp-json\/wp\/v2\/comments?post=15905"}],"version-history":[{"count":2,"href":"https:\/\/www.gcdev3.com\/mwra\/wp-json\/wp\/v2\/posts\/15905\/revisions"}],"predecessor-version":[{"id":15909,"href":"https:\/\/www.gcdev3.com\/mwra\/wp-json\/wp\/v2\/posts\/15905\/revisions\/15909"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.gcdev3.com\/mwra\/wp-json\/wp\/v2\/media\/15907"}],"wp:attachment":[{"href":"https:\/\/www.gcdev3.com\/mwra\/wp-json\/wp\/v2\/media?parent=15905"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.gcdev3.com\/mwra\/wp-json\/wp\/v2\/categories?post=15905"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.gcdev3.com\/mwra\/wp-json\/wp\/v2\/tags?post=15905"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}