(August 21, 2012) – The Massachusetts public pension system will be handing out a total of $815,000 in performance bonuses this year, following a spate of high-level departures.
“We are paid on a three-year-basis, and our three years are strong,’’ Executive Director Michael Trotsky said in an interview with Boston Globe. “It shows we generated $2.6 billion in excess returns.’’
Over the last three years ending June 30, the Massachusetts Pension Reserves Investment Management Board (MassPRIM) has returned 11.25% on its $48.9 billion in assets. MassPRIM calculates its bonuses based on three-year returns, but the payouts have drawn criticism due to the system’s weaker short-term returns. For the last year, the fund has returned -0.08%. Newspaper articles have called the bonus package “huge,” despite it being, in total, much smaller than many single bonuses in the private sector.
The $815,000 bonus pool will be distributed to most of MassPRIM’s 25-member staff, amounting to nearly 20% of the system’s entire staff payroll. Trotsky will receive the largest bonus at $98,000, on top of his $245,000 annual salary.
The pension board Chairman and State Treasurer Steven Grossman has publicly criticized the performance bonus system and said he will attempt to overhaul it.
“I think the citizens of Massachusetts would think it inappropriate, and it lacks common sense for any company or public organization to pay bonuses when it lost money,’’ Grossman said to the Boston Globe. However, he did acknowledge in a recent interview with aiCIO that “when you’ve got a CIO vacancy and other senior positions open, it’s challenging.” Former CIO Stan Mavromates departed in June to join Mercer as CIO of its Americas division. We suspect the move involved a pay hike.