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Public pensions in Florida

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Florida public pensions
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Pension system
Number of pension systems 1
State pension systems: Florida Retirement System (FRS)
System type: Defined benefit plan; defined contribution plan
Pension health (2012)[1]
Fund value: $127,891,781,000
Estimated liabilities: $148,049,596,000
Unfunded liabilities : $20,157,815,000
Percent funded: 86.38%
Percent funded change: Decrease.svg0.55%[2]
Percent funded rank: 8[3]
Pension fund members (2012)
Total members: 1,101,286
Active members: 623,011
Other members: 478,275
Other state pension information
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Public pensions
State public pension plans
Public pension health by state
Florida public pensions are the state mechanism by which state and many local government employees in Florida receive retirement benefits. The Florida Retirement System administers benefits for all state, county, district school board, community college and university employees, as well as some city, charter school, metropolitan planning district and special district employees.[4]

According to the United States Census Bureau, the state has 302 locally-administered pension systems.[5]

A 2012 report from the Pew Center on the States noted that Florida's pension system was funded at 82 percent at the close of fiscal year 2010, above the 80 percent funding level experts recommend. Consequently, Pew designated the state's pension system as a "solid performer."[6]

The funding ratio for the state's pension systems decreased from 105.65 percent in fiscal year 2007 to 86.38 percent in fiscal year 2012, a drop of 19.27 percentage points, or 18.2 percent. Likewise, unfunded liabilities increased from approximately -$6.7 billion in fiscal year 2007 to more than $20 billion in fiscal year 2012.


Pension plans

In fiscal year 2012, according to the system's Comprehensive Annual Financial Report, Florida had a total of 623,011 active members in its retirement plans. Our membership figures divide plan participants into two broad categories: active and other. Active members are current employees contributing to the pension system. Other members include retirees, beneficiaries and other inactive plan participants (usually terminated employees entitled to benefits but not yet receiving them).[7]

The following data was collected from the system's 2012 Comprehensive Annual Financial Report. The "percentage funded" is calculated by taking the current value of the fund and dividing by the estimated amount of total liabilities. The assumed rate of return used to calculate fund value was 7.75 percent for fiscal year 2012. The Government Accountability Office (GAO) and Pew Research Centers cite a percent funded ratio of 80 percent as the minimum threshold for a healthy fund, though the American Academy of Actuaries suggests that all pension systems "have a strategy in place to attain or maintain a funded status of 100 percent or greater."[8][9] The column labeled "SBS figure" refers to a market liability calculation of the fund by the nonprofit organization State Budget Solutions. This analysis uses a rate of return of 3.225 percent, which is based upon the 15-year Treasury bond yield. The organization calls this a "risk-free" rate of return that would make it easier for states to achieve their pension funding requirements in the future. Since 2006, all private sector corporate pension plans have incorporated market costs into their funding schemes.[10]

Basic pension plan information -- FRS[4]
Current value Percentage funded Unfunded liabilities Membership
State figure SBS figure[11] State figure SBS figure[11]
$127,891,781,000 86.38% 46% $20,157,815,000 $152,651,611,000 623,011 active members

Annual Required Contribution

Annual Required Contributions (ARC) are calculated annually and are a sum of two different costs. The first component is the "normal cost," or what the employer owes to the system in order to support the liabilities gained in the previous year of service. The second component is an additional payment in order to make up for previous liabilities that have not yet been paid for. According to a report by the Pew Center on the States, in 2010 Florida paid 107 percent of its annual required contribution.[6][12]

On June 25, 2012, the Government Accounting Standards Board (GASB) approved a plan to reform the accounting rules for state and local pension funds. These revised standards were set to take effect in fiscal years 2013 and 2014.[13] As a result, ARCs were removed as a reporting requirement. Instead, plan administrators and accountants will use an actuarially determined contribution or a statutory contribution for reporting purposes.[14]

ARC historical data[4]
Fiscal year FRS
Annual Required Contribution (ARC) Percentage contributed
2012 $1,962,816,000 60%
2011 $3,680,042,000 83%
2010 $2,447,374,000 111%
2009 $2,535,854,000 111%
2008 $2,612,672,000 107%

Historical funding levels

Historical pension plan data - FRS[4]
Year Value of assets Accrued liability Unfunded liability Funded ratio
2007 $125,584,704,000 $118,870,513,000 $(6,714,191,000) 105.65%
2008 $130,720,547,000 $124,087,214,000 $(6,633,333,000) 105.35%
2009 $118,764,692,000 $136,375,597,000 $17,610,905,000 87.09%
2010 $120,929,666,000 $139,652,377,000 $18,722,711,000 86.59%
2011 $126,078,053,000 $145,034,475,000 $18,956,422,000 86.93%
Change from 2007-2011 $493,349,000 $26,163,962,000 $25,670,613,000 -18.72%

