"Is my FRS Pension Secure"?

Many of those government agencies are going to change from the traditional Pension Plan, whereby a retiree’s “benefit is defined”, to a “Defined Contribution” plan such as a 401k.

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Over the years, I have had many FRS members call and ask questions regarding their pensions.  The most common question used to be, “Should I DROP”?  Now however, the single most important question seems to be “Is my Pension secure?”, or “Will I get my pension”.  Most of the conversation was started with the dramatic losses within the FRS investment holdings.  The 2008-2009 financial crisis hacked some 25% off of the total assets in FRS.  Tie that in with the drop in state revenues due to severely declining property taxes, and one of the worst unemployment rates in the country, and the need to cut costs is loud and clear.

In a conversation with a FRS participant the other day, she questioned why government entities were not fulfilling their pension obligations.  FRS is underfunded by some 12%, and many local governments are in much worse shape, some underfunded by almost 50%.  The problem is simple.  Tax bases are down dramatically, so the Gov’t agencies flat out don’t have enough money to cover their costs, let alone the shortfalls created by the financial crisis.  The only way to make up the difference is to either cut costs or increase income.  Increasing income would mean raising taxes.   In this economy, with 14% unemployment, and just about everybody in a financial pinch, raising taxes is probably not feasible.  That leaves cutting costs!

Many of those government agencies are going to change from the traditional Pension Plan, whereby a retiree’s “benefit is defined”, to a “Defined Contribution” plan such as a 401k.  In the Defined Contribution plan, the employee makes the bulk of the contribution into their retirement plan, and the employer makes a matching contribution.  A typical plan calls for the employer to contribute one dollar for every two the employee puts in.  Compare that with FRS’ current program where the employer makes 100% of the contribution, and it is pretty easy to see how it cuts costs dramatically.

Other options include increasing the age of retirement, Lowering the annual contribution percentage (several times in the past it has been raised and lowered, for special risk it has ranged from 2% per year of service, to the current 3%), or making employees pay a part of the contributions.

OPPAGA (the Office of Program Policy Analysis and Government Accountability) recently released their report number 10-15, titled Several Options Are Available for Modifying the Florida Retirement System’s Class Structure to Reduce System Costs. It lays out some of the options FRS might consider to save considerable tax payer dollars.  You will probably not like it, but I urge you to read it AND MAKE YOUR VOICE HEARD. You can find it at the following link:

http://www.oppaga.state.fl.us/Summary.aspx?reportNum=10-15

  • Rick

    Hello, The contribution described above is incorrect, that is the multiplier used to calculate pension benefits for members. years of service times 3% per year. If you are going to try and make comments, at least make sure you have the facts straight. The employers “contribution” is anywhere from 12% and up depending on the class of employee. Special risk are at a 3% multiplier and General Employees are at a 1.6% multiplier and that actuall increases minutely if the General Employee works past their “Normal Retirement” date which is 30 years of service or vested and 62. Also, look at national statistics to see what the life-expectancy is for Police and Fire. Our line of work is not only hazardous while we are on the job, but also statistically shortens our life span as well, that is why the higher multiplier and the earlier pension, so we can retire while we still have a little breath left in us. Oh, yes some live to ripe old ages and the they are the ones that out-performed the Actuaries calculations. Most Firefighters are going to be earning around 55-k or so as AFC at the end of their career of 25 years so at 75% of that is right at 42,000….. yep they sure are rich!!!! All I ask is that everybody use factual information when they are spouting opinions or facts. Let the public make an informed decision. I am a member of a ch-175 plan and have contributed to my pesnion for 25 years, so yes I agree that employees should contribute. Do I agree with a DC instead of a DB plan, NO. DB is one of the reasons people get into Govt jobs and in some cases the pay is lower than private sector, unfortunately this is not the case for Police n Fire – what civilian comparison is there…. duh. Teachers, Admin assts and others, yes could make more money in private sector, but they are into it for the retirement. When I am done I will be in my mid fifties and have given the FIre Service 30 years of service. Police and Fire are considered quasi-military and I dont hear anyone complaining about the retrement benefits for service members. OK I am done for now. Have a great day and let your public servants know that you appreciate them.

  • http://www.floridaretirementsystem.info FRS Options

    We’re pretty sure we have the facts straight, but we appreciate the sarcasm.

    While we hear the shorter life span comments often, we can’t find any real research to support it. Calpers (the California version of FRS) released the following actuarial statistics:
    For answers, CalPERS looked at an experience study conducted by its actuarial office in 2004. It looked at post-retirement mortality data for public safety officials and compared it with mortality rates for miscellaneous government workers covered by the CalPERS system.

    Here are the CalPERS life expectancy data for miscellaneous members:

    >>If the current age is 55, the retiree is expected to live to be 81.4 if male, and 85 if female.

    >>If the current age is 60, the retiree is expected to live to be age 82 if male, and 85.5 if female.

    >>If the current age is 65, the retiree is expected to live to be age 82.9 if male, and 86.1 if female.

    Here is the CalPERS life expectancy data for public safety members (police and fire, which are grouped together by the pension fund):

    >>If the current age is 55, the retiree is expected to live to be 81.4 if male, and 85 if female.

    >>If the current age is 60, the retiree is expected to live to be age 82 if male, and 85.5 if female.

    >>If the current age is 65, the retiree is expected to live to be age 82.9 if male, and 86.1 if female.

    That’s no mistake. The numbers are identical for public safety retirees as for other government workers. Here is CalPERS again: “Verdict: Myth No. 4 Busted! Safety members do live as long as miscellaneous members.”