Metro is forecasting a 32 percent jump in pension costs for its next budget, costing the agency an extra $36 million. The transit agency is planning to pay out $112 million to its five pension programs this year as part of its $2.6 billion budget, but it expects those costs to rise to $148 million in next year’s budget.
The increase comes because the agency is making up for losses in the stock market from three years ago, plus covering for the continuing weak market, Metro Chief Financial Officer Carol Dillon Kissal said Thursday.
Metro has five pension plans for nearly all of its thousands of unionized employees, which give workers a set retirement benefit until they die.
During the stock market highs of the last decade, Metro did not contribute any money to the pension funds because the gains in stock holdings covered the required payouts to retired workers. But when the market tanked in fall 2008, the pension funds also suffered.
Now Metro is on the hook for the difference between how much the funds earn and the required payouts to retired workers.
Last year, the transit agency and pension trustees agreed to spread out the stock market losses over 15 years, similar to how a homeowner spreads out the cost of a house with a mortgage.
“It would have been far worse if we hadn’t amortized those losses,” Kissal told The Washington Examiner.
Kissal said she expects the costs to be somewhat less in the following budget year as the economy recovers.
Metro does not have much direct say in the pensions. Each fund has three management trustees and three union representatives, with some requiring all six trustees to agree on any changes.
Some other agencies, including Amtrak, have merged their multiple pension funds. That leads to savings on administrative costs and also creates a larger pool of assets, leading to potentially more diverse investment offerings, Kissal said.
In addition to the rising pension costs, Metro anticipates an estimated 8 percent increase in health care expenses next year as national health care costs have risen and more of Metro’s retirees are using union-won health benefits. The agency also is planning for 5 percent increases in insurance costs stemming from payouts from the 2009 Red Line crash.
Metro will be on the hook for startup costs associated with the new Silver Line currently under construction in Fairfax County. The agency estimates the costs next year will be $20 million, none of which will be offset by fares on the new line. The first segment isn’t expected to open to riders until December 2013, Metro officials said.
