FRS in Legislative Cross-Hairs
Legislation that would force new FRS employees – including troopers and other special risk class members – into the investment plan passed its first committee stop in the Florida Senate.
The proposal would close the traditional pension plan to new hires and move them into a 401(k)-type investment plan, managed by the individual worker and not by the state.
It would also mark the biggest change to the state retirement system in nearly 50 years.
Bill sponsor, Senator Ray Rodriguez (R-Estero), ordered an actuarial study of the FRS for lawmakers and stakeholders to review. The Milliman firm will report back in March when the session commences.
“We will know more once we get the study back,” Rodriguez said. “We are going to follow the data. The data will guide the amendments to the bill.”
His focus is on the pension plan’s unfunded liability, the difference between the amount of money on hand and what is needed to pay promised benefits to current workers were they all to retire today.
Rodriguez says the $36 billion shortfall, up 230% since 2009, is a threat to the state’s financial well being.
Others disagree, noting that even with the shortfall the plan is funded at 82%. Financial experts generally consider any pension fund at least 80% to be in good shape.
“Using the ‘doomsday’ scenario to gauge the health of a pension fund doesn’t reflect reality,” said FAST Chairman Mike Kirby – himself an accountant, who likens the unfunded liability to a car or mortgage payment. “You generally don’t pay it all it once. You make monthly payments, which are manageable.”
Kirby said that new special risk employees need to be allowed to continue to enroll in the defined benefit plan. “There is a reason that troopers and other first responders are classified ‘special risk,'” Kirby said. “The inherent day-to-day hazards of the job. The defined benefit plan protects families and dependents in the event of a personal catastrophe.”
The shortfall has had the attention of lawmakers since 2012. They’ve reduced the number of employees in the defined benefit plan and passed legislation requiring FRS employees to contribute a portion of their salaries towards their retirement.
Kirby also noted that if lawmakers do nothing, that the state’s own economists say the unfunded liability – largely a result of the Great Recession – will likely disappear within 30 years.