Florida House Republicans are back at it again. They’ve revived an effort to make changes to Florida’s Retirement System.
Rep. Matt Caldwell’s (R-North Fort Myers) proposal includes an expansion of the number of people who will now qualify for full benefits upon the death of their spouse.
Left with only one option, newly elected officials would also no longer have a choice in retirement plans.
“If you are newly elected after July 1, 2018, you’re only option would be investment plan,” said Caldwell. “We would no longer allow newly elected officials to participate in the pension plan.”
Within the Florida Retirement System, state employees now choose between the traditional pension plan and the investment plan—a 401 K style option.
The more popular retirement option is the traditional pension plan. It’s also the default for employees who don’t make a choice.
But, Caldwell’s bill would change that default to the investment plan. He says his main concern is addressing the vesting period.
With the pension plan, you have to wait six to eight years before you can take your full benefits. With the investment plan, you only have to wait one year.
“To think of the type of employee we’re talking about, a recent college graduate who comes to be in aide at the Capitol,” he added. “They’re 22-years-old. They’re not thinking about retirement. They ignore the choices they need to make, they get defaulted into the pension, you know they serve maybe two or four years, and then have a private market opportunity and they leave for other employment. They get nothing. They receive nothing for those four years in terms of retirement. They didn’t vest. They weren’t here long enough. Had they been in the investment plan, they would be able to take that cash money and transfer it to wherever they’re going next.”
That provision has been particularly divisive in recent years—as it’s not the first time this bill has come up in the Florida Legislature.
“The controversial aspect of this bill—the default swap—this is the third year that we would have proposed this in the House,” Caldwell continued.
For several employee unions, it’s not a great change. They say the investment plan is more risky. And, Rich Templin with the AFL-CIO calls the 401-style plan inferior.
“The 401K was never designed as a retirement instrument,” he said. “It was actually designed for folks with a quick influx of money needing a place to park that money for a short period of time to escape liability on that money. As a matter of fact, Ted Benna—who is credited as the creator of the 401K—now calls the 401K and related plans like we have in the investment plan here in Florida—a monster that he wishes he had never created.”
And, Lynda Russell with the Florida Education Association agrees.
“A first-year teacher starting today that worked a full 35 years until retirement in the pension plan will expect a whopping monthly benefit of about $2,000 a month,” she said. “They will live on $24,000 a year in their retirement. That is not a wealthy retirement by any stretch of the imagination. That same teacher—who either elects or is defaulted into the investment plan will get a whopping benefit at the end of 35 years of about $9,600 a year. That is $800 a month.”
Still, the House Government Accountability Committee—which Caldwell chairs—approved the proposal 14-8 with Democrats opposed.
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