Florida has made changes to retirement plan provisions for the Florida Retirement System (FRS) Investment Plan, as presented in Florida House Bill 5007, adopted on March 14, 2022. The stated intent of the legislation is to increase the benefits provided to public employees.
Equable Institute has analyzed the proposed changes using Retirement Security Report methodology, and we report here how these changes to retirement benefits would influence current and/or future FRS plan members.
EQUABLE INSTITUTE’S ANALYSIS OF FLORIDA HOUSE BILL 5007
The retirement benefit increases adopted via HB5007 will substantially improve income security for FRS Investment Plan members. The
- Short-Term Workers will have a defined contribution plan that works much better for them (66.5% of available Retirement Benefits Score points versus 56.7%), though even the improved plan is still only working moderately well.
- Medium-Term Workers will also benefit from the increased contributions, though even accounting for the changes the FRS defined contribution plan is only getting 63% of available points for this cohort of workers.
- Those Regular Class members who work a full career covered by FRS will benefit the most from the changes, with the enhanced benefits moving them into the “works well for members” assessment given the 91.8% of available points scored.
Increasing the total contributions for the FRS Investment plan from 6.3% (3% member and 3.3% employer) to 9.3% of salary is a big improvement. Enhancing the overall benefits package by nearly a third will mean many more teachers, Florida state workers, and municipal employees across the state will be on a path to retirement income security.
However, the changes proposed in Florida House Bill 5007 did not entirely fix the moderate performance of this retirement plan for Short-Term and Medium-Term workers. Defined contribution plans like this one offered by FRS should have at least 10% to 12% of salary total contributions — which means even the adjusted change is falling short.
Individual plan members can make up the difference with additional voluntary contributions, but they may not be aware of the need to do this on their own without some change to the default amount they contribute.