FRS Legislative Alert, HB 303

House Bill 303 was introduced by Representative Fredrick Costello (click for contact information)of Ormond Beach. It is a far reaching and devastating proposal.

THIS BILL WAS WITHDRAWN AT 4:28 THURSDAY, JANUARY 27, 2011.  ONE WEEK AFTER IT WAS PROPOSED!!!!

House Bill 303 was introduced by Representative Fredrick Costello (click name for contact information)of Ormond Beach.  It is a far reaching and devastating proposal for Florida Retirement System members, particularly FRS Special Risk members.  The bill was filed just today, so we have had very limited time to study it.  Please note also, that we are not lawyers, so some of the language is somewhat subject to interpretation, but as we read it, the bill includes the following changes:

Service credit would be reduced from 3% to a maximum of 1.6% for ALL employees for future service after June 30, 2011.  Higher credits for previous years will be honored, but all future years for ALL employees will be reduced to 1.6% per year.   (HB 303, lines 112-125)

Effective December 31, 2012 the Deferred Retirement Option Program (DROP program) is terminated for ALL members.  Those already in the DROP will be paid out and terminated.  (HB 303, lines 147-152)

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FRS Change Ahead

Judging from the amount of media coverage the Florida Retirement System and your benefits are receiving, it isn’t a question of whether there will be changes made this legislative session, but a question of what change and how much.

“Change is inevitable”…

After last weeks run-in with HB 303, we might review the overall challenge to FRS Participants.  Judging from the amount of media coverage the Florida Retirement System is receiving, it is not a question of whether there will be changes made, but a question of what change and how much.  Our newly inaugurated governor, Rick Scott, has made it very clear that he believes FRS is a “ticking time bomb”. Last year’s legislative session included over 35 bills introduced to make changes at FRS, and we can speculate that those proposals might simply be foreplay for this session’s action.  Governor Scott has announced he will make his recommendations known by February 4th.

The Florida League of Cities has waged a full scale war against your Pension.  Representatives and Senators from both parties, from Senate President Mike Haridopolis, a Republican,  to Senator Jeremy Ring,  a Democrat  and chairman of the Senate panel that is considering the changes, are out to change the Florida Retirement System.  Senator Mike Bennett announced his intention to introduce legislation to make sweeping changes months ago (See Is Florida Paying Former Employees too much).   Florida Tax Watch has recommended far-reaching changes of the Florida Retirement System

Why  is this such a major issue all of a sudden?  As of the FRS Annual Report from June 30, 2008, the Pension Trust was slightly “overfunded”.  When Lehman Brothers went bankrupt in September and created a financial panic, the assets in the plan dropped significantly, and the fund became “underfunded” for the first time in 11 years.  As of the most recently published annual report, for the period ending June 30, 2009, the fund was only 87.5% “funded”, with some $96.5 billion.  According to the MyFRS website, as of December 31, 2010, the FRS pension assets were up to almost $124 billion.  That is putting the fund assets back on par with where they were in 2008 when it was fully funded, and is a gain of some $30 billion since the 87,5% funding report .  According to the FRS and SBA Annual reports, the amounts are as follows:

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Special Session to Override Vetoes

Florida legislature has called a special session to begin on November 16th at 10:00 specifically to consider overriding the vetoes Governor Charlie Crist

The newly elected Florida legislature has called a special session to begin on November 16th at 10:00 specifically to consider overriding the vetoes Governor Charlie Crist instituted back in May.

As you will recall, Crist’s veto nullified a reduction in the interest rate paid to DROP participants from 6.5% down to 3% in House Bill 5607. It also would have established the basis for employer contributions into the pension plan.

While we don’t know if those line item vetoes will be a target of the special session, we can only imagine the legislators will be keen on overriding anything that Crist Vetoed. You will recall that these are the bills that passed without being discussed in committee where opposing views could be voiced.  It is essential that all 685,000 members contact  their Representatives and Senators and urge them to NOT override the FRS veto’s, as well as making sure your Legislators know that you do not want them reducing or changing the benefits that were promised to you at the time of employment.   Numbers count,  encourage your fellow workers and FRS members to call and share this information.

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Be Prepared !

… it would be implausible to believe significant changes aren’t in store for FRS people and their benefits in the 2011 session.

The Florida Senate “Interim Work Plan 2011 Session” has been published on the Florida Senate Website, and there doesn’t seem to be any entry or schedule for the “Summer Study” that was promised (please see FRSOptions post “All FRS Legislation put on hold”).  During the 2010 Legislative Session, Senator Mike Bennett announced that all changes to FRS would be put on hold pending a summer study on how the legislators should best proceed in making potential changes.  The pending study provided a respite for Florida Retirement System participants, as none of the thirty-plus bills that had been introduced in the 2010 session came to fruition.

In the absence of the study it is unclear what course the legislators will take.  Hopefully it will not be a repeat of the maelstrom of bills introduce this past session.  It appears the press has been enlisted to a large degree, as there is seldom a day goes by that an article doesn’t appear condemning the Florida state pension plan and the Deferred Retirement Option Plan (DROP) as being overly generous, and an unfair liability to the taxpayers of the state of Florida.  (We attempt to post a sampling on a regular basis on our sister site on Facebook.com/FRSOptions).

In light of the previously proposed bills, the vetoed changes, and the changes suggested by the “Florida Tax Watch”, which is a lobbying group that boasts of several prominent Legislators including the following:

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Crist Vetoes cut in DROP interest?

Governor Crist exercised his line item veto power to veto HB 5607 which would have cut the interest rate paid on DROP form 6.5% t0 3%

We have just heard that Governor Crist exercised his line item veto power to veto HB 5607 which would have cut the interest rate paid on DROP from 6.5% t0 3% for those entering the DROP after July 1 of this year.  According to our sources, Crist vetoed the cut because he didn’t like the way it was rushed into the legislation at the end of the term, without going through the normal process!  We will keep you informed.