Newly elected Governor Rick Scott has released his proposal for reform of the Florida Retirement System.  As expected, the changes are far reaching and dramatic.  The Governor’s Bill on Pension Reform (beginning of page 610) proposal is 213 pages long, so we have attempted to hit the highlights, as the details will unfold ad infinitum over the next several weeks.

“Floridians shouldn’t have to send more of their MONEY to Tallahassee to pay for non-essential government programs or solely fund the retirement programs of government employees.”

This quote from Governor Governor Scott’s speech today in Eustis seems to sum his position on the Florida Retirement System up neatly, by lumping you in with “non-essential government programs”.  Along with cutting your benefits, and taxing you to pay for future benefits, Governor Scott kicked off his self-proclaimed “job’s budget” by eliminating almost 9000 jobs in the state!

Points we believe pertinent are as follows;

Starting July 1, 2011 Investment Plan membership will be mandatory for all new employees (lines 684-689).  The FRS Pension Plan will cease to be an option for employees hired after June 30, 2011.  After July 1 the only retirement plan for all new hires is a defined contribution plan, similar to a 401k.

The Deferred Retirement Option Program (DROP) will be closed to new participants effective July 1, 2011.  Member participating in the DROP prior to that date will be allowed to continue in the DROP for their full term. (lines 2459-2462)

ALL members will contribute 5% of their Gross Compensation to the Florida Retirement System.  (lines 4932-4962)

The 3% cost of living adjustment (COLA) goes away for service after June 30, 2011.  Current members within the Florida Retirement System will be given a “pro-rata” COLA based on the percentage of their service prior to June 30, 2011, divided by their total service at retirement.  As we read this formula, a member who has completed 20 years of service prior to June 30, and works a total of 30 years, would get an annual cost of living increase of 67% of 3%, (20 yrs divided by 30 total yrs equal .67 times the 3% Cola factor), or a fraction over 2% per year.  (lines 2490-2513).  It appears those already collecting benefits will remain unchanged, and will continue to collect the 3% COLA they were promised.

Service Credit for Special Risk members shall decrease to 2% for all creditable service years after June 30, 2011. (lines 1908-1919) Credit will be given for each year of creditable service prior to that date on a pro-rata formula.

Special Risk Administrative Class will cease to exist on June 30, 2011, and beginning July 1, 2011 those members “shall participate in the Regular Class”. (lines 1146-1149)

Service Credit for Regular risk remains unchanged at 1.6% per service year.  As we read it, the Elected Officers Class reduces to 1.6% after July 1 (lines 1934-1937, 1878-1880), as does the Senior Management Class (lines 1923-1926, 1878-1880).

The classifications within the Florida Retirement System would be re-defined, most notably for “Special Risk” members .  As we read the proposal, it may not remove anyone from Special Risk that is already categorized as such, but it appears the criteria and process is a bit more stringent going forward.  Hopefully, more details will follow to clarify this section. (lines 735-948).  It is expected that Senator Ring’s upcoming proposal will further define the new specifications for Special Risk going forward.

The normal retirement ages appear to remain unchanged at age 62 or 30 (lines 3057-3063) years of service for Regular members, and age 55 or 25 years of service for Special Risk (3070-3075)

While there are other changes indicated,  we are hesitant to offer our interpretations or opinions, as the language is confusing to our un-legally-trained minds.  We are hopeful clarification will come in the near future, as the details seem pertinent to determining how the suggested changes will achieve the desired objectives as stated by Governor Scott.

According to the FRS Annual Report for 2009 (page 12, first line), the state’s contribution to FRS was $667.90 million.  This would indicate a major math problem for the Governor to achieve the $1.4 billion per year savings he has announced, since the entire state contribution was less than half of Scott’s declared savings.  While we are remiss to think facts would interfere with political rhetoric, this was beyond our comprehension.  It seems maybe the difference might come from the local governments, which leads us to believe the taxpayer may not save anywhere near the amounts projected.  The confusing language and the pertinent lines of the proposal can be found as follows:

Required Employer contributions effective July 1, 2011 are 5.23% for Regular Class, and 11.63% for Special Risk class. (lines 4961-4966), Employee contributions would be 5%.  Total contributions to the member’s (Employee) Investment Plan Retirement account will be 9% for regular and 11.25% for special risk (lines 5037-5042).  It appears the total contributions (employer plus employee) to FRS are 10.23% for Regular and 16.63% for Special risk, but only 9% and 11.5% respectively will be contributed to member’s accounts.  Does this mean the employer/employee contributions are higher than the amounts actually allocated to the members Investment Plan?  If we understand this correctly, the local governments would be collecting retirement funds that are not contributed to the retirement plan.  Lines 5587 through Line 5624 seem to reallocate the “savings” recognized by the local governments and passed on to the states General Revenue Fund.  We are hesitant to draw any conclusions on this point, and anticipate clarifying language to be forthcoming.

