TALLAHASSEE — Leaders of the state Fraternal Order of Police union on Thursday came out strongly in opposition to changes in the Florida Retirement System, saying the movement of newly hired state employees will eventually bankrupt the pension pot for existing employees and retirees.
State Sen. Greg Evers, R-Baker, and Rep. Dave Kerner, D-Palm Springs, joined dozens of FOP members for a news conference in front of the Senate chamber to warn against pending bills that would close the traditional Florida Retirement System, or FRS, after July 1, 2015, and steer most new hires into a cash-balance investment plan.
Supporters of the plan have proposed a “carve out” that would let police, firefighters and other special risk employees remain in the traditional defined-benefit retirement plan, but leaders of the union said their members don’t want to be treated differently than other state, county and municipal workers in the FRS.
The other major law-enforcement union, the Florida Police Benevolent Association, has not yet taken a position on the proposals by Sen. Wilton Simpson, R-Trilby, who has emphasized that the changes would not affect current employees or retirees. Simpson and House Speaker Will Weatherford, R-Wesley Chapel, have pushed for pension reforms because of a $500 million annual cost of an unfunded actuarial liability in the FRS.
“There is no way to close the FRS to any significant bloc of workers that does not de-stabilize the system and risk my officers’ retirement security,” said James Preston, president of the Florida FOP.
The cash-balance plan would provide for employee retirement funds to be invested, with a projected return rate of 2 percent. Any earnings above that would be split between the employee and employer but any shortfall would be absorbed by the employing government agencies. It is a variant of the “defined contribution” plan, a straight market investment system which Weatherford tried last year to designate for new employees.
Under the existing defined-benefit plan, favored by most FRS workers, pensions are calculated on the basis of years of service multiplied by a percentage of peak earnings.
The State Board of Administration, which invests public monies, estimates that the FRS has an 86 percent ratio of assets to liabilities. Anything above 80 percent is considered financially healthy for retirement plans.
“If the system were to close today, at 86 percent funding, it would never run out of money,” Preston said. He said the cash-balance plan “is not a pension plan, it’s an investment plan” and would result in employees retiring with less monthly income to show for their years of service.
Evers predicted nothing will happen with pensions this session, although the issue is a top priority of Weatherford.
“When it passes, it’s going to be snowing in Miami,” he said.
Matt Puckett, executive director of the PBA, said his union remains uncommitted on the cash-balance plan -- with or without the “carve out” that would exempt special-risk employees from any changes. An actuarial study has been ordered by the Legisalture, to cost-out potential changes.
“We’re waiting to see the actuarial study report before we take any position,” Puckett said.