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House plan to close traditional pension to new workers carries costs, study concludes

by John Kennedy | February 15th, 2013

The Florida Retirement System, used by more than 600,000 state workers, teachers, police officers and firefighters, would change dramatically under a state House proposal to close the plan’s traditional pension to new employees, according to a state study released Friday night.

The analysis by Milliman, a Virginia-based actuarial firm, concluded that the move would likely increase the plan’s cost for employees. These workers began contributing 3 percent of their pay to take part in the plan for the first time, beginning in 2011.

Also, within as little as seven years, more employees could belong to the 401(k)-style investment plan than the traditional defined benefit plan. The shift  would contribute to a likely change in how the $122 billion FRS invests its holdings,  concluded Milliman, who completed the report for the state’s Department of Management Services.

House Speaker Will Weatherford, R-Wesley Chapel, who is spearheading the pension change, said the report will help lawmakers map a course for the FRS when the legislative session begins next month.

“We are reviewing the study received from the actuary and will derive from it the fiscal impact of our plan to reform Florida’s outdated pension system,” Weatherford said. “Ultimately, we believe that reducing the taxpayer exposure to Florida’s pension liability and creating greater fiscal predictability in our budget is in the best interest of all Floridians.”

The pension fund currently is 87 percent funded — with Gov. Rick Scott recommending in his budget that state lawmakers add $552 million in taxpayer money to fund the state’s share of the fund’s liability.

It’s those payments Weatherford and other supporters of the plan would like to see reduced. Florida’s fund is currently considered strong by most analysts, with the recommended minimum level of funding usually considered to be 80 percent.

Unions oppose ending the defined benefit option for new employees.

They say the move would undermine a strong pension plan and that it is driven by politics — with the Republican-controlled Legislature intent on weakening union strength in Florida.

“This is more about ideology than money,” said Rich Templin, spokesman for the AFL-CIO.

The Florida Retirement System has 623,011 currently employed members, including teachers, state workers, and many local government employees, police officers and firefighters.

Within the system, workers currently can choose between the traditional pension or, for the past decade, an optional 401(k)-like plan. The pension remains the favorite, though, with more than 500,00 employees enrolled, compared with only about 100,000 in the inverstment plan.

The pension fund has another 334,682 retirees enrolled who already collect benefits.

Closing the plan to new employees will rob the traditional pension fund of its stream of new dollars, Milliman concluded. It will also create a system where only older workers looking forward to gaining larger pensions, remain in the fund.

 

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16 Responses to “House plan to close traditional pension to new workers carries costs, study concludes”

  1. Thomas Says:

    The republican could care less what the study reveals. They are poised to push new hires into 401′s run by private firms, putting the profits into the hands of the private firms. Republicanshave got to be the slowest learners in the state. They still think they will exist without the backing of those they represent. I guess the big-businesss who own them have done a good job of buying out what little ethics they had.

  2. Ric Says:

    It doesn’t help that the very people who depend on these pensions (law enforcement) for the most part vote these ethically challenged Republicans into office.

  3. luckydog Says:

    I worked for a county govt. in Georgia that moved to the same type of pensions in 1991!. Florida is way behind!.

  4. Scott R Grande Says:

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  5. Searcher1 Says:

    So, the Repubbies want the Unions to be REALLY MAD for the next election cycle. Maybe the Repubbies want to ride Rick Scott’s coattails and get voted out of office, too……

  6. 2014 Says:

    2014!!!

    ENOUGH IS ENOUGH!!!

    KICK THE FASCIST REPUBLICANS OUT!!!

  7. Kevin Says:

    The problem with some of these government pension plans is that they are way too generous with the tax payer’s money. Many people are able to retire still quite young fully vested with many more productive years ahead of them. I’m not sure it’s fair that I have too work till I am 70 years old so I can pay a retired cop or teachers bills who decided to retire at age 55. That said it would be unfair to change the rules on existing employees who have been promised this as part of their compensation package. Ending this offering for new hires is appropriate. There is no shortage of people in either profession so I don’t feel it’s necessary to offer such a generous enticement to fill these positions either. The future of the plan could be in jeopardy for those who bought in within the last 10 years. I don’t see how the plan can remain solvent without the infusion of new contribution funds. However since most republicans have deep distain for “the government worker” default is probably part of the plan.

  8. bill Says:

    These ideologues better have their numbers cross-checked before they mess with peoples retirements!

  9. bill Says:

    …BTW…is pitiful the way the American worker thinks today….I feel like I am screwed, so I want every one else to be screwed too….that thinking is really taking us somewhere….this country is fast becoming a heaven exclusively for the rich and the powerful! …Welcome to the new 3rd world, where you can pay miserable wages and no benefits, while increasing your profits to no end!!

  10. SOFLGirl Says:

    I do not get it. The government has an abundance of money. All it has to do is print more money. This extra money can be used to fund pensions which will eventually be spent in the economy. This is how to keep the economy strong. There is NO harm in printing more money as it is infused back into the system. It is all GOOD.

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