FLORIDA – The House approved its version of legislation closing the Florida Retirement System to elected officials and Senior Management employees Friday, voting along party lines for a package that includes less controversial revisions in the administration of police and firefighter pensions for local governments.
The Senate gave second reading to the local government bill (SB 246) and will send it — alone — to the House next week. The House version (HB 7181), which merges sweeping FRS changes with the local-government (HB 7189), will arrive in the Senate, where the outlook is dim.
“It will be a struggle to get 21 votes” for the House version, Sen. Jeremy Ring, D-Margate, said after the Senate adjourned Friday. He chairs the Governmental Oversight Committee, which handles pension bills.
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House Speaker Will Weatherford, R-Wesley Chapel, tried last year to require all newly hired employees to take the currently optional investment plan, similar to an 401(k) retirement plan in the private sector. Sen. Wilton Simpson, R-Trilby, countered with a bill requiring Senior Management and elected officials to take the investment option, while leaving the FRS open to employees who want it — but with a financial incentive for going into the investment plan.
Simpson’s bill is back in the Senate this year, but without the financial incentive of lowering the employee-paid pension contribution from 3 percent to 2 percent, for those who take the investment plan. Simpson had to drop that because of questions about whether the Internal Revenue Service would permit it.
Simpson and Sen. Jack Latvala, R-Clearwater, have said the House bill by Rep. Jim Boyd, R-Bradenton, won’t pass in the Senate. Ring said the local bill would pass unanimously, though, by itself.
Last weekend, Boyd’s House State Affairs Committee cobbled together the big FRS bill with the noncontroversial changes in how cities can apportion revenue from the insurance premium tax, to enhance police and firefighter pensions.
Boyd’s FRS bill does three things.
It closes the traditional pension system for Senior Management employees and elected officials hired after July 1, 2015, requiring them to go into the optional 401(k)-style investment plan. It extends the “vesting” period for the FRS from eight years to 10, and it changes the “default” rule so that new employees who don’t make a choice when they are hired will automatically go into the investment plan.
The “defined benefit” FRS plan is the default position currently. New hires who don’t make a choice, and default to the investment plan, will have nine months to change their minds and take the traditional plan — but they would have the incentive of being vested in the investment plan in one year, rather than 10, if they only plan on working a few years in government.
“This plan simply recognizes the changes that have occurred in our society,” said Rep. Charles McBurney, R-Jacksonville. “Our society is a mobile society and this plan reflects the mobility of our society.”
He said six out of 10 public employees don’t work long enough to get vested in the pension plan, so they leave with only the 3 percent of salary FRS members are required to pay into the fund. With the investment plan, McBurney said, short-term workers would be building a nest egg after their first year of employment, which could be moved to another retirement vehicle.
A staff analysis of Boyd’s bill said the FRS has 621,774 active members, about one-fourth of them at the state level, and 347,962 retirees. There are also 38,724 workers in the Deferred Retirement Option Plan, which allows employees to retire and continue working for a few years with the pensions banked for them.
Weatherford and Boyd contend that the FRS has a funding ratio of 86 percent, assets to liabilities, and that taxpayers put up more than $500 million a year to fund an unfunded liability of about $21 billion. Opponents — mainly Democrats — liken the system to a home mortgage, which does not have to be paid off all at once but can be painlessly maintained by paying regular installments.
“We have the lowest-paid state employees, and the lowest number per capita, of any state,” Rep. Michelle Rehwinkel Vasilinda, D-Tallahassee, told the House. “We have a well invested plan. To erode the basis of that plan and take members out of it is not good for the plan, not good for the state of Florida.”
Contact reporter Bill Cotterell at bcotterell@thefloridacurrent.com