The Florida House of Representatives recently passed legislation that would move new employees in the Florida Retirement System (FRS) from a defined benefit pension plan to a 401(k)-type defined contribution plan. The bill moves to the Senate for consideration.
Committee Substitute (CS) /CS/HB 7011 would eliminate the defined benefit pension plan for teachers, police, firefighters, and other state and municipal employees enrolled in the FRS on or after January 1, 2014, and would require them to participate in a defined contribution investment plan. Employees currently have a choice between both plans. Employees who are already enrolled in the defined benefit plan would not be affected.
The legislation would also provide a new death benefit to future members of the Special Risk Class, which would require that the employer must purchase a life insurance policy equal to 10 times the employee’s salary. It also maintains the disability benefit offered under current law to all FRS employees.
House Speaker Will Weatherford said the bill would “provide savings for Florida’s taxpayers and financial certainty for our state, while most importantly offering future employees a meaningful retirement benefit they control.”
“These sensible reforms will protect current employees and offer a sound investment plan to future employees, while being realistic about the commitments our state government can continue to make,” said Representative Jason Brodeur. “By making small changes now, we can replace an antiquated, unsustainable pension system with something more certain and avoid making drastic changes in the future.”
Representative J.W. Grant compared the state pension fund, which is 87 percent funded, to the Titanic. “At one point, the front page of the New York Times advertised the greatest ship in the world,” Grant said. “It was more than 87 percent afloat when it ended its voyage.”