Section 35 (lines 5627-5637) would seem to be language that might accomplish the proverbial “CYA” for the legislators by stipulating that these changes are “a proper and legitimate state purpose … as required by s.14, Article X of the State Constitution and part VII of chapter 112, Florida Statutes.  Therefore, the Legislature determines and declares that this act fulfills an important state interest.” Article X, section 14 of the Florida State Constitution reads as follows:

State retirement systems benefit changes.A governmental unit responsible for any retirement or pension system supported in whole or in part by public funds shall not after January 1, 1977, provide any increase in the benefits to the members or beneficiaries of such system unless such unit has made or concurrently makes provision for the funding of the increase in benefits on a sound actuarial basis”.

Both citations from the Constitution and Florida Statutes pertain to the actuarial soundness of the Pension Plan.  Could it be the legislators are making changes to FRS Pension Benefits under the proviso that the plan is actuarially unsound, and therefore, the change “fulfills an important state interest”?  This is certainly a legal question outside of our ability to determine.

Ironically, the Actuarial Report on pages 36 and 37 of the most recent FRS Annual Report stipulates that FRS “meet  the requirements and intent of Part VII, Chapter 112, Florida Statutes, and Section 14, Article X of the State Constitution”. Furthermore, the State Board of Administration Releases 2010 Annual Investment Report further stipulates the financial soundness of the plan, and its “strong actuarial position and history of solid funding.” According to Ash Williams, director of the State Board of Administration recently discussed the Plan was near 2008 levels, when the plan was over-funded.

In a handout distributed to the Representatives on January 20 for the Pre-Session Information center, we would direct your attention to page 5.  According to the legislature’s own information, as of July 1, 2010 the plan was 87.9% funded with total asset values of $109.5 billion.  With a little simple math we can deduce that if $109.5 billion is 87.9% funded ($109,000,000,000 divided by .879 equals $124,500,000,000) then the plan would be fully funded at $124.5 billion.  As of January 31, 2011, according to the MyFRS.com website, the FRS asset value was $125 billion!

FRS Options believes all members should contact their respective legislators by phone and mail.  Emails may be sufficient, but they might be the easiest form to ignore.  When placing the calls, we would recommend the emotional content be left behind, and your call should be a calm and logical look at the facts.  We would also recommend you leave your party affiliation at home; this is a bi-partisan issue.  We fully expect Democratic Senator Jeremy Ring to introduce his proposals to the Senate, and up to this point, Ring’s comments have sounded eerily like Scott’s.  Consider questioning your Representative’s and Senators about the following;

1.       It can be argued the plan is well funded and financially sound, ask why are cuts necessary.

2.       The Florida State Budget is looking to have a shortfall of something close to $3.8 billion, out of a total budget of some $70 billion.  That budget is almost $4 billion more than last year’s approved budget.  Of that shortfall, Governor Scott is proposing Pension Reform to provide $1.4 billion of the shortfall.  In addition to reducing your benefits, he wants to tax all FRS members 5% of their total compensation.  Ask your legislator why FRS members should bear the burden of almost HALF of the total shortfall needed.  According to the annual report, the State contributions to the system are only about $668 million, or ONLY about ONE percent of the entire budget!

3.       Despite the propaganda in the press, FRS members are not retiring “high-on-the-hog”.  The average benefit to FRS members (according to the Annual Report page 10) is about $16,845, and the average member receives benefits for only 9.53 years (Annual report page 56, second line from bottom of page).  This is in stark contrast to the politicians that have painted a picture of retirement at age 45 and collecting benefits for the next 45 years!  Less than 11% of total employees (Special Risk, Ann. Rep. page 43) are eligible to retire after 25 years, and over 50% of FRS members are teachers.   Ask your legislator if this is an unfair retirement for employees who have dedicated themselves and in some cases their lives to the state of Florida and its taxpayers.

