Florida pension revamp would push public workers into 401(k)-type investment plan
(The Center Square) – Armed with overwhelming majorities in both legislative chambers after November’s elections, Florida Republicans may achieve a long-sought goal in 2021 – a revamp of the state’s pension program for public employees, including teachers and law enforcement officers.
Senate Bill 84, filed by Sen. Ray Rodrigues, R-Estero, would require new public employees enroll in a 401(k)-type investment plan rather than in the Florida Retirement System (FRS), the nation’s fourth-largest public pension plan that serves about 5.1 million Floridians, including 4.425 million retirees.
According to SB 84’s legislative analysis, the 51-year-old FRS carries $36 billion in “unfunded liabilities,” the gap between assets and obligations, an exposure critics insist put the state at risk.
The bill offers an “investment plan” as an option to more than 644,000 active employees, 432,258 annuity recipients, 15,512 disabled retirees and 33,593 enrolled in the Deferred Retirement Option Program (DROP).
Under SB 84, employees hired after July 1, 2022, the “investment plan” will be the only retirement benefit provided for new state employees and workers in 177 cities, 151 hospitals, school districts and special districts, essentially making FRS a “legacy” program no longer accepting enrollment.
SB 84, which does not have a House companion, advanced through the Senate Governmental Oversight & Accountability Committee, 4-2, Feb. 4. It has one hearing before the Appropriations Committee to reach the Senate floor, likely soon with lawmakers kicking off their 60-day 2021 session Tuesday and joining every state legislature in the nation, other than Louisiana, now in session.
The proposal is adamantly opposed by Democrats, labor unions and a wide range of organizations as a partisan ploy at the behest of conservatives and corporate interests to kill the state-subsided retirement program promised public employees.
“It’s looking pretty rough for the people of Florida,” AFL-CIO Rich Templin told the Senate Governmental Oversight & Accountability Committee. “If you have a very big, influential lobbyist here in Tallahassee, you’re probably doing OK.”
But Rodrigues maintains the FRS’s $36 billion in “unfunded liabilities” means the state’s capacity to deliver its “promise” is on shaky ground.
“The only (pension plan) metric our employees care about is this: Can the state keep the promise it made to them when they accepted the employment and charted their financial future, counting on this pension to be there for them in the end?” Rodrigues said. “That’s the metric that is most important.”
In June, Florida TaxWatch (FTW) in its ‘Road To Recovery’ analysis recommended the Legislature enroll all new public workers into a “Defined Contribution Investment Plan” to “ensure FRS is actuarially sound going forward and avoid billions in future liabilities and to increase the retirement wealth of state employees.”
The move would save $2.7 million the first year and $9.8 billion over 30 years, according to Tallahassee-based FTW.
FRS’s swollen “unfunded liabilities” have been a concern for years. Last year, lawmakers adopted a bill increasing FRS employer contributions by $404.5 million a year — $232.7 million for school boards — to keep the fund from slipping further “underwater.”
As of early February, the FRS had a balance of $184 billion, an increase of $23 billion from last year at this time, and was paying out about $600 million a month, according to the State Board of Administration.
The increased employer contributions are doing what lawmakers wanted them to do, chip away at unfunded liabilities and enhance pension security, Democrats argue.
“Why do we need any legislation?” asked Rep. Joe Geller, D-Dania Beach. “FRS is a model nationally. I have to give credit where credit is due. The people who run it, seem to me, do a very good job. Leave it alone.”
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