The state is moving to replace the pension plan that employees have only had to chip into for the past year with an investment-based retirement plan that would be based more on employee contributions.
Only future employees, those hired after Jan. 1, 2014, would be required to participate in the new investment plan, similar to a 401(k) retirement plan, as currently drafted.
However, questions remain as to what the change will cost or save taxpayers; what will happen to the credit rating of the states existing plan; will employees be required to increase their contribution; and why exactly would the state seek to change the Florida Retirement System that is deemed to be stable, with about 86 percent funding in place?
A lot rides on a study commissioned last August by House Speaker Will Weatherford, R-Wesley Chapel, that is due to be completed in a couple of weeks.
HouseState Affairs Government Operations Subcommittee Chairman James Brodeur, R-Sanford, said Thursday that the intent is to eventually reduce the risk to taxpayers of having to cover holes in the Florida Retirement System at a time when the outlook for the program is stable.
We would rather make a small change to the aircraft now than turn a speedboat 90-degrees in 10 years, Brodeur said as his committee began reviewing a draft of the legislation.
We dont want to take away benefits. We dont want to make people who have made decisions about buying a house, or where to live, or what kind or family to raise, to have to all of a sudden be faced with a severe decline in income.
An investment plan also gives workers greater mobility to change jobs or careers, he added.
Rep. Irv Slosberg, D-Boca Raton, expressed concern that state economists have estimated that creating the investment-based retirement system could cost taxpayers $150 million in the first year of operations, with costs growing.
With a study by economists ordered last August expected to be completed in a couple of weeks, before the 2013 session begins in March, Brodeur said the goal is added stability in the states retirement system.
In the past weve seen some overfunding, some underfunding of liability and what this will allow us to do is a have a lot more consistent and predictable cost to the system while still providing a benefit to the employees, he said.
With the state Supreme Court last week backing the 2011 legislative directive that required employees to contribute 3 percent of their pay into the retirement system, representatives for employee unions questioned the timing and impact on workers.
Lisa Henning, representing the Fraternal Order of Police, argued the state should be proud of its existing pension program and maintain the status quo.
The defined benefit plan gives a law enforcement officer a sense of security that no matter what happens on any day, that their family will be taken care of, Henning said.
By taking away defined benefits, youre taking away that security.
Matt Puckett, representing firefighters, expressed concern that employee contributions would grow from 3 percent to 10 percent.
The plan as drafted would:
close the pension plan (defined benefit) to members initially enrolled in the Florida Retirement System on or after Jan. 1, 2014, and require those members to participate in the investment plan (defined contribution);
close the Senior Management Service Optional Annuity Program to new participants effective Jan. 1, 2014;
prohibit an elected official who is eligible for membership in the Elected Officers' Class from joining the Senior Management Service Class on or after Jan. 1, 2014;
expand the investment options available to investment plan participants as the State Board of Administration would be required to develop investment products and an employee-directed brokerage account must be set up;
eliminate the option to apply for disability benefits under the pension plan for members initially enrolled in the Florida Retirement System on or after Jan. 1, 2014.
Brodeur said a bill would not be filed until the study is complete, and even then could depend upon the findings.
We wouldnt do it until we have the answers to some of those questions, Brodeur said.
I think a lot of it depends upon what we find back. If the study comes back and its not where we thought it was going to be, Im not sure how much appetite members are going to have to do something like that. We want to get this right. Thats why we want to be slow and methodical about workshopping it and giving everyone as much time as they want to speak.
Reach Jim Turner at jturner@sunshinestatenews.com or at (772) 215-9889.
