Internal and independent reports show Florida pension plan “not sustainable”

by | Jan 10, 2023


  • The final report on the Florida Retirement System concludes that FRS is falling behind in its obligations and recently passed legislation won’t help much
  • With membership (payers) decreasing and retirees (payees) increasing, the system is losing ground it can’t make up without major changes
  • An independent report concluded that on its current path, FRS is “not sustainable” and cannot remain solvent long term

(The Center Square) — The Florida Retirement System has shrunk over the last year and some analysts are saying that it will not survive on its current course, with new legislation likely not to have much of an impact.

According to the Department of Management Service’s annual comprehensive financial report, the Florida Retirement System has had a net income loss of $21,773,027 in the 2022 fiscal year, after beginning the year at $202,082,182,546 and ending the year at $180,226,404,807.

The report also says that the long-term financial health of all retirement plans is dependent upon several key items: Future investment returns, contributions, and future benefit payments.

“The division’s funding objective is to accumulate sufficient assets over time to meet its long-term benefit obligations as they become due. Accordingly, collecting employer and employee contributions, as well as earning the assumed long-term rate of return on its investments are essential components of the division’s funding plan to accumulate the assets needed to finance future retirement benefits,” the report says.

Membership overall has decreased, shrinking from 635,266 contributing members in 2021 to 629,073 members as of June 30, 2022. The average age of members is 45 with an average of 10 years of service and an average salary of $52,000.

While member numbers dropped, the number of retirees collecting benefits increased from 440,307 in 2021 to 448,846. This equates to an extra $493,967,668 paid to those receiving benefits.

The Reason Foundation released its own analysis of the current system in 2021 and said in its report that, “The 2008 financial crisis weakened FRS’s funded status, but since then markets have recovered while pension funding has not.”

The report adds that changes made in 2018, which enrolled new members into a 401K-type investment plan by default, instead of a pension plan, were a good idea but does not address all the issues still plaguing the system.

“Reducing benefits in 2011 reduced some costs at the expense of inflation protection for retirees, but it did not fundamentally address why pension debt continues to grow. Defaulting new FRS members into the Investment Plan in 2018 was better aligned with workforce mobility trends and reduced future financial risk, but it did not address why pension debt has persisted for a decade,” the report stated.

It further states that the FRS Pension Plan is not on a sustainable path and will not maintain solvency long-term.

Since 2002, unfunded liabilities have grown by over $130 billion from $86.5 billion to $217.4 billion in 2022 with a deficit of $38 billion.

The State Board of Administration is responsible for investing and managing the funds from the FSR, as well as over 25 other funds as tasked by the Florida Legislature.

Gov. Ron DeSantis is the chair of the Board of Trustees for SBA and is composed of two other members — Chief Financial Officer Jimmy Patronis and the Attorney General Ashley Moody.

6 Comments

  1. nh

    They’re coming for your retirement. Long planned and in process. Check. Next, they’re coming for your Social Security. Long planned and in process. Check. When folks gonna stand up?

    Reply
    • John Murphy

      Wrong its a dumb system state wide. City pension plans are controlled a lot better. City plans have locals running it hence no [political interference I know because I serve on a city plan..

      Reply
    • Tarno_inz

      Deborah, you’re just another muckraker. I checked he article you linked: 0.15% of the fund is (or was at that time, according to PolitiFact) invested in Russian assets. That is essentially a rounding error. Not sure how this tiny investment in private companies based in Russia makes DeSantis a Putin wannabe. 0.15%, good grief !!
      That said, we do have to hold the politicos feet to the fire on this one, the longer it goes on, the more difficult it becomes (financially and politically). I’d say: stop all of these special carve-outs for sales tax, and toll rebates and just use it to start to fix the pension system. That is, the legislature ought to stop the bread and circuses and get to the meat.

      Reply
  2. Tombo

    There should be a Statutory cap put on salaries for use in the computation of one’s retirement, instead of some of the obscene salaries being paid across the State, like to State and County medical professionals, administrative personnel, professors at universities, members of law enforcement, Constitutional officers, Judges, elected officials, etc. Also, the current 5-highest year funding formula is fundamentally flawed and should be revised to an average career earnings method. It’s just not fair for Floridians to see these State, City, County, School Board, College or University retirement checks being so pumped up — for life — for a mere 5-years of work. It’s also not fair to those workers who were paid higher salaries over a 30-35 year career receiving the same or possibly a lesser rate of retirement pay than someone who may have received a similar rate of pay for just 5-years of work. Lastly, is the double-dippers who are married to another eligible retiree and the household receives not just one — but two — pensions. Don’t you think that member employers know how to manipulate the system to yield higher results for their employees, also that they do this each and every day? I even think that the Federal Social Security calculation, is based upon a rolling average of one’s highest 35-years to determine one’s monthly benefit, which seems a lot more fair!

    Reply
  3. Mary

    I agree regarding double dippers, another example being an education administrator who retires, gets the pension and then gets another job in the FRS. I worked for 27 years to earn my pension, on which I depend, for I never had a portfolio of investments. I hope the Governor is keeping me and others like me, who trusted in the system, in mind when he and his Board are making what could be life and death decisions.

    Reply

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