House Pushes Changes In Retirement System

April 13, 2017

The Florida House is poised to adopt major changes in the state retirement system, although the legislation remains in doubt in the Senate.

House members Wednesday took up a bill (HB 5007) that, beginning in January 2018, would make a controversial change for new public employees who don’t make a choice in their retirement plans.

Under the bill, those employees would go into the state’s 401(k)-type investment plan rather than the traditional pension plan. Currently, undecided employees default into the traditional pension plan. In both scenarios, new employees can opt to join either plan.

The legislation would also bar newly elected officials, including state lawmakers, Cabinet members, judges, county commissioners and school board members, from joining the traditional pension plan after July 1, 2018. They would receive retirement benefits through the investment plan.

Also, the bill would limit pension benefits for judges by reducing the annual rate for accruing their retirement benefits from 3.3 percent to 3 percent beginning July 1.

The House is scheduled to vote on the legislation Thursday, after the Republican majority defeated an amendment Wednesday from Rep. Loranne Ausley, D-Tallahassee.

Ausley’s proposed amendment would have eliminated the controversial revisions sought by GOP leaders, while authorizing changes in the annual contributions paid by state government, school districts, county governments and other public agencies.

The Senate in past years has rejected attempts to limit the traditional pension plan. The new House bill would tie such revisions to the annual contribution changes that are required to make sure the pension system is fiscally sound for the long term.

Ausley warned that if the bill is rejected by the Senate, it could hurt the financial stability of the $149 billion pension fund. A Senate bill (7022), which only has the contribution changes, says the rate increases would bolster the fund by $149.5 million in the next budget year.

“The Florida retirement system is at risk of being underfunded,” Ausley warned. “This (the House approach) is a very risky move.”

But her plea to pass “a clean rate bill” was defeated in a voice vote.

Rep. Matt Caldwell, the sponsor of the bill, defended the legislation, including the change in the handling of new employees who do not make a retirement-plan choice. He said it would protect those workers by placing them in the investment plan where they could keep their contributions and investments if they left public employment before the eight-year vesting period, which is required for traditional pension benefits.

“The odds are it will be to the benefit of the employee,” said Caldwell, R-North Fort Myers.

But Democrats who opposed the bill argued that there was no need to change a financially healthy pension plan, which is projected to be able to pay more than 85 percent of its future obligations. They also said workers could be hurt by being placed in the riskier investment plan as opposed to a traditional pension plan that provides specific benefits.

“What is broken?” asked Rep. Joseph Abruzzo, D-Boynton Beach. “What is wrong, considering we have one of the strongest pension systems in the country?”

The retirement system has some 630,000 active members and about 400,000 retirees. About half of the active employees work for Florida school districts, 23 percent are county workers and 20 percent are state employees.

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