House takes on state pensions
As Hillsborough Community College’s human resource chief, Donna Keener hires everyone from professors to janitors.
She always has been able to offer prospective employees the promise that they will have a pension waiting for them when they retire from HCC.
Next year, Keener likely won’t be able to promise that anymore.
Under a bill pending in the Legislature, the 40-year-old pension system will stop taking new members as of Jan. 1. All state workers hired after that date will contribute only to a 401(k) system instead.
Today, those workers are automatically enrolled in the pension system but can opt for the 401(k). Florida is one of seven states that offer that choice.
The switch to the mandatory 401(k) system is a priority for Speaker of the House Will Weatherford, a Republican from Wesley Chapel.
The House of Representatives passed that change March 22.
Weatherford’s fellow Pasco County Republican, Wilton Simpson of Lacoochee, is sponsoring similar legislation in the Senate that automatically enrolls future workers in a 401(k) but lets them opt into the pension program.
Whichever bill Gov. Rick Scott finally signs into law, the resulting change to the state’s retirement system will ripple across the Tampa region for decades.
The change to the Florida Retirement System will fall heaviest on the 51,000 public school employees spread across Hillsborough, Pinellas and Pasco counties.
Thousands more people work for state agencies in the region, from the Department of Juvenile Justice to the Department of Environmental Protection.
Legislators say the current crop of state workers won’t feel the pending change to the retirement system.
Those changes will fall on the next generation of teachers, lawyers and environmental engineers.
Supporters say the switch is needed to save the state money and protect it against the kind of massive losses the current system suffered when the financial markets collapsed in 2008.
Critics say the change unnecessarily damages a system praised nationally for its stability and low cost to taxpayers.
“The Florida retirement plan is a well-funded plan. It is not in fiscal danger in any way,” said Stephanie Baxter-Jenkins, executive director of the Hillsborough Classroom Teachers Association. “This is a solution looking for a problem.”
Closing the pension system’s doors to new members will starve it of new contributions, effectively creating the kind of financial problems Republicans say they’re trying to avoid, Baxter-Jenkins said.
State Rep. Jason Brodeur of Sanford sponsored the bill in the House. He says the retirement system is $20 million in arrears already, forcing the Legislature to inject millions of tax dollars every year to shore it up.
State employees now have the option of a traditional pension — a defined-benefit plan that guarantees them a fixed yearly payment after they retire — or a 401(k) plan, also known as a defined-contribution plan.
Legislators began requiring all workers to pick up 3 percent of their retirement costs — regardless of the plan — last year.
Putting all new workers into a 401(k) system will reduce the state’s overall costs and give workers more say over their own retirements, Brodeur said.
“It will be their choice as to how they want to manage their money,” Brodeur said.
Brodeur noted that about 60 percent of the state’s pension enrollees quit their jobs before they’ve worked the eight years required to earn benefits.
A 401(k) system that kicks in after one year would give more people access to retirement savings if they contribute, he said.
The bill requires the State Board of Administration to create its own investment fund and brokerage to handle those 401(k) accounts on behalf of state workers, he said.
Florida would become the third state in the country, after Alaska and Michigan, to adopt a 401(k)-only retirement system.
Thirty-two states still have only a mandatory pension system for their workers, according to the National Conference of State Legislatures.
Jean-Pierre Autry, assistant director of state and local research for the Boston-based Center for Retirement Research, said recent changes to the Florida Retirement System — reducing benefits and requiring employees to contribute — have made the system one of the cheapest to manage in the country.
“The system is perfectly well funded. The cost issue doesn’t seem to be urgent in this case,” he said. “In practice, we’ve had a 20-year experiment with 401(k)s, and they’ve proven to be inadequate for funding retirement.”
Sherman Dorn, an education professor at the University of South Florida, said the pending change to retirement plans amounts to yet another legislative attack on the state’s teachers.
“Eliminating the … entry point is not the first thing that makes it unattractive to be a teacher,” Dorn said. “It’s the fourth, fifth or tenth thing.”
In recent years, legislators have eliminated tenure for public school teachers and made their pay contingent in part on students’ academic performance.
Last year, they and other state employees had to start contributing 3 percent of their pay to their retirement accounts.
Baxter-Jenkins said the proposed retirement system changes will make it harder to persuade young people to become teachers in a state that already pays them less than the national average.
“As the economy rebounds, you’re going to find people leaving the state,” Baxter-Jenkins said. “The state Legislature is acting in a way that will make it less and less possible for us to attract people to those jobs.”
HCC’s Keener isn’t so sure.
Keener said the kind of retirement system the state offers is less important than the fact it offers one at all.
She sees an advantage to the 401(k) system. Pensions benefit people who stay with the same employers for decades, an increasingly rare situation given the current labor market, Keener said.
“I do think as we become a more mobile society and employees are moving from employer to employer and having shorter stints, actually a defined-contribution plan can be viewed very positively,” she said.