State employees to see more retirement cuts on July 1
The retirement plans of about 100,000 Florida employees are about to change, after Governor Rick Scott signed a bill into law that allows employers to reduce the amount they pay into a 401-K type retirement plan. But as Sascha Cordner reports, the move could spur employees to start looking at other options.
Within the Florida Retirement System, there are two types of retirement plans: the pension plan and the investment plan. In the pension plan, employees receive a fixed benefit level. But, in the investment plan, employees could see losses or gains, depending on the fluctuation of the financial market.
Last year, all public employees, regardless of their retirement plan, had to start contributing 3-percent of their pay toward their plans.
Now, on top of that, Governor Rick Scott has signed a bill that would further affect employees in the 401K-type investment plan, which could save the state millions of dollars. The employees in the investment plan are facing an overall reduction of 30-percent in total employer contributions.
Ray Walls is a husband and father of two, who works as an Orange County government employee. He’s also a member of the investment plan.
“All employees have a one-time option to switch between plans. So, they can switch between the investment plan to pension plan or from the pension plan to the investment plan, one time during their career.”
As a regular public employee, Walls is looking at lower employer contributions from 9 to 6.3-percent. He says with the bill now signed into law, the investment plan is looking less favorable. So, Walls says he might use his one-time switch and opt into a different retirement plan.
“So, what this is going to do is going to push people like myself to switch from the investment plan to the pension plan, which has an undefined cost, in the pension plan because basically what the pension plan says is they have to pay me retirement benefits until I die, whereas the plan I’m in now, they only have to pay whatever’s in my account, and then they’re off the hook after that.”
Law Enforcement Officers will also see a cut in state contributions from about 18 to 12-percent. And, University and State College employees, who are part of the optional retirement system, will also see a reduction from 7.4 to 5.1-percent.
Critics of the bill, like Republican Senator Mike Fasano, say it’s sad that the measure could cause many to weigh their options and switch from the investment plan into the pension plan. The New Port Richey lawmaker says because the affected employees’ retirement plans were reduced by such an amount:
“There’s no longer an incentive.”
The Governor’s Office declined to give any comments on tape. But, in a letter explaining why he signed House Bill 5005, Scott said the legislation “takes a positive step toward addressing the overall costs of the Florida Retirement System, and making the overall retirement benefits more affordable to Florida’s taxpayers.” The law takes effect July 1st of this year.