As you are aware, one of the better benefits within the Florida Retirement System has been the automatic 3% Cost of Living Adjustment that FRS adds to your Pension checks each year.  Over the course of a 24 year retirement, the COLA would almost double your annual pension, which would hopefully allow your standard of living to keep up with rising prices and inflation.

COLA is a simple process.  Each year, beginning on July 1, your pension check is increased by 3% more than what it had been for the previous 12 months.  That 3% compounds each year, meaning next year’s 3% pension increase will be added to last year’s pension increase, which was added to last year’s pension hike, and so on.  To illustrate, let’s assume you Pension check is $2500 at retirement.  Next year, it will be $2500, plus 3% ($75), so your pension check will be $2,575.  Year three FRS will add 3% to the Second year amount which is $82.50, so the third year checks will be $2,657.50, and so forth.  If you retire at 62, by the time you reach age 85 your monthly pension check will be almost $4,900!

As of July 1, 2011 there will be some changes made.

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For those of you that were interested in entering the DROP, you might not want to give up so quickly because of the decrease in interest rates.  The rate reduction from 6.5% to 1.3% initiated by the Florida Legislature as of July 1 does not necessarily make the Deferred Retirement Option Program obsolete.  Certainly, it lowers the earnings, but, the biggest part of the DROP sum is not interest, but simply your pension payments accruing each month in the DROP account.  There seems to be some misunderstanding about these numbers.  It appears that those of you choosing to enter the DROP on or after July 1 will earn the lower 1.3% interest rate on your pension payments.  If you are already in the DROP, and once you begin the DROP, you will NOT have to make the 3% employee contributions!

Your DROP amount will not decrease by 70%, only the interest earned will.  As we discussed on our web page , there is no magic to DROP, the bulk of the DROP benefit is simply your own pension being returned to you after the 5 years.

When you enter the DROP, you technically retire and begin to receive your pension.  Since you are going to continue to work, instead of the pension checks coming to you each month, those checks are deposited in your “DROP account”, and interest is then added to it.  The monthly amount going into your DROP is determined by the same calculation as your pension, which is:  Years of service, multiplied by service credit (3% for special risk, or 1.6% for regular members.  The result is then multiplied by your Average Final Compensation, which is the 5 years of your highest earnings.  For example, you have worked 30 years, and average of your highest five years of compensation (your AFC) is $50,000.   Your calculation is 30 times 1.6%, times $50,000, or a pension of 48% of $50,000, or $24,000 per year – so you would receive $2,000 per month into your DROP account.  Each year, on July 1, you will receive an annual increase by whatever your Cost of Living Adjustment (COLA) is.

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It appears we have a Final Agreement between the House and Senate on changes to the Florida Retirement System.  The changes are substantial, but not nearly as dire as Governor Scott wanted.  There will be NO changes for those already retired, or those already in the DROP, your benefits remain the same. Many of the more radical changes only affect those hired after July 1, 2011.  Changes for new hires only are:

For members after July 1, AFC become the highest 8 fiscal years.

Increases retirement age for all new hires after July 1:

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As best as we can decipher the myriad amendments, amendments to the amendments, and replacements to the amendments, SB 2100 has passed its 2nd reading and is heading to the third and final reading.  The changes would seem to indicate the following:

  • Employee contributions would be a graduated scale; 2% on the first $25,000, 4% for compensation between $25,000 and $50,000, and 6% for compensation over %50,000.
  • AFC will include up to 300 hours of overtime, and 500 hours of accumulated leave time.
  • The DROP will continue through July 1, 2016.  No new enrollees after that date.
  • The interest rate for DROP members entering after July 1, 2011 will be reduced to 2%, it will stay at 6.5% for those enrolling before July 1.
  • Vesting for the Pension goes to 10 years for those hired after July 1.  Only those hired in Special Risk may participate in the Pension Plan after July, all other new hires must participate in the Investment Plan.
  • Special Risk members retain the normal retirement date of age 55 or 25 years of service.
  • Accrual rates remain the same.