4.       Florida State Representatives and Senators are hired by you, to represent your interests in the Florida Legislature.  Let them know you want them to best represent you.

It has been demonstrated many times that your voice can be heard, and you can influence the way our legislators vote on the various proposals.  BE HEARD!

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  • mariann13

    Vote NO to Gov Scott’s Pension Reform.

  • Bob

    These figures do not take into account the proposal to move the Emergency Management Division out of the Department of Community Affairs and under the Governor’s office. This accounts for $241,593,605 and 128 positions which are not part of his current budget. So he is effectively reducing the net number of staff, though the budget does go up – primarily for economic development.

  • dburney

    Lets not just sit back and let this happen. The time is now to mobilize and get the Governor out of office. His anti special risk attitude is a power play and an act of revenge from all the fines and fraud charges he incurred. For him, its payback time. The following are instruction on how to remove a governor from office. If applies, “LETS GO TO WORK”

    Instructions.1.1
    Reside in the correct state. Only 18 states in the United States and the District of Columbia allow for gubernatorial recalls. Only residents in one of these states may recall the governor.

    2.2
    Submit the reasons for the recall. In 7 of the 18 states you are required to produce specific grounds for recall. This is not required in the other 11 states but even here, it’s a good idea to have your reasons for recall prepared and be ready to discuss them.

    3.3
    Learn the petitioning rules. Gathering signatures is part of any recall but the number of signatures and the time you have to gather them will differ by state.

    4.4
    Prepare for debate. During the recall process, the governor will be notified a recall petition has been circulated. At that time, he will have a chance to respond to the charges. Be ready to debate the merit of the recall.

    5.5
    Get to the recall election. The final step in the process is the recall election where you’ll be asked on the ballot if the governor should be removed from office. Get community members to vote in the election to increase your odds of getting the governor recalled.

    Read more: How to Recall a Governor | eHow.com http://www.ehow.com/how_2096902_recall-governor.html#ixzz1E4IdPemm

  • CARMENYRODRIGUEZ

    A PROTEST ON THE STATE LEGISLATURE ON APRIL THE 6 OF 100,000. WOULD OPEN EYE BROWS

  • Stoptakingmyretirement

    Can we sue Gov. Scott and all those who are changing what we signed up for when we got hired? I think we all have contracts with FRS, that says what we are entitled to?

  • Snady

    Rick Scott is here to hurt us not benfit us as state employees .Changing our retirement plan would hurt us tremondously alot of state employees stay here inspite of the lousy pay due to our comminment to the state . Only person that benfits here is Rick Scott

  • http://www.floridaretirementsystem.info FRS Options

    That is a legal question, and not within our capabilities to answer. We would speculate that benefits earned would be hard to take away, but future benefits might be a different story.

  • Let’s Act!

    Florida is not a recall state. Too bad too, a recall could realistically happen under these circumstances if it were legally possible here.

    But organizing a formal protest in Tallahassee might be a good idea. We have to organize now, though! What do you all think? I’ll take a day off and drive 6 hours to play along!

  • Ralph

    I need to correct what I said. Sen. Dockery said she would not affect my benefits if i am already retired. But my bewilderment remains.

  • scout

    We sheep are figuring it wrong. Compare the assets of the best funded private enterprise annuity with that of the Florida Retirement System, and the acutarial ability of each to perform its payouts. Florida Retirement System should win with no argument.

  • Florida-dude

    This will only close the FRS pension plan to new participants. The pension plan is fully funded, assets will cover liabilities. The investment plan was created about 15 years back and participants were given a choice of switching from the pension plan.

  • http://www.floridaretirementsystem.info FRS Options

    To the best of my knowledge, the legislators are not remotely considering FRS funds. It appears, they are considering taking some of the contribution money, and putting it into the general fund, instead of FRS

  • http://www.floridaretirementsystem.info FRS Options

    Statutes can be changed with a simple vote of the legislators. Changes to the Florida State constitution are a little more difficult.

  • http://www.floridaretirementsystem.info FRS Options

    HIS is not a ‘retirement benefit”. The language is clear, the benefit is dependent on the legislature granting the benefit, and can be stopped at the legislators whim.

