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Pension deal requires Florida workers to contribute 3 percent to retirement

TALLAHASSEE — Teachers, police, firefighters and state workers would face a 3 percent cut in their take-home pay as the state uses the money to pay for retirement costs under a pension agreement reached late Friday by state legislators.

The agreement would require all public employees enrolled in the Florida Retirement System to have 3 percent of their earnings shifted to their retirement accounts, beginning July 1. Combined with other adjustments in the state benefits' plan, the savings to the state will be $1.18 billion — more than budget writers planned in their first budget drafts as they attempt to close a $3.8 billion deficit. The pension agreement is expected to be approved as part of the budget.

The extra cash from state and local government workers — about $234 million in the Senate's proposed budget and $471 million in the House's — leaves room for bill drafters to use the additional revenue to resolve differences in the health care budgets or to help finance the first installment of Gov. Rick Scott's plan for a corporate income tax cut, which had been initially rejected by both chambers.

The pension agreement also will hit workers in their retirement years. It calls for the elimination of the annual 3 percent cost-of-living adjustment for all employees enrolled in the Florida Retirement System after July 1, 2011. Anyone who is currently retired will continue to receive COLA payments, and current employees will keep the benefits they have already earned when they retire but will not earn any more after this year.

That provision alone saves the state $404.8 million. Lawmakers attempted to soften the hit by requiring that legislators reinstate the COLA payment on June 30, 2016. One legislature can't bind future legislatures, however, so the change will only happen if lawmakers agree to it during the 2016 legislative session.

Legislators kept the popular deferred retirement option program, known as DROP. It allows workers nearing retirement age to accumulate five years' worth of retirement pay, while they continue to work so that they can gather a lump sum upon retirement. But rather than guaranteeing that money will earn 6.5 percent interest, as is current law, legislators will allow them to reap 1.3 percent interest on their money, saving the state $81 million.

The plan also reduces benefits for any new hires who enroll in the state retirement system after July 1. They will have to work longer before they are eligible to retire. Special risk employees, such as police, firefighters and paramedics, would retire at age 62 instead of 60, or after 30 years instead of the current 25, whichever comes first. All others, including newly hired teachers, would have to wait until age 65 to retire instead of 62, or after 33 years instead of 30 as it is now. The change saves the state $145.3 million.

Also, public employees will have their retirement benefits calculated based on their "average final compensation" over the last eight years of employment, instead of the last five years as is current law. That will save the state $68 million.

The legislative package rejects much of the governor's proposals for pension overhaul, although it modifies his call for an employee contribution, keeps his plans to eliminate the COLA and raises the retirement age. Scott called for employees to face a 5 percent salary cut to pay for retirement, while the agreement calls for 3 percent. The governor also recommended eliminating DROP, ending the traditional defined benefit retirement plan, and requiring all new workers to join a defined contribution, or 401(k)-style, retirement plan — ideas rejected by legislators.

Lobbyists for Florida's largest unions, whose members took leave time to come to Tallahassee every week to lobby legislators and testify before committees, were resigned to the changes.

"It could have been a lot worse,'' said Matt Puckett, executive director of the Police Benevolent Association. "They had a budget hole they had to fill and they did the best they could to make sure it wasn't totally on the backs of most people. But it gives us something to work on in future years — to restore these cuts. I don't like the 3 percent contribution, but I know five's a lot worse."

Lisa Henning, lobbyist for the Florida State Fraternal Order of Police, said that watching legislators use the salaries of law enforcement, who haven't received pay raises in years and face increasing risks as their ranks are cut, has been a discouraging experience.

"It has broken morale,'' she said. "It has broken the spirit of a lot of people. The average law enforcement officer did this job not to get rich but to be a hero. Most of them really love their job."

Mary Ellen Klas can be reached at meklas@miamiherald.com.

Pension deal requires Florida workers to contribute 3 percent to retirement 04/30/11 [Last modified: Saturday, April 30, 2011 10:01pm]
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