Bill phasing out retirement pensions for state and local workers passes FL Senate

The Florida Senate voted, 24-16, along party lines on Thursday to stop offering the state’s traditional pension plan to new hires beginning next year, waiving aside warnings that the shift would leave the pension system unsustainable over the long term.

Senate President Wilton Simpson was behind the legislation (SB 84), which would require all workers joining state government’s workforce after July 1, 2022, to forgo the traditional “defined benefit” pension plan in favor of an investment vehicle like 401(k)s that don’t guarantee retirement income.

There’s no companion bill in the House but that doesn’t mean the lower chamber couldn’t take up the measure during horse-trading on the state budget as the annual legislative session winds down.

The change would affect workers in state, local, and regional government, schools, and public hospitals. It would not apply to police, firefighters, and corrections officers, who could continue to join the pension plan. Union officials are firmly against the change.

Democrats argued the bill would break the promise the state makes to employees — accept less money now in return for a more secure retirement. As it is, the state’s contribution to the fund is 0.6 percent, Democratic caucus leader Gary Farmer, of Broward County, said.

“We’ve got a sustainable plan. There is no unfunded liability problem,” Farmer said. “This mousetrap isn’t broken. We don’t need a new one.”

The bill’s supporters cited the system’s $36 billion in unfunded liabilities —$164.3 billion in assets against $200.3 billion owed — or 82 percent the money needed to satisfy all obligations if every covered worker retired today.

Ash Williams, who manages the system on behalf of the governor and Cabinet, told his bosses last month that the plan is sustainable and that Florida has retained its AAA status among the financial ratings agencies.

Ray Wesley Rodrigues, the Lee County Republican carrying the bill, countered that the state will pay more than $2 billion this year in interest on its unfunded liability, and that compounding interest will increase the unfunded obligation to $42 billion in three years.

Furthermore, 75 percent of workers over the past 2 1/2 years have opted for a 401(k) plan over the pension, he said.

“The majority of the new employees are there. If we want to limit our liability and ensure that we put our plan on the most actuarially sound basis so that we can keep the promises that have been made, then this bill is the step that will do that,” Rodrigues said.

Democrats countered that, with fewer financial participants in the plan, the pension system will prove unsustainable eventually. And they said the change could discourage skilled workers from joining the government labor force.