As Senate Pension Overhaul Clears First Panel, House Measure Heads To Floor

Apr 10, 2014

A pension reform proposal is now heading to the House floor, while its Senate companion just cleared its first official committee. While both now scaled-back bills have their differences, they have an equal amount of opposition from public employees and most Democrats stacked against them.

Trilby Republican Senator Wilton Simpson’s bill has gone through several changes, and Thursday, during the Senate Government Oversight and Accountability Committee, it was no different.

The bill no longer tries to create a new retirement option for new employees coming into the Florida Retirement System or create a special exemption for special-risk employees, like firefighters or police officers. Instead, it’s now similar to a proposal that died in the Senate last year—also authored by Simpson—and he says all employees still get to choose.

“Under this plan, newly hired rank-and-file employees, including teachers, law enforcement officers, firefighters, and corrections personnel, and emergency workers who have never previously participated in the state’s retirement system will continue to have a choice between pension and investment,” said Simpson.

The bill now looks a lot like the House bill in that elected officials and Senior Management no longer can join the defined benefit plan known as the traditional pension plan, and must instead join the only other main retirement option: the 401-K style plan known as the investment plan.

Included in that are judges, which some Republicans didn’t like. That includes Fleming Island Senator Rob Bradley.

“It’s a separate co-equal branch of Government and it’s appropriate to not have them included,” said Bradley.

School superintendents could be included in that as well, which concerned Tallahassee Senator Bill Montford. But, the panel’s chair and fellow Democrat Jeremy Ring, urged caution.

“Because eventually everyone is going to come to us with a carve-out and I’m not saying they’re not legitimate, but I’m saying we need to be a bit careful as we start looking at each group because every group is going to come to us with that,” said Ring.

The measure also makes the investment plan the new default for newly hired public employees, and they have eight months to decide if they want to stay or move to the pension plan. The current default is the pension plan.

Those who decide to opt into the pension plan would have to stay in the plan for 10 years in order to get their benefits. The current vesting period is eight years in the pension plan. It remains one year for the investment plan. All employees still retain the right to switch to either plan for one time only.

And, to further incentivize employees to stay in the investment plan, the bill lowers the contribution employees have to pay toward their retirement to two-percent. Currently, those in both retirement plans contribute three-percent. Under Simpson’s bill, only those in the pension plan will continue to pay the three-percent.

Mike Fewless with the Orange County Sheriff's office says that appeal to recent hires of the 401K-style plan will hurt all the people that are already in the system.

“Right now, what we’re doing for the new employees is we’re saying ‘look, if you go into the investment plan, you’re going to pay a less contribution. You’re only going to have to contribute two-percent. And, after one year, you’re already vested into that program, whereas in the defined benefit program, you’re 10 years down the road before you’re vested,’" added Fewless. "So, by having them default in the investment program, it is more appealing to them. And, so, what we’re saying is that’s going to deplete the funds that are going to the normal retirement system, which ultimately hurt the people that are in the system.”

But, Altamonte Springs Republican Senator David Simmons, a bill supporter, says the measure is already appealing for employees who may not believe they’re going to stay in their employment for that long.

“The fact of it is if I get into the investment plan, the amount that’s put in vests immediately, right? And, then, if from five years from now, I decide that I don’t want to be a police officer or I try something else, that money is mine,” said Simmons.

The measure is also supported by Americans for Prosperity and the Florida Chamber of Commerce, who say it’s great for Florida taxpayers. But, some unions point to how the legislature is using numbers from last year as part of the study and the actuarial data could change.

Still, the Senate measure passed 7-2 with most Democrats opposed. Senator Jeremy Ring, the panel’s chair, was the only Democrat to vote in favor of the bill. His measure aiming to address some of the unintended consequences of the state’s so-called “Double-Dipping” law is now tucked into Simpson’s bill.

The law was designed to stop thousands from collecting a paycheck and retirement benefits at the same time. But, in doing so, about 38,000 people who left their jobs after the law was enacted, took their plan with them, and later tried to work again for the state during a specified time period found they could no longer re-enroll in the Florida Retirement System or receive the benefits owed.

There may also be another amendment added to the bill that looks at exempting judges from having the investment plan retirement option as their only choice.

Meanwhile, the House proposal, which encountered the same opposition from Democrats and public employee unions, passed its only committee Thursday. It now heads to the floor.

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