Overview of the Massachusetts State Retirement Board

This section describes the makeup and responsibilities of the Massachusetts State Retirement Board.

Background

The Massachusetts State Retirement Board (MSRB), established by Chapter 532 of the Acts of 1911, is responsible for administering the Massachusetts State Employees’ Retirement System (MSERS), one of 104 public contributory retirement systems in the Commonwealth. MSRB administers MSERS for state employees, the former Massachusetts Turnpike Authority Employees’ Retirement System (MTAERS), and benefits for employees of the state’s judiciary branch. All the systems, though they operate independently, are bound together under one retirement law: Chapter 32 of the Massachusetts General Laws, which establishes the benefits, contribution requirements, and accounting structure for the systems.

MSERS is a contributory defined-benefit retirement system, governed by Chapter 32 of the General Laws, that provides retirement, disability, survivor, and death benefits to members and their beneficiaries. All MSERS members who are regularly employed on a part-time or full-time permanent basis are required to enroll with MSRB and make mandatory pretax contributions through payroll deductions. Members contribute a percentage of their earnings based on the date they were hired and became members of MSERS:

Date Hired	Contribution Rate*
Before January 1, 1975	5%
January 1, 1975 through December 31, 1978	7%
January 1, 1979 through December 31, 1983	7%, plus 2% on earnings over $30,000
January 1, 1984 through June 30, 1996	8%, plus 2% on earnings over $30,000
July 1, 1996 through present	9%, plus 2% on earnings over $30,000
*       Exceptions: Members appointed to the State Police on or after July 1, 1996 contribute 12%. Group 1 members (i.e., “officials and general employees including clerical, administrative and technical workers, laborers, mechanics, and all others not otherwise classified,” according to MSRB’s website) whose service began after April 2, 2012, and who have attained more than 30 years of service, contribute 6% plus 2% on earnings over $30,000.

Based on a member’s age, length of service, and group classification,¹ retirement allowance benefits can be up to 80% of the average of the member’s three highest-paid consecutive years of service (if the member was hired before April 12, 2012) or the average of the five highest-paid consecutive years of service (if hired thereafter).

Governance

Section 50 of Chapter 7 of the General Laws governs how public employee retirement systems are overseen and regulated by the Public Employee Retirement Administration Commission (PERAC). Section 1 of Title 840 of the Code of Massachusetts Regulations governs the administrative procedures, financial operations, recordkeeping, and reports required of public employee retirement systems.

As part of its oversight, PERAC performs periodic reviews of records of all retirement systems at least once every three years. PERAC also provides training as well as legal and technical assistance to retirement boards.

MSRB files an annual report with PERAC for each fiscal year on or before December 31 of the following fiscal year. The annual report contains the assets and liabilities of MSERS and MTAERS, as well as statistical information regarding membership, findings of audits, the most recent actuarial valuation,² the system’s investment portfolio, and any other pertinent information that PERAC deems appropriate. MSERS’s and MTAERS’s disbursements for annuities and pensions for July 2017 through June 2019 were as follows:

	July 2017–June 2018	July 2018–June 2019
MSERS Disbursements	$2,230,740,039	$2,340,305,905
MTAERS Disbursements	15,585,244	15,155,776
Total	$2,246,325,283	$2,355,461,681

 

The Pension Reserves Investment Management Board manages and invests MSRB member contributions and assets; these funds are held in a trust fund known as the Pension Reserves Investment Trust (PRIT). MSRB’s annual reports for fiscal years 2018 and 2019 listed the following investment values as of June 30, 2018 and June 30, 2019:

	As of June 30, 2018	As of June 30, 2019
MSERS Investment in PRIT Capital Fund	$27,554,530,336	$28,374,124,490
MSERS Investment in PRIT Cash Fund	28,974,989	30,621,937
MTAERS Investment in PRIT Capital Fund	174,856,275	169,577,674
MTAERS Investment in PRIT Cash Fund	248,083	235,103
Total	$27,758,609,683	$28,574,559,204

MSRB Composition

MSRB is a five-member board established by Section 18 of Chapter 10 of the General Laws. It includes the State Treasurer and Receiver General, who is its chair; one member appointed by the State Treasurer and Receiver General, who must be a retired member; two members elected by current and active members of MSERS; and one member chosen by the other members of MSRB. As of June 30, 2019, the board consisted of the following members:

• Chair ex officio: Deborah B. Goldberg, State Treasurer and Receiver General
• Appointed member: Patricia Deal
• Elected member: Francis Valeri
• Elected member: Theresa McGoldrick
• Chosen member: Archibald Gormley

The board is required to meet at least once a month. According to the MSERS Benefit Guide, dated August 2018, MSRB “processes and approves retirement applications, ordinary and accidental disability retirements, refunds, service purchases, and survivor benefits” and “is a resource for state employees seeking information on retirement.”

