Pension Changes Ready for House Vote
By: James Call
Florida House Republicans again have set their sights on changing the Florida Retirement System. A proposal automatically enrolling new state agency hires in a defined-contribution plan Tuesday cleared its final House committee on a mostly party-line vote.
The proposal by Rep. Matt Caldwell, R-Lehigh Acres, would create survivor benefits for first responders enrolled in the so-called investment/defined contribution plan offered by the Florida Retirement System – that benefit now is available only to workers in the defined-benefit plan, the traditional pension system.
HB 7107 also would allow returning workers to once again sign up for the investment plan – a 401K-like fund with a set contribution rate. And it changes the default choice for new hires who do not make a selection within eight monthsof starting to work from the defined benefit to the defined investment plan.
Caldwell framed it as a small fix whileopponents say it is amajor change that they say is bad for workers and taxpayers.
“Survivor benefits were not dealt with in the past. It has been an oversight (and proposed reforms) were far more robust in past years,” Caldwell explained to the Appropriations Committee. “I would assume extending a benefit to investment employees will not create any kind of instability.”
Rich Templin of the AFL-CIO used a bathtub analogy to counter Caldwell’s claim.
Templin said there were two components to a pension fund:a faucet adding water to the tub and a drain to remove thewater. He said Caldwell’s plan cuts the flow fromthe faucet while not addressing the amount of water going down the drain.And that, concluded Templin, could make the fund unstable.
“It is a major change,” said Templin. “It is bad for new hires and it is bad for taxpayers. Except for the most optimistic 30-year projections it will cost taxpayers money, according to a studythe Legislature commissioned.”
More than 20 people signed up to speak on the proposal. All but one, a representative of the James Madison Institute, were opposed.
The Florida Retirement System is the pension plan for state employees, workers for cities, counties and special districts along with school boards, colleges, and universities. It has 622,000 members and 363,000 retirees, according to legislative staff.
The system is funded at an 86.6 percent rate, above the 80-percent mark economists use to define a healthy pension system. House Speaker Steve Crisafulli had placed overhaul of the $160 billion system high on his agenda, as did his predecessor Will Weatherford.
House Republicans have said they want a fully funded system that will remain solvent well into the future. Currently, about 15 percent of new hires do not make a selection between the two plans available. Of those who do, more than 75 percent choose the defined-benefit plan.
“We believe the change to default is unnecessary and could result in a heavy cost to the individuals who choose it,” said Rocco Salvatori of Florida Professional Firefighters.
The opponents fear that fluctuations in the stock market will leave retirees without any savings; forcing 60 and 70-year-olds back into the workforce to make ends meet.
“Ultimately, the Legislature is responsible for the security of the plan were this to create any instability,” Caldwell responded when asked what happens if his assumptions about his proposal were wrong.
The measure was approved on a 15-9 vote and is ready for consideration by the full House.A similar bill in the Senate has been waiting for a hearing in the Appropriations Committee since November.
In recent years, House efforts to reform the FRS have failed in the Senate.