Pension Sustainability: Florida

Retaining Effective Teachers Policy

Goal

The state should ensure that excessive resources are not committed to funding teachers' pension systems.

Meets
Suggested Citation:
National Council on Teacher Quality. (2011). Pension Sustainability: Florida results. State Teacher Policy Database. [Data set].
Retrieved from: https://www.nctq.org/yearbook/state/FL-Pension-Sustainability-9

Analysis of Florida's policies

As of July 1, 2010, the most recent date for which an actuarial valuation is available, Florida's teacher defined benefit pension plan is 86.59 percent funded and has an amortization period of less than 30 years. This means that if the plan earns its assumed rate of return and maintains current contribution rates, it would take the state less than 30 years to pay off its unfunded liabilities. Both levels are better than regulatory recommendations, and Florida's system is financially sustainable according to actuarial benchmarks. Further, Florida's defined contribution plan is fully funded and sustainable. Employers make mandatory payments credited to teachers' individual accounts. 

Florida does not commit excessive resources toward its teachers' retirement system. The current employer contribution rate of 3.77 percent to the defined benefit plan and 6 percent to the defined contribution plan are both reasonable, in light of the fact that local districts must also contribute 6.2 percent to Social Security. The rate is determined according to statutory requirements, which mandate that the employer contribution rate must be equal to an actuarially determined rate in order to provide sufficient assets to pay benefits when due. As of July 1, 2011, all employees contribute 3 percent to the defined benefit pension system. Previously, there was no employee contribution.

Citation

Recommendations for Florida


State response to our analysis

The Florida Retirement System did not respond to repeated requests to review NCTQ's analyses related to teacher pensions.

Research rationale

NCTQ's analysis of the financial sustainability of state pension system is based on actuarial benchmarks promulgated by government and private accounting standards boards. For more information see U.S. Government Accountability Office, 2007, 30 and Government Accounting Standards Board Statement No. 25.

For an overview of the current state of teacher pensions, the various incentives they create, and suggested solutions, see Robert Costrell and Michael Podgursky. "Reforming K-12 Educator Pensions: A Labor Market Perspective." TIAA-CREF Institute (2011).

For evidence that retirement incentives do have a statistically significant effect on retirement decisions, see Joshua Furgeson, Robert P. Strauss, and William B. Vogt. "The Effects of Defined Benefit Pension Incentives and Working Conditions on Teacher Retirement Decisions", Education Finance and Policy (Summer, 2006).

For examples of how teacher pension systems inhibit teacher mobility, see Robert Costrell and Michael Podgursky, "Golden Handcuffs," Education Next, (Winter, 2010).

For additional information on state pension systems, see Susanna Loeb, and Luke Miller. "State Teacher Policies: What Are They, What Are Their Effects, and What Are Their Implications for School Finance?" Stanford University: Institute for Research on Education Policy and Practice (2006); and Janet Hansen, "Teacher Pensions: A Background Paper", published through the Committee for Economic Development (May, 2008).

For further evidence supporting NCTQ's teacher pension standards, see "Public Employees' Retirement System of the State of Nevada: Analysis and Comparison of Defined Benefit and Defined Contribution Retirement Plans." The Segal Group (2010).