Continuing Reform: Challenges Persist With the Florida Retirement System (FRS)
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Policy Study

Continuing Reform: Challenges Persist With the Florida Retirement System (FRS)

The retirement benefits ultimately received by members of both plans within FRS will come at an ever-increasing cost to taxpayers and other public services if needed technical adjustments to both plans go neglected.

The FRS Pension Plan and a defined contribution retirement plan option called the FRS Investment Plan together comprise the Florida Retirement System (FRS), which manages retirement benefits for almost 648,000 active members and over 584,000 retirees. Two decades ago the nation’s fifth-largest public pension system held a surplus of over $13 billion in assets and stood at 118 percent funded. Today, FRS finds itself nearly $30 billion in debt with only 84 percent of assets on hand to pay out benefits over the long term, a net change in position of over $40 billion.

This is despite several previous reforms enacted to lower financial risk and cost to Florida’s public employers that helped the situation some, but not enough. Today the FRS system as a whole continues to pile up pension debt, and worse, the current benefit design is undermining the retirement security of the current generation of Florida’s public employees.

The growing pension debt stems from the FRS Pension Plan which has yet to find its path to long term solvency due to, among other things, an unnecessarily high amount of systemic risk built into the plan. Yet the FRS Investment Plan—although free of pension debt and a great option for short to medium term employees—is no closer to providing retirement security for Florida’s public retirees than the debt-riddled FRS Pension Plan, as it relies on contribution rates that fall far below industry standards for retirement benefit adequacy.

This analysis by the Pension Integrity Project at Reason Foundation finds that the retirement benefits ultimately received by members of both plans within FRS will come at an ever-increasing cost to taxpayers and other public services if needed technical adjustments to both plans go neglected. FRS pension debt has risen steadily despite the longest bull market in American history, and without additional reforms, FRS will continue to face financial headwinds and public employees will continue to see diminished retirement security.

Full Analysis— Florida Retirement System (FRS): Despite Reforms, Remaining Challenges Are Undermining FRS Member Retirement Security

Raheem Williams is a policy analyst with Reason Foundation's Pension Integrity Project.

Steven Gassenberger is a policy analyst with Reason Foundation's Pension Integrity Project.

Leonard Gilroy is vice president of government reform at Reason Foundation, a nonprofit think tank advancing free minds and free markets. He also serves as senior managing director of the Pension Integrity Project at Reason Foundation, which assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.