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FRS RIP: Public Employees Hired After 2013 Would Be Shifted to 401(k)-Like Plan

| January 24, 2013

You'll have to pay for the cake, too. (Amy Kearns)

You’ll have to pay for the cake, too. (Amy Kearns)

A Florida House committee unveiled a proposal Thursday that would shift all future state employees to a 401(k)-style retirement plan even as the chairman indicated the measure’s future could depend on studies of the proposal’s financial impact.

The draft legislation, which has not formally been published as a proposed committee bill, would push all state employees hired after Jan. 1, 2014 into a defined-contribution plan instead of the defined-benefit plan that most state workers currently join. Supporters say the plan will make the retirement plan more predictable and takes the state off the hook.

“There will no longer be a blank check written by the taxpayers,” said House Government Operations Subcommittee Chairman Jason Brodeur, R-Sanford.

But Brodeur stressed that current employees would not be affected.

“This does nothing to pull back promises that were made in the past,” Brodeur said.

Democrats and unions, though, argued that the state’s pension plan is one of the best-funded in the nation and is financially sound.

“What exactly are we trying to fix here?” asked Rep. Irv Slosberg, D-Boca Raton.

In fact, critics of the measure say it could cost state taxpayers additional money, beginning with $150 million next year and escalating to $450 million within three years. The state would continue to pay until 2018, they said.

“We are looking at potentially billions of dollars in taxpayer revenue simply to fix a system which we’re still not sure what the problem with that system is,” said Rich Templin of the AFL-CIO.

The battle is a remnant of the fight two years ago between unions and largely Republican supporters of overhauling the retirement plans. Then, legislators voted to require employees to contribute 3 percent of their income to the retirement plan, but shied away from Gov. Rick Scott’s insistence that workers should eventually be shifted to a designed-contribution plan.

Unions eventually sued to block the 3 percent contribution, but the Supreme Court ruled last week that lawmakers had the right to make the change.

Rep. Ritch Workman, the Melbourne Republican who spearheaded the 2011 changes, said at the time that the existing system needed to be fully funded before moving to a 401(k)-style plan. But House Speaker Will Weatherford, R-Wesley Chapel, has said he thinks the state needs to make the switch. And Brodeur said that the state’s budget situation is now strong enough to consider the changes.

“Most of our concerns and risks about the current system are about our out years — years 15, 20, 25 — so by making a small change now, we can avoid drastic changes in the future,” he told reporters.

At the same time, he said the legislation’s future could be determined by a study that the House has commissioned to find out what impact the overhaul might have.

“If the study comes back, and it is not where we thought it was going to be, I don’t know how much appetite members are going to have to do something like that,” he said.

For his part, Workman said he’s now confident lawmakers will find a solution.

“I won’t support a bill that increases the liability to the taxpayer to get to a certain destination,” he said. “But I think we can get there.”

–Brandon Larrabee, News Service of Florida

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19 Responses for “FRS RIP: Public Employees Hired After 2013 Would Be Shifted to 401(k)-Like Plan”

  1. Samuel Smith says:

    Hahaha, oh boy. I imagine the investment firm that lobbies Tallahassee the hardest will be the one managing the funds, right? Mortgage-backed securities for Florida, here we come!

    On a more hilarious note, school teachers take note: there is literally no reason to come to Florida and teach here. You won’t get tenure and you won’t get a pension, and you’ll be underpaid. GO SOMEWHERE ELSE.

  2. Justice for All says:

    Know anyone who has retired on just a 401K? Just curious.

  3. Nancy N. says:

    Few private companies offer pensions these days. It’s all 401k’s in the private sector. My husband has never worked anywhere that offered a pension. People don’t stay long enough at jobs anymore to vest a pension that requires decades of service. Perhaps it is time for the public sector to catch up with that reality.

    • Samuel Smith says:

      Good point, there’s no reason for a good teacher to give decades of service now.

      • Nancy N. says:

        Even if a teacher wants to teach for decades these days, the odds of them doing it in the same district or even state for their entire career is low these days. Families are too mobile and two career families mean that one partner often has to move to accomodate the other’s career.

        • Samuel Smith says:

          I know 4 teachers that work in the Flagler school district and each one has been in their position for at least 5 years with no plans to leave. Anecdotal, sure, but my advice would be to look at the statistics instead of assuming.