MSRB maintains offices in Boston and Springfield to administer and implement its policies. According to its annual report, as of June 30, 2019 there were 76 permanent full-time, 4 permanent part-time, and 3 contract employees serving more than 89,000 active MSERS and MTAERS members and more than 64,000 retirees and survivors.

Retirement Application Process

For eligible members, the standard superannuation³ retirement process begins with the submission of a retirement application. MSRB reviews submitted applications, and if requested, counselors meet or correspond with the applicants. For completed applications, a member of the MSRB Benefit Calculation Unit confirms and enters data, such as dates of birth, option selections (see Appendix), and beneficiary data, in MSRB’s Massachusetts Retirement Information System (MARIS) and verifies them as complete and accurate. When data entry and verification are complete, MSRB sends requests for salary histories, current wage data, dates of service, and final pension contribution amounts, known as Salary Request and Release Forms, to the employing agencies. Once MSRB has received and verified all required data, another member of the Benefit Calculation Unit calculates benefits and submits them for quality review and recalculation by a third unit member. When the first benefit payment is issued, a letter known as a first pay letter is sent to the retiree, containing the details of retirement, including service dates, salary averages, and amounts of initial payments.

MSRB processes approximately 3,000 retirements annually. The retirement application indicates that retirement processing generally takes 60–90 days from the date of retirement to the date of first payment. Section 13(1)(b) of Chapter 32 of the General Laws indicates that the first payment must be made “on the last day of the month following the month in which . . . such . . . pension . . . becomes effective.” Depending on the day of the month when retirements occur, payments can be due within 28 to 62 days.

Benefit Eligibility Verification Procedures

Periodically, MSRB provides a third-party vendor with a copy of its entire MARIS retiree payee file, including designated joint survivors (Option C beneficiaries⁴), for the purpose of identifying member and beneficiary deaths. During the audit period, files were provided to the vendor six times. The vendor cross-matches the information in this file with its death data to determine whether any MSRB benefit recipients or designated beneficiaries have died. Each week, the vendor returns the results of its match to MSRB for examination and, if necessary, appropriate action by MSRB. Possible actions include the following:

• termination of benefit payments, if there are no survivor benefits
• termination of benefit payments and, if applicable, payment of remaining annuity allowance to beneficiaries or members’ estates
• creation of new payees and calculation of benefit payments, for Option C beneficiaries
• adjustment of retirees’ benefit payments, if Option C beneficiaries predecease retired members
• payment of underpaid benefits to members’ estates, if applicable, depending on date of death and date of suspension of benefit payments
• collection of overpaid benefits from members’ estates, if applicable, depending on date of death and date of stoppage of benefit payments.

MSRB also examines monthly death reports provided by the state’s Group Insurance Commission, as well as notifications from family members of deceased pensioners.

In addition, to ensure that pensioner information on file is accurate, MSRB contracts with a third-party vendor to mail out Benefit Verification Forms (BVFs) once every two years.⁵ The forms must be signed by benefit recipients and notarized. The vendor processes and reviews returned BVFs to determine completeness (for instance, whether the BVF has been signed and notarized). The vendor reports any discrepancies on the BVFs to MSRB for follow-up. If a pensioner does not return the BVF by the designated due date, his/her pension benefits are suspended until the form is received.

1.     A member’s position, occupation, and duties performed determine the group classification.

2.     An actuarial valuation is a statement of future values of pension assets and liabilities based on certain assumptions, including pensioner demographics.

3.     The Massachusetts Public Employee Retirement Guide for Those Becoming Members Prior to April 2, 2012 defines “superannuation” as “the process of being retired upon reaching a certain age and meeting other requirements, including length of creditable service.”

4.     A member who chooses an Option C retirement allowance designates a beneficiary who, upon the member’s death, is paid a lifetime monthly benefit.

5.     Section 15.01 of Title 840 of the Code of Massachusetts Regulations requires that each retirement board perform, at least once every two years, a verification of all retirees and beneficiaries who receive monthly benefits. To this end, MSRB requires benefit recipients to file notarized affidavits including statements certifying that they are alive. The last benefit verification process during our audit period was initiated in April 2018 for an estimated 63,000 individuals.

Date published:	January 6, 2021