  • Fury32fl

    Another cop in Florida gave his life today. That makes the total 8 this year and Feb isn’t even over yet. Rick Scott is garbage!!!

  • Engine37

    Thanks Batt Chief for you comments. 10 years into the fire service now and i was comforted knowing that despite being paid so little I was going to at least have a modest retirement that would cover my bills. I work for a city municipality under a my own retirement plan. The changes in the state trickle down to my little retirement plan. I ask the public to keep public servants in mind. We aren’t making the money people are making in the private sector. We are just trying to get by and hold on to our safety net at the end of our careers.

  • http://www.floridaretirementsystem.info FRS Options

    Florida is an “at will” employment state. The long and the short of it is you can quit for any reason, so they can terminate you for any reason (that is not illegal). Unless you are working with a valid “contract”, I going to guess you don’t have one! DROP is not a contract, and the language is very specific to that effect. The employer has NO obligation to keep you at your job for those 60 months, any more than you have to stay for 60 months. The legislature has increased FRS benefits multiple times in the past, so I have to guess they can also decrease them if they can get our duly elected representatives to pass such a change in what they feel is the best interest of the state. You will know for sure when some form of legislation passes, as the TV and media will be full of ads from the attorneys!

  • Don

    As a state employee elgible to retire now on basis of age, I elected last year to move away from the pension to the investment plan. There’s numerous reasons but the primary one was that I wanted to be able to make sure my family would get something when I kick the bucket. A lot of people don’t realize that if you go into DROP and elect option 1 where you pay a small amount of the monthly pay to have your spouse recieve a portion of you pay for a period of 10 years, the 10 years start the day you start DROP. So, if you join DROP and work 5 years before retiring you only have 5 years left that your spouse will draw that pay. The investment plan gave me the benefit of naming beneficiaries now so that even if I die today they would receive that money. Also, everybody is blaming Scott for this but last year around this time we saw a lot of the same proposals being put out by the legislators for Crist to sign but they never had time to get to them. Both sides can only propose. Neither can just pass this into law as far as I know.

  • Travelassie

    Excellent points! What hasn’t been mentioned here is that because of the low salaries Florida has traditionally paid to its state employees, it’s been difficult to attract and to retain qualified employees for state jobs. Many of those employees can easily get comparable jobs in the private sector for 25-50% more than the state pays, and it’s been the good benefits that have made those employees who can afford to work for those low salaries take the state jobs, and sometimes, even stay long enough to retire. I’m also a state employee working in a regulatory position, which happens to be federally funded using professional licensure/certification user fees and not taxpayer dollars-of course I know that this federal money goes into the state kitty where it isn’t distinguished from other revenue sources, but technically it’s not taxpayer money. I’m a licensed professional working for the state at approximately 50% less than what I’d make with a private employer doing the same job, but I like the job (and am fortunately not the sole provider in my family) so I’ve stayed, also counting on the pension ( which for me will be about $11,000 annually since I don’t have 30 yrs in the system, but I’m grateful for that).

    You mention the Special Risk Class applied to laboratory personnel and other medical personnel, I wasn’t aware that this had been done. The application of the Special Risk category class to these employees would have been in lieu of raises for these employees to make their salaries even close to approaching what they’d make for comparable jobs in private hospitals, laboratories, and other health care institutions. It’s been darn near impossible to hire these folks into public jobs, so often those they manage to hire aren’t the best qualified or have questionable work
    histories. I’m sure you’re aware of the numbers of state employees who stay long enough for valuable training and experience provided by the state ( at considerable expense to the state) and then quit to take comparable jobs at considerably higher salaries with private employers. And from what I’ve seen, state employees ( well, most of them, anyway) provide public services Floridians expect and take for granted. I’ve seen the same Floridians who complain about paying taxes for state employee benefits also complain that county code enforcement officials aren’t around on weekends, that “there’s never a cop around when you need one”….
    that their court cases aren’t moving along as timely as they should be, that a fire rescue call didn’t bring someone along as quickly as they thought it should, the list goes on and on… I’m guessing Rick Scott really cares only about his bottom line (although he should realize he’s not the CEO of Florida. but another public servant accountable to the taxpayers), but do these folks really think that these services will be improved by removing any incentives at all for hiring and retaining good employees for these jobs?

