As House Pension Reform Package Heads To House Floor, Opposition Continues To Mount

Feb 17, 2016

Credit Pelican Post

A bill seeking to reform Florida’s Retirement System is now heading to the House floor, despite continued opposition.

Among the changes the pension reform proposal makes, Rep. Matt Caldwell (R-North Fort Myers) says one area is perhaps the most important part of his bill.

“It establishes a survivor benefit for members of the investment plan who are killed in the line of duty and it mirrors that benefit which is afforded to members of the pension side of the plan,” he said. “Additionally, it makes retroactive that benefit to every member of the investment since the inception of the investment plan in 2002.”

The Florida Retirement System has two main options for employees to choose from: the defined benefit plan also known as the traditional pension plan—the more popular option—and the defined contribution plan also called the 401 K style investment plan.

The pension plan is currently the default for employees who haven’t selected a retirement option.

And, Caldwell’s most controversial provision would change that default to the investment plan for new hires, extending the time for employees to make that choice from six months to nine months.

Caldwell argues while the investment plan allows employees to vest after one year, the pension plan takes several years for that to happen.

“Of the folks that are in our pension plan, 60 percent don’t vest,” he added. “So, just to understand, we are putting contributions in for all those folks who are participating right now in a pension and they leave and walk away with nothing. We’re keeping that money rather than letting them take it with them.”

A few groups have come out in favor of the proposal including the Florida Chamber of Commerce and the James Madison Institute.

But, about 20 people opposed his proposal Tuesday because of that change, including Linda Edson representing Florida Retired Educators Association.

“Research has shown—the little bit I’ve read—that the defined contribution plans [investment plan] statistically are lower return value than it is a defined benefit plan,” she said. “Why not get the best for your buck for our people?”

Rocco Salvatori representing Florida Professional Firefighters is also against the default change.

“I’m not going to stand here and tell you that this bill is going to destroy the system,” he said. “We believe this change to the default is unnecessary though and could result in a new cost to individuals who now default into that investment plan realize several years later that that was not their intent. Then, they would have to essentially buy their way back into the pension plan, where that individual would not have to do that.”

House Democratic Leader Mark Pafford (D-West Palm Beach) doesn’t like the default provision either, comparing it to a toilet.

“Because I think once you hit that handle, you’re flushing away all the good that’s still left in what we have here as a pension system and we flush it away,” he said. “And, we flush away a lot of the dignity that we provide our public servants.”

And, Rep. David Richardson (D-Miami Beach) says changing the default to the less popular retirement option makes no sense.

“Why would we say we’re going to change the choice and default people into a plan that only 1 out of 4 would choose when they don’t make a choice,” he asked. “But, it’s clearly an effort to reduce participating in the plan.”

But, Caldwell doesn’t fully agree with those stats.

“The folks that default into the pension plan—that 75 percent of members—we don’t know what percentage are doing that because they actively want to be there and by not making a choice, they know they would go, and if we make this change, we will find out what the statistic is and it may very well be that still 75 percent of members go to the pension plan,” he replied.

And, he says the death benefits provision is also much better than the Senate’s standalone bill.

“I do want to mention the Senate bills do touch on in line of duty death benefits for special risk members,” Caldwell added. “We are actually giving that to everyone who participates in the FRS [Florida Retirement System] in the plan before you. So, if you’re a teacher, if you’re a clerk at the front office, and you die in the line of duty you would be included in the plan here and that’s a group of people that are actually left out in the Senate bills that are before you.”

And, the House Appropriations Committee passed the pension reform package 16 to 9 along party lines with Democrats opposed.

Last week, the Senate voted unanimously on its bill providing benefits for the surviving spouse of first responders who have died in the line of duty.

For more news updates, follow Sascha Cordner on Twitter: @SaschaCordner.