A cost estimate for closing Florida’s pension system to new employees is finally in. Legislative leaders commissioned the report to determine how much it will cost to close the pension program. The benefits would still have to be paid even though there won’t be enough funds or employees in the system to support them.
House Speaker Will Weatherford argues the state can’t afford the $500 million dollars a year it costs to keep paying out benefits. And he wants new employees steered into 401-k style plans.
According to the report, the state’s unfunded liability is $19.3 billion. If the pension system is shut down, those liabilities won’t be expected to drop for another 25 years. The report basis its findings on annual increases in employee salaries of four-percent, but state employees haven’t had a raise in years. The report also assumes investment returns of around 7.75 percent when the actual returns have been much lower.
Meanwhile, Republican Senator Wilton Simpson has a plan that would default new employees into the investment plan, they could chose to transfer into the pension system. It would require a 2-percent contribution rate for investment-enrolled employees, instead of the 3-percent everyone pays now. Simpson’s bill would also increase the vesting period for the pension system to 10 years. A one year vesting period would be required for employees in the investment plan.
Two years ago, the legislature required state employees to make three-percent contributions to their retirement plans.
