Unlike most American workers, Washington Metropolitan Area Transit Authority employees receive handsome pensions without ever contributing a penny to their pension fund. The annual pension payments, some unusually generous, are funded entirely by Metro riders and taxpayers.
The arrangement was part of the labor contract signed in 2004 between Local 689 of the Transport Workers Union and WMATA — a contract that also provides time-and-a-half payments for all overtime work.
While paying 50 percent more for overtime work is not unusual, Local 689’s contract is remarkable in that it mandates that overtime hours be included in the compensation totals used to calculate an employee’s future pension payments.
Once retired, workers receive pensions based on their years of service and the average of their compensation — including overtime — during their four highest-paid years. Because of the inclusion of overtime, some pensions exceed the employee’s annual base salary.
Other public employee pension plans in the District, including those for police and firefighters, do not include overtime payments in pension calculations, and neither do large transit agencies in other cities.
Experts said pensions that the public fully funds , such as the one for Metro employees, are common at the state and local level.
(The retirement plan for federal workers is modeled on private sector plans that require employee contributions. Mike Orenstein, a spokesman for the Federal Office of Personnel Management, said federal workers contribute money to their retirement fund with a government match. Overtime is not included in these calculations, he said.)
"It is often noted thatrelatively generous public-sector pensions and health benefits compensate for what traditionally has been perceived as lower wages and salaries than in the corporate sector," said J. Mark Iwry, an expert on pensions at the Brookings Institution.
But this approach may be outdated in cases where powerful unions representing public employees negotiate generous contracts.
A recent Examiner report, for example, found that hundreds of hourly Metro employees, including bus drivers and train operators, make six-figure incomes when overtime is included, which is significantly higher than the regional average for the private sector.
The immediate cost of the overtime is substantial. Some 70 percent of WMATA’s 10,000 employees fall under the Local 689 contract. Last year WMATA paid more than $70 million in overtime, representing 60 percent of its budget shortfall of $116 million.
The great unknown is whether Metro’s generous retirement payments undermine the health of the pension fund and whether it has sufficiently strong finances to fulfill its obligations.
Despite the fact the fund is financed largely by taxpayers, details on Metro’s pension fund are shrouded in secrecy. There are no public reporting requirements, and it is not subject to the Freedom of Information Act. There is no federal accounting requirement for public pensions, and though Metro’s operations span Virginia, Maryland and the District, WMATA does not appear to be subject to the accounting or disclosure rules of any jurisdiction.
"The disclosures of public pension funding are not uniform or standardized, so it is not always easy even for public officials to determine how well or poorly funded they are," Iwry said.
WMATA would not provide figures to show that its fund has enough resources to pay its future retirees. The Metro management said it needed the permission of the union’s six-member pension board to disclose this information. Frederick Marx, an attorney for the board, refused to answer any questions on the fund until its members discussed the request at a meeting set for Wednesday.
The lack of disclosure is particularly worrisome because there is no federal safety net for public pensions. If the fund were to run short of cash, Metro retirees could suffer. More likely, WMATA would be forced to raise fares, borrow money or ask for expanded payments from local governments to ensure that its obligations were met.
In such retirement plans, Iwry said, "the taxpayer ultimately pays."