A Senate proposal to overhaul the Florida Retirement System could have its first official committee hearing later this week. But, The recently scaled-back proposal—already starting to move in the House—could still be in trouble in the Senate.
Last week, the House State Affairs Committee agreed to advance a measure aimed at overhauling the state’s retirement system.
At first, the bill closed the traditional pension plan to new hires. Today, the pension plan and the 401-K style investment plan are the two retirement options available to most public employees. The bill would have created a third option known as the hybrid plan—a combination of the investment and pension plans. That left new enrollees with two options: the investment plan and the newly created hybrid plan.
But, House Speaker Will Weatherford says in the spirit of compromise, he allowed the measure to undergo a massive change: scale it back to resemble a similar plan that died in the Senate last year. He says ultimately, both save the state money.
“Well, in your first year, in your first Session, you tend to swing for the fences a little bit. Our bill last year would have saved $60 billion over 25-30 years. I think it was a 30-year span. The bill that they’re [Senate] proposing, we believe, is somewhere between the $26-27 billion range. It’s about half of what we were trying to get last year. It’s not all the way there, but to me that’s a significant improvement. That’s game-changing for our pension system and it puts us in a position where we can be solvent long-term,” said Weatherford, speaking recently to a group of reporters.
Trilby Republican Senator Wilton Simpson, like he did last year, is leading this year’s pension reform effort in the Senate. He says the new Senate proposal could be taken up as early as this week. And, he says like the recently advanced House bill, his measure will be similar to last year’s bill.
“We made the default mechanism—default into the defined contribution plan. So, what that was doing was allowing young people that were coming into the system that were staying less than the vesting period, they will actually take an asset with them. And, then in addition to that, I think, we increased vesting from 8 to 10 years, and elected officials and Senior management were the two groups that could no longer participate in the defined benefit program,” said Simpson.
Another part of last year’s proposal—that’s not included in the House bill—incentivizes employees to move into the investment plan. Enrollees would only have to contribute two-percent of their pay toward retirement, not the currently required three-percent. Those in the defined benefit plan would stay at three-percent. It’s unclear if that will show up in the Senate bill.
That bill was initially backed by many Republicans, including Senator Jack Latvala. But, the Clearwater Republican says after the Senate last year adopted Weatherford’s House proposal closing the pension plan to recent hires, he helped defeat that effort.
He also voted against this year’s initial Senate proposal. And, following the vote, Latvala indicated he’d have supported last year’s bill over this year’s.
“I could have supported that. But, then last year, they took the House bill, and then they tried put it on over here, and all the work that we did on that went down the tubes. So, if he were to go back in that direction, I would certainly look at supporting something like that,” said Latvala, speaking to WFSU in February.
But, just last week, Latvala appeared to have changed his tune. So, does he still favor last year’s proposal over this year’s unamended Senate bill?
“Oh, I like it better, yeah, but whether we need to do that or not, I still need to figure out,” said Latvala, speaking to WFSU Thursday. “So, I'm not sure yet. I’m talking to other people who are involved in the issue that supported my position, and we still gotta figure it out.”
Though, Latvala admits he is in talks with the House as well as other stakeholders in seeing if they should compromise. The House proposed committee bill has not yet been referred to any committees. But, during its initial vetting last week, Democrats and public employee unions opposed the proposal. One recurring question was how could the bill move forward when there was no official study done this year.
The data that’s being used is part of a study done on last year’s bill. According to a recent letter from Millman—which did the study—it could still be accurate to use last year’s numbers, providing it’s used only for the first year of projections.
Meanwhile, if the Senate bill is taken up, its first official hearing could be scheduled during this week’s Senate Governmental Oversight and Accountability Committee.
For more news updates, follow Sascha Cordner on Twitter: @SaschaCordner.