Senate's Pension Overhaul Bill Heads To The Floor
A pension overhaul bill is now heading to the Florida Senate Floor. The measure’s focus is to make one of the state’s retirement options known as the investment plan, the more attractive choice for new employees. Opponents of the change say they like this bill better than the House version, which seeks to eliminate the state’s traditional pension plan option. But, that didn’t stop them from trying to make changes to the bill.
Today, state workers essentially have two options within Florida’s Retirement System: the defined benefit plan known as the pension plan and the defined contribution plan, or the investment plan—the 401K style retirement option.
Currently, if an employee does not make a choice between the two plans, they automatically default into the pension plan. But, under a bill sponsored by Republican Senator Wilton Simpson of Trilby, that would not be the case for new employees.
“If a new member fails to make an active election, the member will default into the investment plan,” said Simpson.
Simpson’s bill does keep both retirement options available for new employees—a priority of Democrats and unions who oppose any changes to the way things are now.
That’s why those groups like it better than the House version, which eliminates the state’s pension plan for new employees, hired after January 1st of next year. It passed recently out of the Florida House, and could lead to a showdown in the Senate.
Still, some, like Democratic Senator Bill Montford questioned the need for changing the default in the Senate Appropriations Committee Thursday.
What advantage is to the employees themselves to default into one rather than the other? Why make that change," asked Montford.
“Yes, sir. Thank you! Folks that are going to be a firefighter, police officer, teacher who are going to be there for 20 or 30 years. They know they’re going to be a teacher or one of those careers. They will choose then what they think is best for them. The ones who don’t choose are probably not as prepared and will change careers like most people 10 or 15 times. They will vest in one year. This gives them a better opportunity to work 4 or 5 years in one year, and then change, and take their assets with them,” replied Simpson.
That explanation did not satisfy Democratic Senator Eleanor Sobel, who sought to change the bill herself by offering up an amendment that would leave the state pension plan the default option.
“I believe that changing the default option takes advantage of public employees and puts them at a greater risk unknowingly, especially new employees,” Sobel.
Sobel and Democratic Senator Arthenia Joyner had also offered up several more amendments, but they were all defeated. They included another that dealt with the default option.
Currently, if an employee does not make a choice, the waiting period before an employee automatically defaults into a plan is about five months. Sobel wanted to have that changed to 11 months—a priority of the Florida Professional Firefighters. The group’s President is Gary Rainey.
“So, the training period for a firefighter to go from date of hire to go from date of hire until they’re able to go out onto a fire truck varies somewhere between about three and six months. And, during that period of time, until they finish and take their minimum standards test, they may not actually have the job. And, we wouldn’t be able to talk to them about their benefits and things like that, until after they secured the job permanently, and within five months—that window—does not allow that to happen,” said Rainey.
But, Republican Senator Jack Latvala sought to alleviate those concerns.
“I’ve just gotten Senator Simpson’s assurances that Senator Simpson will accept an amendment on the floor that goes to seven [months]…from 5 to 7 that should cover this training period,” said Latvala.
Other than that, unions at the committee meeting were divided in expressing their support for the bill, but most thanked the sponsor for working with them to address their concerns.
The bill also changes the vesting period for new employees from 8 years to 10 years for those in the Pension plan, but keeps the vesting period for the investment plan at one year. In addition, Simpson changed the bill Thursday so that starting July 1st, of next year, all employees in the investment plan will begin contributing two-percent of their pay toward retirement—down from the present three-percent. Those in the pension plan will continue to invest three-percent.
The bill passed out of the Senate Appropriations Committee 14 to 5 mostly along party lines Thursday. Its next stop is the Senate Floor.
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