Rate of return

Florida presumed a 7.75 percent return rate on its pension investments in 2012.[4]


According to a 2012 analysis by the Pew Center for the States, most state pension plans assume an 8 percent rate of return on investments.[15] Critics assert that this assumption is unrealistic, citing changing market conditions and significantly lower investment returns across the board over the past several years.[16] When states lower the rate of return in an effort to predict investment earnings accurately, it increases the current plan liabilities, thereby lowering the percent funded ratio and causing the ARC to increase. This is because future plan liabilities are discounted based on the rate of return, so smaller expected investment returns result in larger actuarially accrued liabilities.[17] For example, on September 21, 2012, the Illinois Teachers Retirement System voted to lower its rate of return from 8.5 percent to 8.0 percent. This change increased the state's fiscal year 2014 ARC from $3.07 billion to $3.36 billion.[18] Similarly, when California's CalPERS reduced its projected annual rate of return from 7.75 percent to 7.5 percent in March 2012, it cost the state an additional $303 million for fiscal year 2013.[19]

The 2008 financial crisis had a devastating effect on pension plans nationwide and resulted in slower economic growth and increased market volatility. In light of this, some market strategists find the 8 percent assumption to be overly ambitious. Stanford University Finance Professor Joshua Rauh stated that using past investment performance in this economic climate was "dangerously optimistic."[20] Advocates for a lower assumed rate of return argue that the standard assumptions could cause pension fund managers to engage in more risky investments and imprudent stewardship of public funds. Further, if pension plans were using more conservative assumptions, such as the 3 or 4 percent assumed rate of return used in the private sector, and the plans grew more quickly than expected, the fund would have a surplus and smaller future ARCs, which would be preferable to using optimistic assumptions and potentially being caught with larger-than-expected deficits.[21][22][23][24][25]

On the other hand, traditional public pension plan advocates argue that the dip observed in recent years is not sufficient proof of a long-term, downward trend in investment returns. According to Chris Hoene, executive director at the California Budget Project, "The problem with [the market rate] argument is there isn’t significant evidence other than the short term blip during the economic crisis that there’s been that shift. It’s a speculative argument coming out of a very deep recession."[20]

The National Association of State Retirement Administrators compiled data on the median annualized rate of return for public pensions for the 1-, 3-, 5-, 10-, 20-, and 25-year periods ending in 2013. While the median annualized rate of return failed to meet the 8 percent assumption that most public pensions assume over the 5- and 10-year periods, it was just shy (7.9 percent) over the 20-year period, and it exceeded 8 percent for the 1-, 3-, and 25-year periods. It is important to note that the NASRA data is reporting the median returns, indicating that even though median annualized returns exceeded 8 percent in the 25-year period, the investment portfolios for half of the examined public pension funds failed to meet an 8 percent assumed rate of return.[26]

In September 2013, the nonprofit organization State Budget Solutions published an analysis of state pension funding levels. In its calculations, State Budget Solutions used a 3.2 percent rate of return, the 15-year Treasury bond yield as of August 21, 2013, to discount plan liabilities.

The research found that in all states combined, state public employee pension plans have only 39 percent of the assets they need to cover their promised payments—a $4.1 trillion gap. According to the report, Florida's public pension plans were 46% funded, making it the 8th most funded state.[27]

Moody's report on adjusted pension liabilities

On June 27, 2013, Moody's Investor Service released its report on adjusted pension liabilities in the states. The Moody's report ranked states "based on ratios measuring the size of their adjusted net pension liabilities (ANPL) relative to several measures of economic capacity." In its calculations of net pension liabilities, Moody's employed market-determined discount rates (5.67 percent for Florida) instead of the state-reported assumed rates of return (7.75 percent for Florida).[28]

The report's authors found that adjusted net pension liabilities varied dramatically from state to state, from 6.8 percent (Nebraska) to 241 percent (Illinois) of governmental revenues in fiscal year 2011.[28]

The adjusted net pension liability for Florida in fiscal year 2011 was ranked the 15th highest in the nation.[28] The following table presents key state-specific findings from the Moody's report, as well as the state's national rank with respect to each indicator.

