TALLAHASSEE, Fla. — A proposal to end guaranteed pensions for new teachers, state and county workers and other public employees began moving through the Florida Legislature on Thursday.
A House panel voted to introduce a committee bill that would replace traditional defined benefit pensions with individual investment accounts similar to 401(k) plans for employees hired after Jan. 1, 2014. It would shift investment risk from employers to employees, a growing trend in the private sector. Benefits can vary widely depending upon the performance of investments each employee chooses. The bill also would end disability benefits for new employees.
The measure is a top priority for Gov. Rick Scott and Republican legislative leaders. It cleared the Government Operations Subcommittee on a party-line 9-3 vote.
Republicans and business groups that support the measure contended the switch would save taxpayers money. Democrats, union officials and other critics argued it would have the opposite result.
Opponents also objected to taking a vote before actuarial studies, which are expected to resolve that question, have been completed.
Subcommittee Chairman Jason Brodeur, R-Sanford, assured his colleagues there will be plenty more opportunities to discuss and modify the measure when it is heard by other committees.
If passed, the proposal would be the second major change in the Florida Retirement System since Scott took office two years ago. A law passed in 2011 requires public employees to contribute 3 percent of their earnings to the system, in effect a pay cut.
Brodeur stressed that the bill would affect only new hires, not the retirement system’s 623,011 current active members — those now working — or its 334,682 retirees.
Only about 25 percent of all covered employees are state workers. The rest are teachers and local government workers including law enforcement officers and firefighters.
“It doesn’t hurt anybody who’s currently in the system,” Brodeur said. “It doesn’t break any promises to those who haven’t been hired yet and it doesn’t ask for any taxpayer increases either.”
Brodeur acknowledged that the Florida system now is one of the nation’s best-funded and well-managed pension plans.
Financial experts say pension plans that are at least 80 percent funded are considered on solid ground because employees do not all retire at the same time. The Florida system was 87 percent funded as of last June and since then its investments have grown by $10 billion to $132 billion as a result of the ongoing stock market recovery.
In some years the fund has topped 100 percent. That’s enabled the Legislature to divert about $12 billion in state contributions to other purposes over the past dozen years. Also, the 3 percent employee contribution is being used to reduce employer contributions instead of increasing the fund’s assets. Public employers now contribute 3.55 percent for most workers.
The bill’s supporters, though, say they are worried that kind of success cannot continue, citing huge unfunded liabilities racked by municipalities, other states and private companies.
Brodeur characterized the proposal as a minimal change as opposed to more drastic measures he said would have to be taken if the Florida plan suffers the same fate.