A.G. Gancarski
For the second straight week, Rep. Jason Fischer and Sen. Jeff Brandes are teaming up on another ambitious pension reform bill.
Last week saw the two file bills in their respective chambers that would close the Florida Retirement System’s defined benefit plan to new cities.
That bill has gotten pushback already from Republicans in both chambers.
This week saw a bill, to be filed in both chambers Wednesday, that would reform local pensions.
Fischer’s House Bill 603 and Brandes’ Senate Bill 632 would put a check on the often optimistic rates of return on investments that create a rosier picture of solvency than actually exists in local pension plans.
Given the flux in investment markets, rates arrived at during boom times can be unachievable when markets flatten out. This can create an unfunded liability crisis, especially when compounded with a city (like Jacksonville most recently) not contributing enough to the plans to keep them solvent.
The Brandes/Fischer bills also create a new language: a “long range return rate.” The definition, used in the 2014 Society of Actuaries Report on public pension plans, is the rate of return to be met at least 50 percent of the time over three decades.
Starting in 2021, assumed rates of return that exceed that mark are prohibited, and public pension plan administrators will be compelled to lower their expected rate of return by 25 basis points a year until projections meet reality.
The gradualist approach is intended to put pension plans on a glide path toward sustainability.
“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 Sen. Brandes in a news release from his office.
“This legislation will prevent pension plans from playing games with their funding formulas, and bring about fiscally prudent funding practices in these important programs,” Brandes added.
“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,” Rep. Fischer stated.
“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 fiscal responsibility by pegging the state retirement calculations to the real world,” Fischer added.
The Brandes/Fischer legislation would require those long range return rates to be calculated every five years.
