"Florida Senator files bill on local government pensions"

Senator Jeff Brandes (R-St. Petersburg) filed SB 534 – Publicly funded defined-benefit retirement plans, designed to bring transparency into the varying accounting methods used in the reporting standards of municipal pension plans. The bill will require the almost 500 publicly funded defined benefit plans in the state to provide standardized reporting to the Department of Management Services; eliminating significant discrepancies between the assumed rates of return and actual rates of return for investments reported by many plans. The bill also requires that the plans use conservative methods in projecting future liabilities. According to the most recent DMS reports, the current calculated unfunded liabilities of Florida municipal and special district pension plans...61% of plans are funded below 80% funding levels...Ten plans currently assume a rate of return at 8.5% annually, and 222 plans have an assumed rate of return set between 8.0% and 8.49%. This totals over 43% of plans assuming a rate of return equal to or greater than 8.0% annually.

Commentary: Remember that assumption rates are set using a 30 year or longer rates of return and pension funds smooth the losses in a particular year over a number of years. The taxpayer organizations, Chamber of Commerce and uninformed elected officials want to mandate that the pension funds use conservative methods to project future liability. Artificially lowering assumption rates based upon today's rates will crash many pension funds because the unfunded liability will skyrocket.