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House plan to close state pension system to new employees moves forward

TALLAHASSEE — A plan to close Florida's pension system to new government employees passed a key House committee along party lines Friday, with Republicans saying the change would shore up retirement plans for government workers and Democrats crying foul.

The proposal, HB 7011, would force government employees hired after Jan. 1, 2014, away from the state pension system and into 401(k)-style retirement plans.

The measure — which would not affect the nearly 1 million current pension members of the Florida Retirement System — is a top priority of House Speaker Will Weatherford, who says it's necessary to salvage state finances and prevent a future bailout that states such as Illinois are facing.

"If we address our pension structure now, and make minimal changes, we can avoid having to deal with potential massive shortfalls in the later," said the bill's main sponsor, Rep. Jason Brodeur, R-Sanford.

But Democrats said there was no reason for an overhaul. Florida's pension fund, the fourth largest in the nation, is funded at about 86.9 percent, above the national average of 75 percent. Many local governments and school districts also participate in the pension system.

"Clearly this is a situation where we have a solution looking for a problem," said House Minority Leader Rep. Perry Thurston, D-Fort Lauderdale. "When you have a system that's top 10 in the nation, top five in being funded, we're tinkering with a problem that does not exist."

Aside from ideological differences between Democrats and Republicans, part of the disagreement about a need for change centers around a study that was supposed to provide objective numbers.

The Florida Division of Management Services hired Milliman, a Vienna, Va., actuarial firm, to estimate the projected costs of the changes. Upon its initial release last month, lawmakers learned that the study didn't include important assumptions and did not compare the proposed plan to keeping the pension system as is.

So Milliman had to redo the study. The revised study was supposed to be an "apples-and-apples" study that compared the costs of the pension plan with those of a 401(k)-system.

The results: The state could enjoy significant savings by closing the pension system to new employees — up to nearly $10 billion by 2043.

Milliman actuary Robert Dezube, however, said he wouldn't depict the study as being positive or negative. He said the projections were far from precise and were based more on trends. If they were accurate projections, he'd be doing something else, he joked.

Former director of the Florida Division of Retirement, Sarabeth Snuggs, said she found problems with the revised Milliman study as well.

"This was not an apples-to-apples comparison," said Snuggs, who served as director from 2003-12. She called the proposed changes unnecessary and "strictly a political decision."

The House bill has another committee stop. There is not yet an identical proposal in the Senate.

House plan to close state pension system to new employees moves forward 03/08/13 [Last modified: Friday, March 8, 2013 9:17pm]
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