Florida Legislative Leaders Call for Pension Reform

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November 15, 2012 by Julie Montanaro

Florida's legislative leaders are calling for an overhaul of the state's pension system.

State workers and retirees are now wondering what this will mean to their bottom line.

It's the talk of cubicles and cafeterias all over town. Florida's House Speaker wants to require new state employees to contribute to a
401(k) style plan, instead of counting on regular pension payments.

"I think it's probably needed," state employee Cindy Holleman said, "but if there are any changes, I would like to see them made for new employees that start with the state and kind of leave the ones who've been in the system the way that things are now."

Florida Senate President Don Gaetz echoed the need for an overhaul of the state retirement system. He says it's time for Florida to follow the private sector's lead in adopting defined contribution plans. He says the challenge is figuring out how to do it.

"We've got to look at a way to make sure our pension system remains solvent for people who depend upon it and will depend on it," Gaetz said,

Gaetz points out Florida's retirement system is not fully funded right now.

"Right now, the taxpayers of Florida are having to subsidize that pension system," Gaetz said. "I was in a budget meeting just yesterday and the question was, do you want to dump several hundred million dollars into the pension system to keep it solvent or would you like to provide money for education and health care and the environment and energy?"

David Jacobsen retired last year. He says Florida's current retirement system is one of the highest rated in the country.

He worries any shift to a 401(k) style plan would put his future pension payouts in jeopardy too.

"I fear that if now we're not going to fund the state retirement system, when I reach my older years, my sunset years, will I have money coming in from the state retirement system?" Jacobsen said.

Jacobsen represents the Northwest Florida retirees chapter of AFSCME. That's the American Federation of State, County and Municipal Employees.

"All state workers should be concerned," he said.

Some say any change to the state's retirement system is likely to wind up in court.

A law that would have required state workers to contribute 3% of their salaries to their retirement was struck down in court earlier this year. That issue is still before the state supreme court.



THE CAPITAL, TALLAHASSEE, November 13, 2012.........Calling the current pension system "old and archaic,'' incoming House Speaker Will Weatherford said Tuesday he wants to revamp the state retirement program for new employees and make it more like the private sector.

Weatherford, a Wesley Chapel Republican, said new state employees should be required to enroll in 401(k)-type plans instead of counting on regular pension payments from the state. Most large corporations have moved to such plans, which help them control retirement costs while also placing more responsibility on workers to make investment decisions.

"It (pension costs) is a ticking time bomb in every state and in every city across the country, and it's time for us to get real and do what the private sector has done,'' Weatherford told reporters, as he prepares to formally begin presiding over the House next week.

But trying to change the pension system likely would be controversial. The Republican-controlled Legislature in 2011 approved a plan to require workers to contribute 3 percent of their salaries to the retirement system --- a move that has touched off a legal battle now at the Florida Supreme Court.

Rep. Dwayne Taylor, a Daytona Beach Democrat who has served as a trustee on his city's fire and police pension board, said requiring new employees to enroll in 401(k)-type plans would jeopardize the actuarial soundness of the pension system. That is because fewer people would be paying into the system, while it would still owe benefits to retirees and workers who would be entitled to the more-traditional pensions.

"There's a domino effect when you start tinkering with the system,'' Taylor said.

The Florida Retirement System includes state employees and many local-government workers, such as teachers. Weatherford said he would have to look at whether his proposal would also apply to local governments.

People in the retirement system currently can choose whether to enroll in pension plans or 401(k)-type plans, though most have chosen pensions. As of Aug. 31, 540,352 active employees were in the pension plan, while 107,040 were in a 401(k)-type plan.

Under Weatherford's proposal, already-hired workers would continue to be able to choose a pension of a 401(k)-type plan, which might help avert legal problems. The key question in the court battle about the 2011 law is whether the state can force already-employed workers to contribute 3 percent of their salaries to the retirement system. Opponents have not legally fought the requirement for new employees.

The financial health of public pension plans has been a major issue in numerous states. Florida's pension plan has an estimated balance of $125.1 billion, though, on an actuarial basis, it is not fully funded. An October report from state economists said it was funded at 86.9 percent.

Any changes to the retirement system are closely watched by groups such as public unions, and Weatherford's idea could touch off a political fight. The unions and their legislative backers argue, in part, that pensions and other benefits are a way to make up for lower salaries that workers earn working for the government instead of in the private sector.

But Weatherford said pension costs are a "real problem for the state long term."

"I think when it comes to pensions, this is not anything radical,'' Weatherford said. "Ninety percent of the private sector has a 401(k)-based plan."


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