Adjusted net pension liabilities (ANPL) relative to key economic indicators - Florida
Governmental revenue* Personal income State GDP Per capita
State findings 19.2% 1.7% 1.7% $677
National ranking 44th 49th 45th 48th
*Moody's uses governmental revenues as reported in each state's consolidated annual financial reports; this includes not only state-generated revenue, but federal funds, as well.[28]

Increased contributions

In January 2013, the Florida Supreme Court ruled that the state could retain a 3 percent levy on employee salaries to offset the state's investments into the FRS. The law mandating the levy (as well as the elimination of cost of living increases in retirement benefits) first became effective on July 1, 2011, but was beset by a host a legal challenges. The Supreme Court's verdict struck down a lower court's earlier ruling that the changes were unconstitutional and constituted a breach of employees' contractual rights.[29]

Pension fund management fees

See also: Public pension fund management fees

In July 2013, the Maryland Public Policy Institute (MPPI) and the Maryland Tax Education Foundation released a report detailing the fees paid for the management of state pension systems. According to MPPI, the 10 state pension funds that paid the most in management fees relative to net assets experienced lower returns over a five-year period than the 10 state pension funds that paid the least in management fees. For example, in fiscal year 2012 South Carolina's pension system paid approximately $296.1 million in total management fees (1.31 percent of total net assets at the beginning of the fiscal year) and its five-year rate of return was 1.46 percent. By contrast, Alabama's pension system paid roughly $13.3 million in management fees (0.05 percent of total net assets) and its five-year rate of return was 7.53 percent.[30]

The table below presents the information collected by MPPI for Florida and surrounding states. For each state's pension system, total net assets are listed (both for the beginning and end of the fiscal year in question), as well as the total amount paid in management fees. In addition, the rates of return for the pension systems are presented. Compared to surrounding states, Florida had significantly higher total net assets.

Public pension fund management fees, 2011-2012
State Fiscal year Total net assets at the beginning of the year Total net assets at the end of the year Total management fees Management fees as a percentage of total net assets at the beginning of the year Five-year rate of return for the pension fund
Florida 2012 $126,579,719,608 $119,981,464,834 $374,200,433 0.30% 1.56%
Alabama 2012 $25,092,788,000 $28,374,703,000 $13,294,000 0.05% 7.53%
Georgia 2012 $69,563,890,000 $68,239,850,000 $53,014,039 0.08% 2.95%
Mississippi 2012 $20,840,987,000 $20,220,476,000 $47,575,948 0.23% 1.30%
South Carolina 2012 $22,691,660,000 $25,891,849,000 $296,135,000 1.31% 1.46%
1"Three states— Hawaii, Nevada and Rhode Island—were excluded because they hadn’t published CAFRs for fiscal years ending December 31, 2011 or later. West Virginia was excluded because its June 30, 2012 CAFR lacked sufficient disclosure."[30]
Source: Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," July 1, 2013


Enacted reforms


S.B. 1810

Sponsored by the Governmental Oversight and Accountability Committee, S.B. 1810 proposed increases to employer contribution rates, effective July 1, 2013. The employee contribution rate of 3 percent remained unchanged under S.B. 1810.[31] Governor Rick Scott signed the bill into law on May 20, 2013.[32]


S.B. 198

Sponsored by Senator John Thrasher (R-District 6), S.B. 198 increased the number of companies from which contracts may be purchased under the State University System Option Retirement Progress to no more than six. The bill was signed into law by Governor Scott on March 23, 2012.[33]

S.B. 1986

Sponsored by the Committee on Budget, S.B. 1986 revised the definitions of "regularly established position" and "temporary position" for purposes of water management district positions within the FRS. The bill was signed into law by the governor on April 20, 2012.[34]

H.B. 5005

Sponsored by Representatives Denise Grimsley (R-District 77) and effective July 1, 2012, H.B. 5005 revised employer contributions for members of each membership class and subclass of the FRS. Governor Scott signed the bill into law on April 20, 2012.[35]

H.B. 7079

Sponsored by Jimmy Patronis (R-District 6) and effective July 1, 2012, H.B. 7079 altered Deferred Retirement Option Program deferral ages for members first enrolled on or after July 1, 2011. The bill also amended hardship and loan provisions and revised the definitions of terms "normal retirement date," "vesting," and "vested." The bill was signed into law on May 4, 2012.[36]

Proposed reforms


H.B. 7011

Sponsored by Representative Jason Brodeur (R-District 28), H.B. 7011 proposed to provide for compulsory membership in the FRS Investment Plan for employees first enrolled on or after January 1, 2014. The bill also stipulated that certain participants in the optional retirement program for the State University System have a choice between that program and the FRS Investment Plan and expanded investment options prospectively for members of the FRS Investment Plan. The bill ultimately died on calendar. S.B. 1392 was the associated Senate bill.[37]

Local public pensions

See also: Local government public pensions

According to the United States Census Bureau, the state has 302 locally-administered pension systems.[5]


See also: Public pension disclosure and Governmental Accounting Standards Board
  • For Florida Retirement System participants, there must be an exemption from public records law to withhold information upon request. For retirees, the names and addresses in list form are exempt from a public records request. For active members, the home addresses of certain members and their families are exempt from public records requests, including public safety officers, judicial officers and employees involved in hiring and firing.
  • Pension fund investment performance data is available on the FRS website.[38]
  • External audit and oversight information is published.[39]
  • Pension lobbying laws and restrictions on “pay to play” (the practice of investment managers contributing to officials with influence over public pension fund decisions) are addressed by state law.[40]

