Bill will require pension plans to increase contributions and reduce unfunded liabilities
Senator Jeff Brandes (R-St. Petersburg) and Representative Jason Fischer (R-Jacksonville) jointly filed legislation today to change the methodology used by pension plans in determining appropriate levels of annual contributions. If adopted, many pension plans will be required to increase their annual monetary contributions. The proposed changes will increase the financial strength and solvency of the plans by reducing unfunded liabilities.
“Many pension plans in Florida are dangerously underfunded, bringing into question whether they will be available to our police, firefighters, first responders, and public employees who rely on them for retirement,” stated Senator Brandes. “This legislation will prevent pension plans from playing games with their funding formulas, and bring about fiscally prudent funding practices in these important programs.”
“We’ve made a promise to our teachers, first responders, and hardworking public servants that in exchange for their sacrifice we would help support them in retirement,” stated Representative Fischer. “For far too long faulty assumptions and pie in the sky numbers have put that promise at risk. This bill will put us on a path to fiscally responsibility by pegging the state retirement calculations to the real world.”
The legislation, Senate Bill 632 and House Bill 603, change the way pension plans determine their assumed return rates for investments made by plans. The legislation would implement recommendations from a 2014 report from the Society of Actuaries, urging the use of more reasonable rate-of-return assumptions by plans to avoid unfunded liabilities that accumulate over time. This legislation follows reforms by Senator Brandes in 2013 and 2015 that increased transparency in pension funding levels, and required more updated actuarial assumptions be used when projecting future plan costs due to plan participant mortality. Senator Brandes and Representative Fischer have also collaborated this year on pension reform legislation designed to prevent underfunded local plans from entering the Florida Retirement System.
For more information on SB 632 and HB 603 please visit http://www.flsenate.gov/Session/Bill/2017/0632.