TALLAHASSEE -- Traditional pensions for new state and county employees, including teachers, would end under a proposal that's advancing through the Legislature.
The House Appropriations committee on Friday voted 12-9 along party lines on a bill that would do away with guaranteed pensions for workers hired as of January 2014. It would replace pensions with individual investment accounts similar to 401(k) plans.
That will save the state nearly $13 million a year by 2016, according to Rep. Jason Brodeur, the Sanford Republican who's sponsoring the bill (HB 7011).
"This bill reduces the state's risk, saves the taxpayers a great deal of money, keeps every promise made to every current state worker, and offers robust benefits for our future state workers," he said.
Democrats, labor unions and other critics are fighting the effort, saying state and local governments will have to pay more into the current pension plan because there will be fewer members paying into it.
Republicans and business groups support Brodeur's measure. American companies have generally moved from pensions to 401(k)-style plans over the last few decades because they cost employers less money and shift retirement investment risk from employers to employees.
"We have to do a better job of educating our employees," said Rep. Joe Gibbons, a Hallandale Beach Democrat. "They're going to be assuming the responsibility for understanding investing and (become) day traders, in a sense," referring to amateur stock investors who try to make a profit in the course of one day.
"They're not day traders; they can just put their money in and forget about it," Brodeur responded.
More than 900,000 current employees and retirees belong to the state's pension plan. State workers make up about a quarter; the rest are teachers and local government workers, such as law enforcement officers and firefighters. Those now in the Florida Retirement System can select a traditional pension or a 401(k)-style plan.
Florida's overall pension fund, valued at roughly $133 billion, recently had been estimated to have a $19.2 billion gap between the money it has and the money it needs to cover all current and future benefits. That gap was still within a healthy range as considered by many financial experts, but Gov. Rick Scott has questioned the long-term health of the pension plan.
A legislative financial analysis from last month said the Florida pension plan's "10-year performance exceeded that of similarly-sized funds in other states," but "recent market volatility has made it difficult ... to meet its overall investment objective."
The Florida system is now 87 percent funded. Financial experts say pension plans that are at least 80 percent funded are considered safe because employees retire at different times.
"So stop beating us to death with `ticking time-bombs' and all these other ridiculous statements," Raymond Edmondson, a public pension advocate, told lawmakers.
Public employers contribute 3.55 percent toward pensions for most workers, and as much as 11 percent for those in high-risk jobs. A law backed by Gov. Scott that went into effect July 2011 requires teachers, state and county workers and some municipal employees to kick in 3 percent of their pay toward their pensions. It also repealed the 3 percent annual cost-of-living increases.
Employees complained the requirement amounted to a pay cut. After a lawsuit, the Florida Supreme Court upheld the law by a 4-3 vote.
Brodeur's bill, which also would end disability benefits for new workers, next goes to the House State Affairs Committee.