Florida's new pension formula creates a more equitable contribution balance between employers and employees. Until this year employees did not directly contribute to their plans. That has now changed to a three percent direct employee contribution representing about $800 million. At the same time, the employer contribution has been reduced by 2.86 percent representing a "savings" of $430 million for governments. Employers will now contribute 3.77 percent.(Here's full schedule of contribution rates among different workers effective July 1, 2011) According to the Center for State and Local Government Excellence, average contribution rates in 2006 for the public sector were five percent for employees and seven percent for employers.
The reduction is described as a windfall to be used to balance local budgets. Brevard County Schools is now able to plug its budget hole after last year's reduction in state aid. But the change in contribution rates is less a windfall than a cost-shift with the contribution now being carved out of employee salaries and the money shifted over to the employer to be spent on other items - such as balancing the school budget. The cost-shift has the merit of 'burden sharing' giving employees more of an incentive to monitor the fund's management. In a sense it shifts the perception of the cost. But care should be taken in describing the maneuver as a anything more than a change in how funding is structured.