Pension Reform - Filling the Gap
The Florida Retirement System (FRS) is the fourth largest public retirement program in the United States. It operates as a defined benefit (pension) program for 80 percent of its participants. The remaining participate in a defined contribution investment program. The FRS covers state and county government agencies, public schools, the State University System, Florida counties and any municipalities that choose to join the plan. More than one million employees, retirees and beneficiaries are enrolled or receive benefits from the FRS.
According to the most recent reports, the current funding level – just under 86 percent – means a total gap of more than $21 billion. This has real-time economic and fiscal costs. In 2013, legislators had to allocate $500 million from state revenues to the FRS pension fund. Without addressing this challenge now, by 2020 that allocation could rise to as much as $1 billion.
Florida’s local governments not on the FRS are not faring any better. While some have fully funded plans, a review of the most recent actuarial data from the Department of Management Services shows that a large number of plans are in danger of complete insolvency. Plans in cities as large as Fort Myers, Hollywood and even Miami all have pension programs falling behind the 80 percent funding mark, considered the baseline for being actuarially sound.
That gap will have severe negative effects on Florida’s economic future if not addressed. Time, unfortunately, is not in abundance.
Bottom line: without substantial changes to the Florida Retirement System, the program will be unsustainable over the long term.