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The recession and volatility in financial markets is driving up required payments by state and local governments into the Florida Retirement System — just when both face a massive revenue crunch. This raises the question of how much risk should be baked into the system’s long-term savings plan.
This means facing hard choices. Reducing risk in FRS investments means assuming lower rates of return than originally expected — a struggling economy shouldn’t be expected to deliver boom-time investment returns. FRS actuaries have deemed the system’s assumed investment return as one that “conflicts with our judgment regarding what would constitute a reasonable assumption” the last several years running, even before this recession.
Yet plan administrators have been slow to adjust investment assumptions to match reality.
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