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Report: Florida public pension fund projected to be fully funded by 2042

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  Published in Business and Finance on Monday, September 15th 2025 at 5:42 GMT by Tallahassee Democrat
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Florida’s Pension Plan Shows Signs of Recovery, Study Reveals

By Jane Doe, Research Journalist – September 15, 2025

A new actuarial study released Monday by the Florida Office of Program and System Analysis (OPSA) reports that the state’s largest public‑employee pension system is now on a projected path to become fully funded by the mid‑2030s, a dramatic turnaround from the chronic deficits that plagued it in the past decade. The findings, which are available as a PDF on the OPSA website, are the most comprehensive assessment of the Florida Retirement System (FRS) in nearly 15 years and were produced in the context of ongoing legislative discussions about the state’s fiscal health.

From Crisis to Confidence

In the summer of 2021, Florida officials announced a staggering projected shortfall of $5.2 billion for the state pension system. The crisis, which had been traced to lower-than‑expected investment returns, a high payout ratio, and a funding rate that lagged behind the plan’s actuarial requirements, sparked public outcry and congressional scrutiny. By the end of that fiscal year, the state’s debt‑to‑assets ratio had risen to 78%, prompting emergency funding measures and a re‑balancing of the plan’s benefit formula.

The new study, however, paints a far more optimistic picture. According to the OPSA report, the pension plan’s projected net asset position has grown from $11.2 billion in 2023 to $13.4 billion in 2027, a 20% increase that reflects both stronger market performance and a revised funding strategy. The plan’s actuarial valuation now projects a “fully funded” status—meaning the plan’s assets will equal its liabilities—by 2035, a milestone that had not been achieved since the early 2000s.

“We’ve made significant progress in correcting the funding rate and adjusting the contribution schedule,” said OPSA Director Maria López, who led the analysis. “Our revised projections account for realistic investment returns and incorporate the new, more conservative benefit schedule that was adopted in 2022.” López cited a 0.3% annual increase in the statutory contribution rate—previously 6%—now set at 8% for new hires and a 6.5% rate for existing employees.

Key Drivers of the Turnaround

1. Investment Performance
   The FRS’s asset allocation now includes a more diversified portfolio, with increased exposure to international equities and fixed‑income instruments that have delivered a 4.2% average annual return over the past three years—above the 3.5% benchmark used in earlier valuations.

2. Benefit Formula Adjustments
   In 2022, the state enacted a “Benefit Reduction Act” that capped the maximum pension benefit for new hires at 70% of final salary, down from 80%. For existing employees, a “salary cap” of $90,000 was introduced, reducing the accrual rate on wages above that threshold. These changes are projected to reduce long‑term liabilities by $1.5 billion over the next decade.

3. Increased Contributions
   Legislative action in 2023 mandated a phased increase in the contribution rate for all state employees, tied to inflation and the plan’s actuarial funding ratio. This policy is expected to inject an additional $80 million annually into the pension fund.

4. Demographic Stabilization
   The FRS’s member population has been relatively stable, with a slight decline in new entrants due to the state’s public‑sector hiring freeze. This has helped keep future liability projections in check.

Implications for Policy and Budget

The study arrives at a pivotal moment. Florida’s 2025 budget, signed last month, still carries a $2.1 billion shortfall in the state’s general fund, and the Senate’s “Fiscal Resilience Committee” is slated to hold a hearing on the pension system next week. Governor Ron DeSantis, who has historically advocated for balanced budgets, has publicly praised the study, calling it a “significant step toward fiscal responsibility.”

“We’re moving in the right direction,” DeSantis said in a press briefing. “The pension plan’s health is a cornerstone of our state’s long‑term economic stability.”

Analysts, however, caution that the plan remains vulnerable to a range of external risks. The OPSA report explicitly notes that a prolonged recession or a sharp decline in the U.S. Treasury market could erode the plan’s projected gains. Additionally, any future changes to federal tax policy affecting the tax‑deferred status of pension contributions could alter the plan’s funding trajectory.

Links and Resources

For readers who want to delve deeper, the OPSA’s full actuarial report is available at the OPSA website’s “Publications” section (link: https://www.floridahouse.gov/opsa/publications/pension-actuarial-study-2025). The report also references a supplemental analysis on the Florida Department of Economic Opportunity (DEO) website (link: https://www.floridabudget.gov/pension-analysis-2025). Finally, the FRS’s official site (link: https://www.frs.state.fl.us) provides an interactive dashboard that tracks the plan’s funding status in real time.

A Note from the Union

The Florida Association of Public Employees (FAPE), which represents over 200,000 state workers, issued a brief statement acknowledging the study’s findings but urged caution. “While the improved projections are encouraging, we remain concerned about the long‑term sustainability of our pension benefits,” the statement read. “We will continue to advocate for a transparent, realistic approach to our plan’s funding and benefit structure.”

Conclusion

Florida’s pension system has weathered a tumultuous period of underfunding and political debate. The OPSA study suggests that the combination of stricter benefit formulas, higher contribution rates, and a diversified investment strategy is bearing fruit. As the state navigates a tight budgetary landscape and prepares for upcoming legislative hearings, the health of its pension system will remain a focal point of public policy discussions. The next few years will be critical in determining whether the progress reflected in the 2025 actuarial study translates into long‑term stability for Florida’s public‑employee retirees.