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Economists agree to disagree on state pension fund

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State economists on Tuesday deadlocked over changing the state pension fund’s expected rate of return on investments.

The Florida Retirement System Actuarial Assumption Conference will meet again Thursday to see if members can compromise.

Christian Weiss, economic policy coordinator for Gov. Rick Scott, argued for keeping the system’s assumed rate of return at 7.65 percent.

But Don Langston, staff director of the House of Representatives’ Finance & Tax Committee, and Amy Baker, head of the state Office of Economic and Demographic Research, argued for lowering it to 7.5 percent.

During the meeting, Baker mentioned a “long-term dimming of expectations” from the investment markets.

Pensions & Investments money management newspaper recently explained that “lowering return assumptions can have big implications.”

For instance, “it increases the unfunded liabilities of pension plans,” meaning legislatures “must make larger pension contributions.”

The pension plan of the Florida Retirement System, the nation’s fourth-biggest public retirement system, has been approximately 85-87 percent funded in recent years.

But as conference members were told Tuesday, retirees are living longer and investments aren’t as profitable as they used to be.

The state’s pension fund ended the 2015-16 fiscal year at $141.3 billion in assets, down from $148 billion the year before. It earned $600 million but paid out $17.5 billion in benefits, the conference was told.

Where the system once had three active workers per one retiree, that ratio now is close to 1-to-1.

Earlier this year, a government-efficiency task force recommended closing the pension system to new hires and forcing them to enroll in an investment plan.

For several years, House Republicans have pushed some version of pension reform that fizzles out in the Senate. The House wants to move new state workers into 401(k)-style retirement accounts, as most private companies offer.

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Before joining Florida Politics, journalist and attorney James Rosica was state government reporter for The Tampa Tribune. He attended journalism school in Washington, D.C., working at dailies and weekly papers in Philadelphia after graduation. Rosica joined the Tallahassee Democrat in 1997, later moving to the courts beat, where he reported on the 2000 presidential recount. In 2005, Rosica left journalism to attend law school in Philadelphia, afterwards working part time for a public-interest law firm. Returning to writing, he covered three legislative sessions in Tallahassee for The Associated Press, before joining the Tribune’s re-opened Tallahassee bureau in 2013. He can be reached at jim@floridapolitics.com.

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