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Retirement Planning > Retirement Investing

Florida Senate rejects pension changes

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TALLAHASSEE, Fla. (AP) — The Florida Senate on Tuesday defeated a proposal to revamp the state’s vast public retirement system for future employees, denying House Speaker Will Weatherford one of his top goals for this legislative session.

See also: Baltimore mayor wants no pensions for new hires

Republican Sen. Wilton Simpson said he was giving up on his efforts to pass a pension overhaul this year after his colleagues in the GOP-led Senate rejected the approach preferred by the House.

The plan presented by Simpson resembled the House version by proposing to keep out new state and county employees and teachers from Florida’s traditional pension plan. After a long debate, 18 senators voted for it and 22 against it.

Simpson offered the House plan (HB 7011) with a few alterations. His version would have done away with guaranteed pensions for workers hired as of Jan. 1, 2015, one year later than the House approach.

Both versions would replace pensions for future hires with individual investment accounts similar to 401(k) plans, but they did grandfather current employees in the existing pension plan.

See also: Kan. House panel ends push for 401(k)-style plan

The GOP-led House passed its version by a 74-42 vote in March.

Simpson said he wouldn’t push his own pension bill (SB 1392) because House leaders had signaled their opposition to it.

“So I don’t want to waste Senate time debating a bill that’s not going to pass the House,” he told reporters.

Weatherford also acknowledged that his priority was dead for this session, but he said that he would try again in 2014.

“We didn’t get quite get there, but that doesn’t mean we can’t still reform pensions,” he said. “It just means we just have to come back and try all over again.”

The vote against Weatherford’s pension proposal was a stinging defeat for the young House speaker, but he and Senate President Don Gaetz have won passage of their other top priorities, including an education overhaul and changes to Florida’s ethics laws and to campaign contribution limits. The lone outstanding bill is a measure to change Florida’s election system, which Weatherford promised would still pass by the end of the session on Friday.

The debate about future pension benefits comes as other states have been following the lead of many American companies. They’ve generally moved from pensions to 401(k)-style plans for new workers because these plans cost employers less money and shift retirement investment risk from employers to employees.

See also: Time to boost retirement readiness at the worksite

Republican Sen. Jack Latvala spoke against the proposal during Tuesday’s debate, saying the current pension system is an important reward for public-sector workers.

A majority of state employees earn less than $40,000 a year, he said, so they rely on healthy pensions to sustain them after retirement.

Latvala personalized his speech, highlighting the situation of a highway patrolman who lives in his neighborhood.

“Every day he puts on his uniform, gets in his car and he doesn’t know when he leaves his house in the morning whether or not he’s going to pull somebody over and he’s going to walk up to the window and there’s going to be somebody shooting at him,” Latvala said. “And his salary is in the $40,000 range, after 29 years with the state of Florida. What he’s counting on is that pension.”

He later became choked with emotion when he recalled the deaths of two Florida firefighters a couple years ago while fighting a blaze.

“They both made $26,000 a year, which is barely the federal poverty level,” he said. “They worked for their pension.”

Latvala and other opponents of the proposal said that changing the pension system would make it more difficult to lure a quality work force into government work and into classrooms.

Hundreds of thousands of 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.

Old-fashioned pensions are best suited for many workers who lack investment skills, Latvala said.

“Some people can’t manage their money,” he said.

Traditional pension plans offer reliable income; states generally have to guarantee them with general revenue funds. But a retiree invested in a 401(k)-style plan is at the mercy of the market.

Simpson and other senators who backed the House’s approach raised concerns about the pension fund’s long-term stability. It’s an issue that lawmakers can’t keep avoiding, they said.

“Today we have real options on the table that are less draconian than they will be in five or 10 or 15 years,” Simpson said.

Republican Sen. Tom Lee said there’s a “fundamental, underlying concern by a lot of us that this system may not be here if we don’t protect” it.


Associated Press Writer Gary Fineout contributed to this report.

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