House votes to close down guaranteed pension plan
The Tampa Tribune
By Bill Cotterell
TALLAHASSEE — A plan by House Speaker Will Weatherford plan for closing the Florida Retirement System cleared the House on a party-line vote Friday and went to the state Senate, where another Pasco Republican’s competing version has strong support.
Weatherford, a Wesley Chapel Republican, praised state Rep. Jason Brodeur, a Sanford Republican, for steering the powerful speaker’s top legislative priority through the chamber at the end of the 2013 session’s third week. [EXPAND Read more]
The bill (HB 7011) would require public employees hired after next Jan. 1 to enroll in a 401(k)-style investment plan rather than the traditional “defined benefit” system of guaranteed monthly pension payments.
“We have the opportunity to take the fiscal challenges that our state could be faced with … like the fact that we’re spending we could be spending on education, for our pension fund – and we can take that off the table for the future,” Weatherford told reporters after the House adjourned.
After two hours of polarized debate, the bill got a 73-43 House vote, with Republicans and Democrats splitting.
Like Weatherford, GOP members said the investment plan is the dominant trend in the private sector and that the state can’t afford to keep shoring up a 13 percent unfunded pension liability now projected at $19 billion.
Democrats argued that the $123 billion-plus Florida Retirement System – which serves about 600,000 state, county and local employees – is in good financial shape and that Republicans are putting employee retirement at risk to put more money into the stock market for their investor friends.
Sen. Wilton Simpson, a Trilby Republican, has a different plan (SB 1392) that would give rank-and-file public employees the option of continuing to sign up for the “defined benefit” pension plan. But his bill would give them financial incentives for opting into the investment plan by reducing their paycheck contribution from 3 percent to 2 percent and cutting the eight years required for vesting to just one year.
Simpson’s bill would require senior employees and elected officials who join the Florida Retirement System after Jan. 1 to join the investment plan. His bill has been approved in committee but not on the Senate floor, and the two versions of pension changes are sure to be a big issue in the second half of the session next month.
“His bill is better than nothing, it’s certainly better than the status quo,” said Weatherford. “But the question would be, why would we go half way when we can go all the way?”
Rep. Betty Reed, a Tampa Democrat and retired educator, said the proposed changes are too risky. While markets go up and down, she said, employees need to know their nest egg is safe for their old age.
“If it’s not broke, let’s not fix it,” said Reed. “What do we say to new people coming into the system – tell them, ‘At your retirement age, well, you may need to go find another job? You may be on food stamps?’ “
But Rep. Ross Spano, a Tampa Republican, said staggering pension debts are causing tax increases in some of the states that stuck with defined benefits.
“This bill does not break the promises we have made to employees,” Spano said. “I wonder if residents of California and Illinois wish their representatives had been a little more pro-active.”
Rep. Dan Raulerson, a Plant City Republican, said the Florida Retirement System would start saving money as early as fiscal 2016-17 if new public employees must go the investments route. He said the $500 million now being appropriated “can be invested in transportation and schools,” rather than meeting pension obligations.
“This is responsible and realistic,” Raulerson said. “But it takes some backbone.”
In the traditional defined-benefit system, pensions are calculated on a percentage of peak earnings multiplied by an employee’s years of service. In the defined-contribution plan, payments by employer and employee into the Florida Retirement System are placed in an account that belongs to the employee, to be invested in funds judged by the state to be good investments.
The state has had an optional defined-contribution plan for several years but only about one in six employees use it rather than the defined-benefit plan. [/EXPAND]