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Representative John Tobia (Republican from Melbourne) offered five new amendments to House Bill 1405.  The amendments would bring HB 1405 in line with Governor Scott’s recommendations.  As we read and interpret the changes, they include:

  • ·         Reduces the service credit for future years of service in the Special Risk, Elected Officers, and Judges from 3% to 2%.    Amendment 460885
  • ·         Eliminate the Cost of Living Adjustment for Pensions and the DROP after July.  Amendment 279579
  • ·         Eliminate overtime in the calculation of the Average Final Compensation.  Amendment 696491
  • ·         Raises the Employee contribution up to 5% across the board (it had been reduced to 3% in committee).  Amendment 328909
  • ·         Reiterates the closing of the Pension Plan after July 1, and mandates all new members to the Investment Plan.  Amendment 251959


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The Senate Budget Committee introduced a new Committee Bill today, SPB 7094.  The bill reworks many of the terms of Senator Ring’s SB 1130 to the detriment of current members, and brings the Senate version much closer to the House version.    The committee is headed by Republican Senator J.D.  Alexander.  As we read the new proposal, which is to be heard by the Committee on Wednesday, it proposes to:

  ·         Does away with the DROP program after July 1, of 2011.  It appears to read that you must enter the DROP prior to that date in order to be eligible.  (lines 1857 through 1862)

 ·         The Investment Plan will be mandatory for ALL new hires after July 1, 2011, and will not be eligible for a Pension. (lines 888 through 896

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The Senate Committee on Government Oversight and Accountability approved a version of Senator Ring’s proposed Senate Bill 1130 today by a vote of 12 to 1.  This was done on the heels of House Bill 1405 filed by Representative Workman from Brevard.  We are not experts on the legislative process, but believe the bill will now go to the Budget Committee for their approval.

As we read the final version of SB 1130, and the myriad amendments we have pieced together we believe it proposes the following important aspects :

  • The proposal eliminates the Pension Plan for all employees hired after July 1, 2011 that make more than $75,000 per year and mandates participation in the FRS Investment Plan for those employees.  A last minute amendment has preserved the Pension Plan for those making less than $75,000, UNLESS you are in the Elected Officers Class, the Senior Management Class.  Member those classes are required to  participate in the Investment Plan is mandatory regardless of Income.
  • A notable change is the proposal now allows 300 hours of overtime and up to 500 hours of accrued leave time in the computation of Average Final Compensation for service before July 1, 2011.   It does away with all  accumulated annual leave pay for service after that date.
  • Employees will make contributions into their FRS Investment Plan.  The contribution schedule is 0% on the first $40,000 of compensation, 2% on compensation from $40,000 to $75,000, and 4% on compensation over $75,000.  They amended the original version to contain language that seems to limit the employee contribution to no more that 2% of total compensation for regular and special risk members, and a maximum of 4% of total compensation for those in the Elected Official and Senior Management Groups.
  • There is also some new language amended to read that NO employee contributions would be required for years in which the plan is 100% funded.  That amendment would raise more questions to us than it answers, but let’s hope it is as simple as it sounds.
  • The vesting schedule for employee contributions is immediate, and for employer contributions vesting is on a graduated scale as follows:

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The following is a letter we received from a Tax-paying Florida Citizen, who is not associated with the Florida Retirement System.  We found it to be refreshing, and wanted to share it with our readers.  Thank you for your perspectives Mr. Cassidy!

To FRS Options,

I am not in the FRS.  I am also not related to anyone in it. I am really just a concerned Florida taxpayer, who does not believe that scapegoating public employees is fair or right. I do not believe that one small group of people should be punished, and essentially “taxed,” just because they chose a job or a career in public service.

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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!

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As you are no doubt aware, Governor Scott is slipping tidbits about his plan for FRS into the news.  Unfortunately, those tidbits are sparse in detail and his full plan is not scheduled to be released until February 7, so it is very difficult to get a grasp of how they will ultimately affect Florida Retirement System workers and retirees.  It is obvious the changes, IF ENACTED, will be significant.  It might be be premature to make any decisions until the details are known.  In the meantime, 1,000,000 strong FRS participants and retirees should be contacting their legislators and directing those representatives as to how they want to be represented in Tallahassee.