On October 2, 2013, a Florida Retirement System (FRS) Actuarial Assumption Estimating Conference was held to decide what methods and assumptions will be used for the 2013 actuarial valuation. The annual valuation of the FRS forms the basis for setting contribution rates for the following fiscal year. The methods and assumptions used for the 2012 valuation were endorsed at prior estimating conferences and based on the most recent actuarial experience study which reviewed the system experience from 2003-2008. Milliman is currently performing a five year experience study for 2009-2013, the results of which are due in 2014. Some of the key assumptions used include long-term investment return, payroll growth and projected benefit payments. Because the most recent experience study is still outstanding, it was unanimously decided that all assumptions and methods will remain the same for the 2013 valuation.
Milliman then revealed the preliminary results of the July 1, 2013 valuation. It is important to note that this analysis does not take into account the increased contribution rates that went into effect on July 1, 2013. The result of the rate increases will not factor into the FRS valuation until the 2014 valuation. The preliminary results indicate that the unfunded actuarial liability actually increased 8.8% to $21 billion, the funded status decreased from 86.9% to 86.2% and that the payroll growth was lower than projected. The final results of the valuation are due in December. However, if these results do not change significantly between now and then, contribution rates foFY14/15 will probably not change much either.
A major change is, however, in store for all participating FRS employers next year. Beginning in 2014 each participating employer (i.e., every county) will be required to record its share of the system’s unfunded liability on their balance sheet. The new requirement is mandated by the Governmental Accounting Standards Board Statement No. 68, known as GASB 68. Presently, there are more questions about the implementation of GASB 68 then answers. To that end, the Florida Government Finance Officers Association (FGFOA) has created a Task Force to define how the new standard will affect state and local government entities, establish communication with the State Board of Administration to understand their responsibility with regard to implementation and determine the methodology that should be used. Heading up the Task Force is Ken Burke, CPA, Clerk of Circuit Court and Comptroller, Pinellas County. You may access the most up to date information on the Task Force on the FGFOA website - http://www.fgfoa.org/.