Recent news

This section displays the most recent stories in a Google news search for the term "Florida + public + pensions"

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See also

Additional reading

External links


  1. Figures below are compiled by adding up all state pension plans
  2. This figure is derived by calculating the percent difference between the current year's funding level and the system's percent funded from the prior year.
  3. Rank is relative to the 50 state pension programs. "1" refers to the healthiest pension plan while "50" would be the least well-funded plan.
  4. 4.0 4.1 4.2 4.3 4.4 The Florida Retirement System "Annual Report, July 1, 2011 - June 30, 2012," accessed November 4, 2013
  5. 5.0 5.1 United States Census Bureau "Public Employee Retirement Systems State- and Locally-Administered Pensions Summary Report: 2010," April 30, 2012
  6. 6.0 6.1 Pew Center on the States "The Widening Gap Update: Florida," June 18, 2012
  7. Organisation for Economic Co-operation and Development, "Pensions Glossary," accessed November 27, 2013
  8. United States Government Accountability Office Report to the Committee on Finance, U.S. Senate, "State and Local Government Retiree Benefits: Current Status of Benefit Structures, Protections, and Fiscal Outlook for Funding Future Costs," September 2007. accessed October 23, 2013
  9. American Academy of Actuaries, "Issue Brief: The 80% Pension Funding Standard Myth," July 2012. accessed October 23, 2013
  10. Governing Magazine, " Is There a Plot Against Pensions?" October 14, 2013
  11. 11.0 11.1 State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
  12. Government Accounting Standards Board, "Annual Required Contribution (ARC)," accessed October 17, 2013
  13. Reuters, "Little-known U.S. board stokes hot pension debate," July 10, 2012
  14. State Budget Solutions, "GASB's ineffective public pension reporting standards set to take effect," June 5, 2013
  15. "The Widening Gap Update,” Pew Center on the States, accessed October 17, 2013
  16. The New York Times "Public Pensions Faulted for Bets on Rosy Returns," May 27, 2012
  17. Benefits Magazine "Public Pension Funding 101: Key Terms and Concepts," April 2013. accessed October 23, 2013
  18. Crain's Chicago Business "State teachers pension board lowers expected rate of return," September 21, 2013. accessed October 23, 2013
  19. Huffington Post "California Pension Funds Expect Lower Investment Return," March 14, 2012. accessed October 23, 2013
  20. 20.0 20.1 Governing "Expert: Governments Are Masking Their Pension Liabilities ," October 25, 2013. accessed October 25, 2013
  21. The Washington Post "Kansas’s pension funding gap just grew by $1 billion," September 6, 2013. accessed October 25, 2013
  22. Topeka Capital-Journal "KPERS' unfunded liability rises to $10.2B," September 4, 2013. accessed October 25, 2013
  23. Wall Street Journal "Pensions Wrestle With Return Rates," October 10, 2011. accessed October 23, 2013
  24. The Courant "Promising Too Much On Public Pensions," August 10, 2012. accessed October 23, 2013
  25. Business Wire "NCPERS 2013 Survey: Public Pension Plans Report Increasing Confidence, Lower Costs, Growing Returns," October 22, 2013. accessed October 25, 2013
  26. National Association of State Retirement Administrators "Issue Brief: Public Pension Plan Investment Return Assumptions," October 2013. accessed October 23, 2013
  27. State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
  28. 28.0 28.1 28.2 28.3 Moody's Investor Service, "Adjusted Pension Liability Medians for US States," June 27, 2013
  29. The Miami Herald, "Florida Supreme Court upholds law requiring state workers to contribute 3 percent of pay to state pension plan," January 17, 2013
  30. Cite error: Invalid <ref> tag; no text was provided for refs named report
  31. The Florida Senate "SB 1810: Florida Retirement System," accessed November 4, 2013
  32. Florida Retirement System "Important Notice on 2013 Legislation," accessed November 4, 2013
  33. The Florida Senate "CS/SB 198: State University System Optional Retirement Program," accessed November 4, 2013
  34. The Florida Senate "SB 1986: Water Management Districts," accessed November 4, 2013
  35. The Florida House of Representatives "HB 5005 -Retirement," accessed November 4, 2013
  36. The Florida House of Representatives "HB 7079 - State Retirement," accessed November 4, 2013
  37. The Florida House of Representatives "CS/CS/HB 7011 - Florida Retirement System," accessed November 4, 2013
  38. Florida Retirement System "Investment Planning - the Details," accessed November 4, 2013
  39. State Board of Administration of Florida "Financial Statements, Management's Discussion and Analysis, and Other Report,, June 30, 2011 and 2010," accessed November 4, 2013
  40. The 2013 Florida Statutes, "Chapter 121: Florida Retirement System," accessed November 4, 2013