Pension Reform Stalemate goes to Conference!

Since both Houses (the Senate and House of Representatives) sent each other their differing versions of pension reform, and refused to accept either, it will now go to a Conference Committee.


Things will start to get crazy now.  The Senate has passed SB 2100, which is their version of pension reform.  The House, however,  presented  HB 1405, with language that does not coincide with SB 2100.  In order to become law, the same bill must pass both houses in identical language – which they have not.  Since both Houses (the Senate and House of Representatives) sent each other their differing versions of pension reform, and refused to accept either, it appears the matter will now go to a Conference Committee, probably next week.

This is a quote from the Senate Website in regard to the Conference Committee: “For a bill to become an act it must be passed by both houses in precisely the same words and figures. The second house frequently amends and returns the bill to the house of origin.  In the case of bills with substantial differences, the shortcut of a conference committee likely will be taken almost immediately.”  The Conference Committee is really just a horse trading forum; where members from both houses participate in a negotiation process.  According to the Senate site “Conference committees are intended to reconcile differences. This suggests a give-and-take process because if a majority of the conferees from either house refuses to budge, the conference would be stalemated and the bill could fail. However, this rarely happens”.

Ultimately, a group of legislators go into a room, and come out with an agreement.  The process could be either good or bad, as the group doesn’t have to conform to the original bills, and can come up with their own version.  The Speaker of the House, Dean Cannon, and President of the Senate, Mike Haradopolos, have indicated they think they will be ready to go to Conference next week.

Some key differences that will need to be worked out:

  • The Senate allows the continuation of DROP until 2016; the House would eliminate it after 7/1/2011.
  • The Senate has a stepped employee contribution level, 2% on the first $25k, 4% on the next $50k, 6% on compensation over $ 50, The House version is a flat 3% of gross compensation.
  • The House increases the retirement age for Special Risk to age 60 or 30 years of service, the Senate leaves it at age 55 or 25 years of service, but increases  the retirement age for regular members from 30 years of service and age 62, to 33 years of service and age 65.
  • The Senate does away with future COLA credit after July 1 on a pro-rata calculation, the House keeps it intact.  It would be the opinion of FRS Options that this is by far the most important issue.  Doing away with the COLA will have a significant impact on both your future pension, as well as a decreasing affect on you potential Lump Sum value.

As it heads to conference, it is anyone’s guess as to what will stay and what will go.  There are significant issues for the Conference Committee to try and work out, and will have a significant impact on your retirement.  It is more essential now more than ever to contact Speaker Cannon, President Haradopolos, and Budget Chairman Senator J. D.  Alexander.


  • FRS Options

    Nobody is taking away the DROP.