Pensions have led state fiscal health on a downward spiral toward insolvency. Here is Dr. Holcombe with a viable solution for Florida’s pension system.
By Randall G. Holcombe, Ph.D.
Over the past few years both Governor Scott and several members of the Florida legislature have been pushing the idea of transforming the Florida Retirement System (FRS), which pays pensions to retired state workers, from a defined benefit system into a defined contribution system. A defined benefit system, which covers most state workers today, pays a specific monthly benefit determined by the number of years worked and the worker’s salary leading up to retirement. A defined contribution system pays a certain amount every year into an account owned by the employee, and the pension amount is determined by how much money the retiree’s account has accumulated in contributions and earnings on those contributions.
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