  4. confidential says:

    Those are the 401K ‘s like my kids had, that were wiped out with the mortgage manipulated backed securities that caused the market crash! Workers lost half or most their 401 K’s while the like of Hedge Fund John Paulson along withy Goldman Sachs and others made billions in puts against the lending institutiions.”January 2008, hedge fund Paulson & Co. hired Greenspan as an adviser. According to the terms of their agreement he was not to advise any other hedge fund while working for Paulson. (During 2007 Paulson had foreseen the collapse of the sub-prime housing market and hired Goldman Sachs to package their sub-prime holdings into derivatives and sell them. Some economic commentators blamed this collapse on Greenspan’s policies while at the Fed.”.
    Workers given the only choice of 401k that are invested in derivatives don’t even know how much the trading managers charge them in fees for “the investments”. 401k’s are just pushed by Repuglicans to benefit their wealthy buddies Wall Street boys.

  5. Palmcoastconcernedcitizen says:

    Nancy N, that is the problem that you do not understand. Public workers work for less money and generally stay their entire career. Maybe you need to get with the times!
    Who else is going to work for the crappy pay public workers get and this wonderful thank you that they continue to recieve.
    This government is clueless, I cannot wait until elections to get rid of these jerks!

    • Nancy N. says:

      Get with the times? How old do you think I am, anyway? I’m barely over 40…I’m not some out of touch retiree who doesn’t know “how things are these days”.

      Families are mobile these days. The average person holds ELEVEN jobs over the course of their life. For younger people, that lifetime number is going to be much higher by the time they retire.

      The notion of staying in one job for one employer for your entire career is something that died in the 20th century. The government benefits system has simply not kept up with the times and the modern labor market because unions like to hold onto to those dinosaur benefits for their members. But the reality is that we need to bring government compensation and benefits in line with the rest of the labor market. Pensions are a thing of the past…pay market wages and offer market benefits.

  6. Alex says:

    If 401(k) is good enough for private sector employees it should be good enough for public sector employees.

  7. notasenior says:

    This is the same thing that the federal government did to federal employees in the late 1980’s. What makes this different from the private sector is that private sector employees can collect social security without the offset that is charged against government employee payments.

  8. Monica Campana says:

    In order to keep and attract good teachers a switch to this type of unreliable pension will require paying them enough so they can save; equivalent to what their level of education would pay in the private sector. Is the taxpayer ready for that?

  9. Popo3984 says:

    Hey for all of you that think we don’t deserve a pension how about the next time you need help call a crack head

  10. rickg says:

    It’s not surprising that the Republicans in this state would go after a pension plan that is one of the most financially solid plans in the country. Their motto should be… “If it works then destroy it.” They just can’t afford for government to look good. And just where do you think those 401ks will be managed???? I smell campaign contributions….

  11. BeachLvr84 says:

    As a public employee trying to leave and switch back over to the private arena, I’ll say that I agree that we should do away with pensions. That said, salaries need to be commensurate with private employment…. that’s right Nancy N…. you can’t have your cake and eat it too.

  12. Since 1987 says:

    As a public employee, with an advanced degree, I chose public employment due to the retirement offered. For nearly twenty years I took lower pay, no raises or cost of living because I knew it was a trade off for a decent retirement. Shame on our politicians and naysayers who are not seeing the overall picture and affect of what they are doing, and to the taxpayer who is voting for this and laying the road to a dead end. Teachers, Law Enforcement, and a myriad of other public sector careers will not be able to draw from qualified pools. Who in their right mind will want to do those jobs when you offer low pay and a 401K?

  13. Career Firefighter says:

    Again let’s attack something that is not broken. The Florida Retirement system has “NEVER” Let me make this even clearer “ NEVER, NEVER, NEVER” been underfunded, or mismanaged, it has always been in the black and even overfunded. @ Nancy N I take offense at your statement that people don’t stay long enough at jobs to vest a pension, and that died in the 20th century. And that the average person holds ELEVEN jobs over the course of their life. Well you’re wrong, I guess that I’m not just your average person then, I have been employed by my county for 25 years, have held just 3 different jobs in my life since High school, and all those have been related to each other. I have given to the people I serve my unselfish desire to serve & protect, and even almost lost my life in previous employers. All I ask is to be given what I was promised for exchange of Low wages, and that is my retirement. And now we have the legislators who spend let it’s their own, have caused this mess were in, to take from something that has never been an issue until now. So the next time you see a Cop, Fireman, or a teacher stop and thank them, and buy them a coffee, These are the real hero’s and not the zero’s who think of only themselves in Tallahassee. Whatever happened to if it isn’t broke, don’t fix it??????

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