Republicans Want 401-K Model The New Default For State Workers
The House debated a proposal Tuesday that would automatically enroll new state hires into a 401-k style retirement plan instead of a traditional pension.
Republican leaders said the move reflects changing times and a less stable workforce.
The bill by Republican Representative Matt Caldwell of Lehigh Acres targets the 60 percent of new state workers who fail to make a choice of retirement plans when they’re hired.
Caldwell said it makes more sense to enroll them in the so-called “defined contribution” plan because more than half don’t stay the eight years it takes to become vested.
“If they don’t make a choice, inarguably, the better choice for them, is to have something to take with them when they leave rather than surrendering it to the pension plan.”
At the heart of the debate is the Florida Retirement System and its 622,000 active workers and more than 300,000 retirees. Most work for the state, cities, counties, school boards or state universities.
Legislative studies show 23 percent of new hires are opting for the 401-K style plans while just 17 percent sign up for a traditional pension. What’s not clear is how many of the rest are making a choice by remaining silent.
Democratic Representative Amanda Murphy of New Port Richey warned changing the default will confuse younger people.
“A lot of people take these public jobs for that pension. Are we discussing with the younger people coming on, the difference between the pension and the now 403-B plan and what it lacks for them later?”
Democrat Dwayne Taylor of Holly Hill tried to strip the default change with an amendment he said would protect the economic future of fund.
“Vote for our heroes and cheeroes who protect our community. That’s our police officers. They’re out there risking their lives every day to protect our community. Those firefighters are on the front line, protecting our lives and our property.”
But Caldwell said the pension’s unfunded liability, known in legislative shorthand as “UAL,” wouldn’t be affected by his bill.
“As to the question of whether or not I believe the UAL will be increased in a way that makes the pension system unstable, I do not think that to be case. I think the pension will be just fine.”
Pension managers say FRS is funded at nearly 86 percent, well above the 80 percent considered healthy. But Democrats say that’s not enough.
Representative David Richardson of Miami Beach offered an amendment that would require fully funding the pension within 10 years, but it was defeated.
Caldwell added language to the bill that pledges to reduce the unfunded liability by even more next year, but it didn’t specify an amount. Richardson asked if one dollar would satisfy the amendment.
That drew a curt response.
“Thank you, Mr. Speaker, under the most legalistic perspective, correct.”
Caldwell’s bill would also sweeten the defined contribution plan by offering survivor benefits now available only to members of the traditional benefit plan.
Various Senate companions are still working their way through the other chamber.