The Florida Legislature
Office of Program Policy Analysis and Government Accountability
Performance Audit of the 1993 Actuarial Valuation of the Florida Retirement System , Report No. 12275, April 1994
- Our consulting actuary, Buck Consultants, concluded that the 1993 Actuarial Valuation complies with generally accepted actuarial disclosure principles and statutory requirements, and the reported liabilities and values are reasonable based on the assumptions used. However they noted several concerns regarding certain assumptions and methods used in the 1993 Actuarial Valuation. Information on the causes of gains or losses in the System's liabilities was not accurate, which prevented Buck Consultants from confirming the overall reliability of the actuarial valuation processes used by the Division's consulting actuary.
- The payroll growth assumption used in determining the recommended contribution rate for amortizing the System's unfunded actuarial liability does not comply with statutory requirements, since the assumption exceeded the actual average payroll growth for the last three years. Buck Consultants also noted that this provision of the statutes may not be compatible with a general objective that all economic assumptions (such as salary increase rates, investment return rates, and payroll growth rates) reflect a consistent level of inflation.
- The type of salary increase rate assumption used in the 1993 Actuarial Valuation (a flat salary increase rate assumption of 7.5%) differs from the type (graded by member age and years of service) usually used by pension systems the size of the Florida Retirement System. Using a graded salary increase rate assumption would reduce contributions by about $100 million.
- The spread between the investment return rate assumption (8.0%) and the salary increase rate assumption (7.5%) used in the 1993 Actuarial Valuation is overly conservative. The use of a larger spread would reduce estimated pension liabilities and costs.
- Our review determined that the funding status of the Florida Retirement System has continued to improve. The ratio of assets to the System's actuarial liability has increased from 54% as of July 1, 1985, to 69% as of July 1, 1993. Therefore the System's ability to cover its liabilities has improved. However, the Florida Retirement System's funding status, as measured by the ratio of its pension benefit obligation to assets, is slightly below the average of other state- administered pension systems.
Which Government Program Summaries contain related information?
Florida Retirement System
What other OPPAGA-related materials are available?
- Report No. 99-50 Program Review: The Florida Retirement System Continues to Be Fully Funded; Unfunded Liability Eliminated, published in May 2000.
- Report No. 97-66 Review of the 1997 Actuarial Valuation of the Florida Retirement System, published in March 1998.
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