Scott weighs changes to contributions to state investment plans

Apr 6, 2012

About a sixth of Florida’s state employees could see another retirement plan change. As Sascha Cordner reports, a bill is now on the Governor’s desk that would allow employers to contribute less into their employees’ retirement accounts.

Currently, there are about 650,000 people enrolled within the Florida Retirement System. That includes state employees, teachers, law enforcement officers, and city and county government workers.

Most are enrolled in the state’s pension plan known as the defined benefit plan. The rest of the about 100,000 employees are enrolled in a 401K-type plan known as the defined contribution plan, or the investment plan.

Last year, the Legislature made significant change to the state’s retirement system by requiring all employees contribute three-percent of their pay towards their retirement, regardless of the plan they’re in. Now, those in the investment plan, who were already contributing towards their retirement before the 2011 change, could soon see another change that will further impact them.

Because this year, the Legislature voted to reduce the state employers’ contributions to those only enrolled in the investment plan.

“I think you’d have to be a fool to stay in the defined contribution plan, because three-percent is nothing.  Think you’d probably get better benefits at McDonald’s or someplace. That’s just ridiculous!"

Howard Moyes is the Deputy Director for Property Tax Oversight at the Florida Department of Revenue. The 43-year-old has been a state employee for about nine years. He’s one of many who’ve been urging Governor Rick Scott to veto House Bill 5005.

Moyes, who’s currently enrolled in the investment plan, says he couldn’t believe when his colleagues told him about all the changes in the bill:

“They told me that they [Florida Legislature] were cutting back on the contributions to employees in the investment plan or the defined contribution plan. I kept telling them that they were crazy. There’s no way that the Legislature would do that because that’s the plan they’re trying to get everyone to get into. I thought they were wrong. I thought they were misinformed.”

But, Moyes later found out they were correct, and says he’s looking at a 65-percent reduction in retirement benefits.

“With the changes last year, when the state required all employees to contribute three-percent of their salary to their retirement,  that 9-percent employer contribution from the state actually got reduced to six-percent because the state was still putting nine-percent into my defined contribution plan, but three-percent was my own money. So, the contribution went from nine-percent to six-percent effective July 1st of 2011, and now with this bill, with House Bill 5005, the six-percent would now go down to 3.3 percent.”

Other employees, depending on their profession, would also see lower employer contributions. Law enforcement officers would see a cut in state contribution from about 18 percent to 12 percent. University and State college employees who are part of the optional retirement system would also see a reduction from 7.4 percent to 5.1 percent.

Moyes says there’s really not that many options now left for state employees, like himself, if this change goes into effect:

“One, you don’t change anything, you stay in the plan, and you let the state contribute three-percent and you either retire in poverty or you don’t retire at all. The second option is you take your own money out of your paycheck and put it into a retirement account, and save up additional funds that way, which seems unfair because the other state employees and government employees don’t have to do that, that are in the pension plan. Or you’re third option is to go into the pension plan and receive a decent retirement and go that way.”

Another state employee who might be looking into the third option of switching retirement plans is 30-year-old Ray Walls. He’s an Orange County employee with a wife and two kids.

He says as a conservative, he’s all for trimming government and finding efficiencies. But, he fears this will take his retirement plans and those of tens of thousands of other young employees and throw them out the window. He says it could make state employment less desirable.

“By doing things like this, and making these types of benefit cuts and really the three-percent contribution from employees was a salary cut, when you do that kind of thing, it makes these jobs less appealing to people who have higher levels of skills, higher education, and that really want to be here, serve the people of Florida and they’re counties and cities. So, I think it will have a very detrimental impact on being able to get good people.”

Walls says the Legislature can’t keep shortchanging state employees, something that Republican Senator Mike Fasano agrees with. The New Port Richey lawmaker was one of two Senators, who voted against the bill. Fasano says Senate Budget Chief JD Alexander was pushing the measure without fully explain it.

“…by telling is that those employees of the state, the counties, and the cities within the Florida Retirement System, would see almost a 30-percent reduction in the contribution on the retirements. To me, that’s very deceitful, when a major component is in a bill that will have that much impact on the workers on our state, here in the state of Florida. That should have been very clear before the member asked for Senators to vote on the bill.”

Most Democrats in the Senate voted in favor of House Bill 5005, including State Senator Bill Montford of Tallahassee. He agrees that state employees have had the short end of the stick for awhile, especially with the three-percent contribution.

However, he says he voted for the bill because he wanted to be fair.

“This particular House Bill [5005] equalized the participation rate from the state, in other words three-percent regardless of the choice. I believe the state has an obligation to treat its employees fairly and equitably. To me, it was an issue of equity, regardless of the plan a state employee would choose.”

Montford says several state employees have contacted him about the bill, and he says some new information has come to his attention, which he is currently investigating. He declined to comment on that new information at this time, but he says he does intend to revisit the issue.

Rich Templin is with Florida’s AFL-CIO. He says his member unions are already in talks with lawmakers on both sides of the aisle about ways to bring some stability to the pension system. The president of the United Faculty of Florida’s Florida Atlantic University Chapter Chris Robé says the bill is premature because it hinges on the Florida Supreme Court deciding in favor of the three-percent contribution. And, he adds there may be another legal challenge brought forth if House Bill 5005 is signed by the Governor.

Governor Rick Scott has until April 21st to decide whether to sign the bill into law. If the bill is signed, it will go into effect July 1st of this year.