BRADENTON, Fla. — Florida's pension plan for public employees faces new reform measures in the Legislature though it is considered well-funded by analysts compared with many other states.
With $133 billion in assets, the Florida Retirement System had a funded ratio of 85.9% and an unfunded actuarial liability of $21.6 billion as of June 30, 2013. The FRS is the fourth-largest public retirement system in the country.
The Senate Committee on Governmental Oversight and Accountability passed a committee substitute for Senate Bill 1114 on April 10 that would make a number of changes to the FRS.
The bill, affecting new employees on July 1, 2015 if passed, would require that elected officials and senior management join the state's investment plan, which is a defined contribution plan where employees direct their investments.
The state also offers a defined benefit plan also known as the pension plan. SB 1114 would increase the vesting period in the pension plan to 10 years from eight.
Employees who fail to select a plan when enrolling would automatically default into the investment plan. Currently, the default selection is the pension plan.
While employees in the pension plan contribute 3% of wages, those who select the investment plan would see their contribution drop to 2% with the employer picking up the remaining 1%.
"Traditional defined benefit plans provide little benefit to employees who do not spend their entire career in government, and have become increasingly unaffordable for taxpayers as those plans siphon off funding from other priority issues such as education, transportation, public safety, and assistance for vulnerable Floridians," Senate President Don Gaetz, R-Niceville, said referring to the need for changes proposed by SB 1114.
Senate Bill 7046 is also under consideration in the Legislature, and would create a cash balance defined-benefit retirement plan that would provide employees with set contributions to a retirement account and a guaranteed rate of return.
A cash balance plan provides employees with a guaranteed and provides more portability for employees who leave government service for other career, according to Sen. Wilton Simpson, R-Trilby, sponsor of SB 7046.
Florida's retirement system covers state and county employees, district school boards, community colleges, and universities, as well as 185 cities and 259 special districts.
With an 86% funded ratio, Florida's plan is "still strong relative to many states," Moody's Investors Service said in a rating review March 5.
In 2011, state lawmakers, faced with a budget deficit, required public workers to contribute 3% toward their pensions. The move was upheld by the Florida Supreme Court in 2013.