12.6% Return Beats 7% Benchmark for 3rd Straight Year
For the 3rd straight year, the Commonwealth’s Pension Reserves Investment Trust (PRIT) Fund has beaten its benchmark, adding billions in excess investment gains to the mammoth pension fund, now exceeding $123 billion in assets. In fact, investment returns over the past decade have consistently produced gains above the state’s 7% assumed annual rate of return.
PRIT’s assets are managed by the Mass Pension Reserves Investment Management (PRIM) Board.
The timing of the news furthers the case that it is high time for the investment success of our public pension systems to be properly shared with retirees – the members of the retirement system for whom the pension trust funds are legally established to benefit.
This is particularly true for the retired state employees and teachers, who are members of the State and Teachers’ Retirement Systems, and who have not received a COLA base increase since 2012! As our retired state employee and teacher members are well aware, the State/Teacher COLA base has been stuck at $13,000 for 14 years and is long overdue for an increase, essentially capping the maximum annual increase at $390 for these retirees since 2012.
SPECIAL COLA COMMISSION FILES REPORT
A primary objective of the Special COLA Commission was devising the means to fund State/ Teacher COLA benefit improvements – both in terms of the traditional COLA base, as well as the newly proposed Enhanced COLA for long-term retirees. According to Association President Frank Valeri, who served as a Commission member, “The COLA Commission was tasked with three primary objectives:
- Improving the COLA base for members of the State and Teachers’ Retirement Systems;
- Addressing the needs of long-term retirees whose pension benefit has been eroded by inflation; and
- Most importantly, devise a means to pay for COLA benefit enhancements.”
“For years the main hurdle to improved COLA benefits has been how to pay for it. I believe that the COLA Commission has solved that puzzle with a plan that would share the ongoing investment success of PRIT and our local pension funds. Now is the time to act and share that success. Simply put, retirees can’t afford to wait any longer!”
In its report filed in December, the COLA Commission recommends that 10% of annual excess investment gains be set aside to fund COLA improvements. Excess gains are the amount above the assumed rate for annual investment return, which for the State and Teachers’ Systems is 7%.
On February 10, the Commonwealth Pension Reserves Investment Management (PRIM) Board formally announced that the pension fund earned a 12.6% investment return in 2025 – far exceeding the 7% assumed rate of return. As of 12/31/2025, the fund held more than a whopping $123 billion in pension assets under investment.
The balance includes roughly $90 billion in assets of the State and Teachers’ Retirement Systems, nearly $3 billion of assets of City of Boston Teachers, with the remainder belonging to local retirement systems that invest a portion, if not all municipal pension assets through PRIM.
This past year (2025) marks the third consecutive year with the PRIT Fund exceeding the 7% assumed rate of investment return (9.6% in 2024 and 11.4% in 2023). Averaged together, the fund has exceeded an annualized return of 11% over the past three years.
While the specific gains attributable to the State/Teachers’ Systems for 2025 have not yet been determined, we believe the total to exceed $9 billion for the three-year period. Importantly, had a COLA Reserve Fund already been established, PRIT’s excellent 3-year 11% gain would have generated more than $900 million in excess returns dedicated for State/Teacher COLA improvements – an amount that would more than pay for the entire cost of the new Enhanced COLA benefit.
PRIT has now beat its assumed rate of return in 8 of the past 10 years and posted a double digit return in 6 of those years. The system’s 10-year average return is 8.83%. Since the establishment of the funding schedule in 1987, the system has posted an annualized return of 8.58%, net of fees.
Similar investment results exist across the 102 local retirement systems, the majority of which have some if not all pension assets invested within the PRIT Fund.
The 9-member PRIM Board manages the assets of the PRIT Fund. Executive Director and Chief Investment Officer Michael Trotsky has led the fund for more than 15 years, while State Treasurer and Receiver General Deb Goldberg chairs the Board.
An officer of Mass Retirees has held one of the four elected seats (2 members of the State Retirement System and 2 members of the Teachers’ Retirement System) on the Board since PRIM’s creation in the mid-1980s. Association Executive Vice President Paul Shanley had held one of the two State elected seats prior to his passing in 2025.
Association Treasurer Joseph Connarton is one of two candidates now running for the open seat, with ballots scheduled to be mailed to members of the State Retirement System in March. As the former Chair of the Cambridge Retirement System and the retired Executive Director of the Public Employee Retirement Administration (PERAC) we believe that Joe Connarton is uniquely qualified to represent state retirees and employees on PRIM and help ensure that the ongoing success of the fund continues to benefit enrollees. We respectfully request that those who are members of the state retirement system carefully consider casting your vote for Joe.
“We cannot overstate the extraordinary success of the PRIT Fund in both the short and long-term basis. The Commonwealth went from being among the worst funded systems in the late 1980s to now being amongst the best funded and well run in the country,” said Connarton. “Every step must be taken to ensure that this success continues and that it benefits the members of the retirement systems, for whom these trust funds were created to benefit. It can’t be overlooked that this is retirees and employee’s money.”
MAJORITY OF SYSTEMS NEAR FULL FUNDING
What this means is that the health of our 104 public retirement systems is excellent. All systems are well on pace to achieve fully funded status by the statutory deadline of 2040 – if not sooner.
In very basic terms, fully funded status means that the retirement system has enough assets on hand to pay the accrued benefits owed to all retired and active members of the respective retirement system. It is an open debate amongst actuaries and public pension officials as to what exactly constitutes “full funding”, with a growing consensus that an 80% funded status or above is the mark of a very well-funded system.
Not including the 2025 investment gains, of our 104 systems, 6 are currently at or above 100% funded. Another 16 systems are between 90-99% funded, 21 80-89% funded, and 32 between 70-79% funded. In total, 75 systems are above 70% fully funded – without the inclusion of the 2025 investment gains.
While the State and Teachers’ Retirement Systems are revalued each year, based on the returns from the previous year, the 102 local systems are revalued every two years. That means that the funded ratios of municipal retirement systems often lag two years behind based on available data.
As of 1/1/2025 the State Retirement System was 73.9% funded, with the Teachers Retirement System 63.3% funded. Historically, the funded levels of the two systems have remained roughly 10 percentage points apart. Currently, there is a proposal to extend the Commonwealth’s pension funding by 3 years to 2039, reducing the State’s scheduled budget appropriation for FY27 by some $277 million.