TALLAHASSEE —Voting along party lines, the Florida House approved a sweeping overhaul of the Florida Retirement System on Friday and sent it to an uncertain fate in the state Senate.
The Senate, meantime, gave routine second-reading approval to non-controversial changes of rules on how local governments improve police and firefighter pensions. The Senate is handling the Florida Retirement System legislation separate from the local-government plan, but House Republicans merged the two proposals — hoping the popular local plan would improve political odds for the hotly contested changes in retirement rules for hundreds of thousands of state, county, schools and other public employees in the state system.
The House package passed 74-44, with only one Democrat voting for it and one Republican opposing.
The measure is the last chance for House Speaker Will Weatherford’s long-sought goal of moving public employees out of a traditional monthly payout pension plan and into a market-based investment system. Sen. Wilton Simpson, R-Trilby, has offered a similar proposal in the Senate — but without the local government changes that the House added this week in an attempt to sweeten the deal for skeptical senators.
Sen. Jack Latvala, R-Clearwater, a key player in the debate, said the outlook is not good for pension reform in the Senate. Sen. Jeremy Ring, D-Margate, who chairs the Governmental Oversight Committee, said the local government bill “will pass 40-0” next week but “we’d be struggling to get 21 votes” for the piggyback House version of statewide and local first-responder pensions.
“There’s a perception that we don’t do enough to take care of our workforce,” Ring said after the Senate adjourned. “There’s a strong belief in the Senate that the FRS is strong and will remain strong, so why try to change it?”
The House bill by Rep. Jim Boyd, R-Bradenton, essentially does three things.
It closes the traditional pension system hired after July 1, 2015, for senior management employees and elected officials, requiring them to go into the optional 401(k)-style investment plan. It extends the “vesting” period for the Florida Retirement System 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 after 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.”
McBurney 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 the Florida Retirement System 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.
Rep. Dana Young, R-Tampa, said Boyd’s bill strikes “exactly the right balance” by giving rank-and-file employees a choice between the traditional pension plan and incentives to join the investment plan.
“It’s time to modernize,” Young said. “What we have is not the way people work any more.”
A staff analysis of Boyd’s bill said the Florida Retirement System 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 Florida Retirement System has a funding ratio of 86 percent, assets to liabilities, and that taxpayers put up more than $500 million a year to pay for an unfunded liability of about $21 billion. Opponents of reform, mainly Democrats, liken the current system to a home mortgage — it does not have to be paid off all at once but can be painlessly maintained in 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.”