Florida Legislature Votes To Slash Police, Fire Pension Contributions

TALLAHASSEE &#8211 Three days after a trial judge ruled the Legislature’s 2011 effort to make public employees pay part of their pension costs was unconstitutional, lawmakers passed another pension bill reducing government contributions to more than 100,000 public employees.

On the last day of the 2012 Legislature, the House and Senate endorsed House Bill 5005, which cut government pension contribution rates for state workers, law enforcement officers, county workers, school employees and university workers who are part of a 401(k)-type retirement plan.

The bill is awaiting the approval of Gov. Rick Scott, who has made cutting state pension costs one of his top priorities. Scott, who has until Saturday to act on the bill, has not taken a position on the latest measure.

The cuts are dramatic in some cases.

For police officers, sheriff’s deputies and other law enforcement members who fall into the “special risk” class, the government contribution to their retirement will drop from the current 18.3 percent of their salaries to 12.3 percent.

Workers in the “regular” class would see the government contribution cut from 6.25 percent to 3.55 percent. University and state college employees would have their employers’ contribution to their retirement cut from 7.43 percent to 5.15 percent.

“I had concerns that it would hurt the rank and file and sure enough it did,” said Sen. Mike Fasano, R-New Port Richey, who was one of two senators who voted against the bill.

The Florida pension system has 644,000 active members. Most — some 541,000 — are in the traditional pension plan. But another 103,000 are in the 401(k)-type plans that were pushed by former Gov. Jeb Bush as an alternative to the traditional pension plan and have been available to public employees since 2001.

The alternative investment plan is attractive to some public workers, particularly those who may only work for the government for a short time and want the ability to take their retirement investments with them to a new job. It’s attractive to the government agencies because they do not have to guarantee the workers’ benefits under the investment plan. Instead, the workers’ retirement payments would be based on how their investments, which they direct themselves, fare over the years.

Last year, lawmakers decided to make all workers involved in the pension system begin contributing 3 percent of their annual salaries to their retirement plans. It was the first time Florida public employees had to contribute to their retirement since 1974.

But in early March, Circuit Judge Jackie Fulford found that measure unconstitutional and her decision has been appealed to the Florida Supreme Court.

Meanwhile, in the waning days of the session, as part of the overall budget plan, legislative leaders decided to make a further adjustment to the 401(k)-type plans. Although those workers also would have to contribute 3 percent of their salaries as part of the 2011 legislation, lawmakers did not change the employer contribution rate last year.

Reflecting the state’s lower support for the traditional pension plan, lawmakers argued that the government contributions for the 401(k)-type plans should also be adjusted downward.

The bill, if approved by Scott, would save the state and other government agencies more than $172 million. Local school boards would see a $53 million savings, state universities $42 million and counties $49.5 million.

But opponents of the bill see it as another move undermining retirement plans for public workers. The employer contribution cut would come on top of the 3 percent mandatory contribution of last year — which most workers view as a 3 percent pay cut. It would also mean the workers in the 401(k)-type plans would have less money to invest and less money to retire on in the future.

Fasano said the timing of the bill, put together as part of the final budget negotiations between the Senate and House, made it difficult to thoroughly review the impact.

“I did not feel comfortable voting for something I truly did not understand and nor was it explained to us fully” by Senate Budget Chairman J.D. Alexander, Fasano said. “It’s easier to explain a no vote than it is to explain a yes vote.”

After the session, Fasano said he learned the bill would have a major impact on some workers’ retirement plans. In Pasco County, which Fasano represents, he said the local sheriff told him more than 100 law enforcement officers would face reduced retirement contributions.

Fasano said the 401(k)-type plans — also known as an “investment plan” or “defined contribution” plan — was something he supported and is a way to reduce the state’s liability for the main pension fund.

But he said decreasing the government contribution rates will make the option much less attractive to workers.

“This certainly takes away the incentive for anyone to even consider going into the investment plan or defined contribution plan if they see that the contribution that’s coming from the Florida retirement system is going to be reduced significantly,” he said.

Alexander, R-Lake Wales, said the bill was aimed at balancing the state’s financial support for both the traditional pension plan and the 401(k)-type plans.

“Arguably, it might” reduce the workers’ incentive for opting for the alternative plans, he said.

“But it’s hard to argue that an employee should receive more retirement benefits in one plan than another,” Alexander said. “The bill simply made the state’s contribution the same in either plan.”

From The Gainesville Sun.

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