Research Update:
Local Government Retirement Obligations
David Matkin, Ph.D.
Assistant Professor
Askew School of Public Administration & Policy
Florida State University
1
Agenda
• Legislative Update (6 slides)
• Report on Municipal Pensions (5 slides)
• Other Retirement Related Studies (1 slide)
• Mapping Project (1 slide)
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Legislative Update (1/6)
Recommendations for local governments on retiree benefits:
1. The minimum age before a retiree qualifies for benefits should be
gradually raised. A reasonable age to begin receiving benefits could be
approximately 60.
2. Localities should not include overtime or additional earnings/bonus pay in the
base salary used to calculate pension benefits.
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Legislative Update (2/6)
• Florida Retirement System
Legislative Action
Change
Employee contribution:
0% to 3% for all employees
Base calculation:
High 5 to High 8 (new only)
Vesting Period:
6 yrs to 8 yrs (new only)
Normal Age (regular class):
62 with 6 yrs to 65 with 8 yrs OR
30 years to 33 years (new only)
Normal Age (special-risk class):
55 with 6 yrs to 60 with 8 yrs OR
25 yrs to 30 years (new only)
COLA
3% to none after July 2011 (reinstated 2016)
DROP Interest Rate
6.5% to 1.3% (new DROPs)
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Legislative Update (3/6)
• Municipal Pension Systems
Legislative Action
Change
Employee contribution:
Allowed to increase without benefit increase
Base calculation:
Cap overtime at 300 hrs (new agreements)
No sick leave in base
No annual leave in base
Vesting Period:
N/A
Normal Age:
N/A
COLA
N/A
DROP Interest Rate
N/A
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Legislative Update (4/6)
Recommendations for state and local governments on administration and
transparency:
1. Municipalities should set a minimum contribution rate to ensure minimal
contribution levels during good years and reduce the need to significantly
increase contributions during periods of fiscal stress.
2. The statutory restrictions on the use of premium tax dollars that link
increases in tax premium funds to the provision of additional benefits should
be reduced or removed. Municipalities and counties should be able to use
premium tax dollars to cover their current pension obligations.
3. Localities should improve the accessibility of funding, actuarial reporting and
liabilities information to its taxpayers.
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Legislative Update (5/6)
• Municipal Pension Systems
Legislative Action
Change
Transparency:
DMS fact sheet & publish on internet
Actuarial data
Minimal funding level
History of funding level
DMS rating system
Actuarial comparison to FRS rate of return
Taskforce to study disability presumption
Investment surplus constraints
Surplus must remain in plan
Must pay normal cost at a minimum
Municipal Pension Boards
Easier to change municipal representation
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Legislative Update (6/6)
Recommendations for state government on health benefits:
1. Among other options, Florida lawmakers should give much consideration to
repealing current Florida law requiring the implicit subsidization of
healthcare benefits for Florida local governmental retirees.
2. State oversight by a relevant state agency should be provided in statute to
manage local retiree health benefit obligations. This agency should establish
standards and provide technical assistance, if desired, to local government
staff and local officials.
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Report on Municipal Pensions
(1/5)
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Draft report by Garrett and Jed
FY2009 snapshot
Largest 100 Cities in Florida
Approximately 204 DB pension plans
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Report on Municipal Pensions
(2/5)
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Defined Benefit Plan Grades
Funded ratios (assets/liabilities)
A (90-100+)
30
B (80-89)
47
C (70-79)
59
D (60-69)
33
F (0-59)
25
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Report on Municipal Pensions
(3/5)
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Report on Municipal Pensions
(4/5)
Pension Costs by Type of Official in the Plan
General
Police
Fire
Elected
$ 9,732.43
$ 22,715.34
$ 20,620.16
$ 13,556.24
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Report on Municipal Pensions
(5/5)
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Other Retirement Related
Studies in Process (1/1)
1.
2.
3.
4.
What explains the growth of pension liabilities?
What explains the size of OPEB liabilities?
What explains the decision to fund OPEB liabilities?
Which governments reduced their OPEB liabilities prior
to the adoption of the accounting standards and why?
5. Overview of primary considerations in the retirement
benefit debate.
6. Study of best practices in local retirement systems.
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Mapping Project (1/1)
• Pew Center on the States
• Bill Gates
• The Florida Resources and Environmental
Analysis Center (FREAC)
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