  • Lou

    What’s sad we we devoted our life to serving our people and community. We risk our life every day for less than private sector pay, give up time with our families to work on holidays and different shifts for our careers. We looked forward to some day enjoying the retirement we were promised in lieu of receiving pay others enjoy in the private sector and northern states, but now we are asked to contribute to pay for the 10% property tax cut enacted by our last governor. Do the math, the money the state is short is less than 10% of the total budget. It was a bad idea to use public funds to advertise a constitutional amendment and a worse idea to force all state, county and city governments to cut 10% instantly. This should have been phased in over 5 years requiring only 2% cuts a year. It was also a bad idea to do this when the entire country was and is in a recession near depression and Florida was hit far worse with home prices crashing, foreclosures and a loss of most construction jobs. Sadly most people feel homeowners insurance is the big problem in Florida forcing many with only one option, Citizens. I guess we couldn’t address that since many insurance companies donate to political campaigns.

  • B.Boger

    K-9 Deputy: I am in my 25th year as a law-enforcement officer in the state of florida and for 24 years I have been proud of what I do. In 24 years I have had several broken bones, I know have high blood pressure and I have had a procedure done on my heart to stop if it from beating to fast. All of this is a result of years of stress and hard work protecting the public. I am reaching the end of my career and would to be able to retire with the benefits I have worked for all of these years. So if governor scott has his way the life of many people that have worked hard to get to where I am now will be changed dramatically.

  • Guest

    What I find so frustrating about this total cancellation of DROP is that my 20+ years of retirement planning were built on having the funds from DROP when I reached retirement age. I come from a blue collar background and neither of my parents have retirement plans available to them. My mother at 70 and father at 78 are both still working and will have to work until they die. Therefore when I graduateed from high school at 17, I took a job for a state university because of the benefits. I immediately started making plans for an adequate retirement package so I would not be in the same position as my parents. I will hit 30 years of state service before 50, but have never had any intention of retiring early; I have always planned on entering DROP at 59 and working for the 5 years available to me. If I had known when I was younger, I could have planned differently, but now with the recession on, our benefit costs rising, and the new percentage I am expected to pay for my FRS pension, I cannot make up for the difference in not having DROP as part of my future retirement package. And I know people that have 30 years of service who are being told they can enter DROP before June 30th if they want to, but they cannot afford to retire early and take the IRS hit. I am a good employee, having won superior accomplishment and employee excellence awards, but my time investment to the state with the many unpaid hours of overtime and commitment mean absolutely nothing to Rick Scott. There is no “grandfathering” in of this cancellation of DROP by phasing it out or consideration of years in or even setting a cap on what you can make in DROP. There is no acknowledgement that part of the purpose behind DROP was to be able to plan for when the highest paid employees–those that have worked for the state the longest–would retire, rather than continue to work past retirement age when they are perhaps declining in productivity, but cannot afford to retire. No, we are all just cut off at the knees with this change. One final note…..Rick Scott and his supporters have sought out the highest paid faculty, administrators, etc. to make it seem like DROP is an extravagence. I would agree that there are people definitely getting a sizeable payout and this should be looked into. But I am speaking for the average staff member for the state who makes $50,000/year or much less. This cancellation of DROP, for us, is nothing less than devastating.

  • http://www.floridaretirementsystem.info FRS Options

    My guess is it is beneficial for you to switch now, as you lump sum will be growing by a smaller number (it peaks the 25th year in most cases) and if you check, it is probably around 2% after contributions. Once in the retirement plan, you can work as long as they will put up with you, and you will continue to get the employer and employee contributions each year, plus any investment returns.

  • Sgt. Dillingham

    Where is AFSCME in all of this pension reform and your local rep?

  • http://www.floridaretirementsystem.info FRS Options

    I don’t know!

  • Goonter1

    As a 25 year veteran law enforcment officer/Corrections officer. I feel that our pensions kinda represent where we live, meaning America.  The type of service (security) we give our Country is the higest on the planet and always has been.  You cant have a great country like America with poor Cops, Teachers and Firefighters.  If our pensions are dismanteled, the new officers will not stay around long enough to become seasoned officers and then you know what will begin to happen.   All of you Teachers, Firefighters and Cops just think of how many times you wanted to walk off of the job but you stayed because you did not want to lose your pension.