This month, our Tip of the Month is more of a reality check, than a tip. In April 2021, there was a press release that the Florida Senate passed senate Bill 84, Retirement, modernizing the FRS Pension Plan by closing the plan to new employees, except for those in the special risk class and requiring participation in the FRS Investment Plan, instead. After confirming this with EY through myFRS.com new hires CAN still enroll in the pension plan though. *https://www.flsenate.gov/Media/PressRelease/Show/3954
But why are they trying to restrict new employees from participating in the pension plan? As it turns out, there is an unfunded actuarial liability, requiring the state to make up the difference. With $36 billion in unfunded liabilities, and those liabilities growing, the pension plan is underfunded and will need to be modified in the future to protect its solvency for retirees. **https://reason.org/commentary/the-florida-retirement-system-is-still-in-need-of reform/#: ~:text=The%20Florida%20Retirement%20System%20also, shown%20in%20Figure%201%20below.
For those that have been in the pension plan for some time, you do have the ability to elect a "second election" and essentially roll over your net present value of your pension to the Investment Plan or a Self-Directed Brokerage, giving you complete control over the investments, but also bearing 100% of the risks as well. There are positives and negatives to the second election and if you may be thinking about it, feel free to give us a call to see if it makes sense for your situation. For more Tips and Strategies, check out one of our upcoming workshops at www.FRSWorkShop.com or give us a call.