A battle won, but the War is still on to preserve your benefits.

SB 2022 was introduced by Senator J.D. Alexander …. has already passed through the Senate Committee in very rapid manner. It will mandate all employees make a payroll contribution to their retirement benefits.

Please do not think the war is over to protect your benefits. While Representative Grady’s office has indicated HB 1319, which is particularly radical in its changes, is dead, it still appears on the legislative slate.  HB 1543, another really nasty bill, shows up as having been withdrawn on the legislature’s slate.  Senate Bill 2022 is a relative newcomer, and is very much in play.  SB 2022 was introduced by Senator J.D. Alexander, a very powerful figure in Tallahassee and the Chairman of the Ways and Means Committee, and has already passed through the Senate Committee in very rapid manner.   It will mandate all employees make a payroll contribution to their retirement benefits.

It is an interesting coincidence that the two most radical bills were withdrawn concurrent with the introduction and rapid push through committee of SB 2022.  In comparison to HB 1319 and HB 1543, SB 2022 looks like a dream.  I am hoping that wasn’t the plan.  Scare everyone with radical changes, then a seemingly innocuous bill comes up, and it might be more easily pushed through.  I am hoping this isn’t the legislative version of “good cop, bad cop”.  If FRS participants are mandated to pay a portion of their pay, where does it end?  Next year will it be more and more?  The national average for employee contributions to pensions is around 5%.  That is a significant cost to you!

Below is a list of about 30 different bills that have been introduced and are still on the table that could negatively affect your benefits in one way or another.  I would urge you all to keep on your toes, and continue to call your Representatives and Senators and let them know you do not want them to vote in favor on ANY bill or amendment which will take away your benefits. Simply click on the blue link and it will take you to the Florida Legislature site where you may review the status and original version of the bills.

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House Bills 1319 and 1543 Dead?

Congratulations! I can’t help but think your actions, calls and messages played an important part in this huge Victory!!!

Congratulations!  I can’t help but think your actions, calls and messages played an important part in this huge Victory!!!  As soon as I can get official confirmation in writing, I will post it!

Celebrate!!!!!!!!!!!!!!!

There are a few other bills still alive, but none even close to those two.  This is fantastic news to all members of the Florida Retirement System Pension Plan.

A call for ACTION in regard to your pension!

make your AFC the AVERAGE OF ALL YEARS of service. This could effectively cut your pension by as much as 50%.

A call to ACTION,

In the last few weeks I have posted several news releases in regard to the potential for significant change to the Florida Retirement System.  Even though Florida has one of the most financially sound pension systems in the US, it is underfunded by some 10 or 12%. That situation could get even worse in view of the economy, unemployment, and depressed real estate values, which create stress on the state’s tax collection and revenues.   I visited the Florida Legislature’s website to investigate what might be in store, and found no less than 10 bills suggesting changes to the current system.  You will find what I deemed to be the most pertinent considerations summarized below.

House Bill 1319 sponsored by Representative Tom Grady of Collier County

This bill could be far reaching.  Among its provisions is one to eliminate the current basis of your Average Final Compensation (AFC) from the average of your highest five years, and instead make your AFC the AVERAGE OF ALL YEARS of service.  This could effectively cut your pension by as much as 50%. It would average your first year with your last, and every year in between.  This is by far the most drastic change proposed.

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"Is my FRS Pension Secure"?

Many of those government agencies are going to change from the traditional Pension Plan, whereby a retiree’s “benefit is defined”, to a “Defined Contribution” plan such as a 401k.

Over the years, I have had many FRS members call and ask questions regarding their pensions.  The most common question used to be, “Should I DROP”?  Now however, the single most important question seems to be “Is my Pension secure?”, or “Will I get my pension”.  Most of the conversation was started with the dramatic losses within the FRS investment holdings.  The 2008-2009 financial crisis hacked some 25% off of the total assets in FRS.  Tie that in with the drop in state revenues due to severely declining property taxes, and one of the worst unemployment rates in the country, and the need to cut costs is loud and clear.

In a conversation with a FRS participant the other day, she questioned why government entities were not fulfilling their pension obligations.  FRS is underfunded by some 12%, and many local governments are in much worse shape, some underfunded by almost 50%.  The problem is simple.  Tax bases are down dramatically, so the Gov’t agencies flat out don’t have enough money to cover their costs, let alone the shortfalls created by the financial crisis.  The only way to make up the difference is to either cut costs or increase income.  Increasing income would mean raising taxes.   In this economy, with 14% unemployment, and just about everybody in a financial pinch, raising taxes is probably not feasible.  That leaves cutting costs!

Many of those government agencies are going to change from the traditional Pension Plan, whereby a retiree’s “benefit is defined”, to a “Defined Contribution” plan such as a 401k.  In the Defined Contribution plan, the employee makes the bulk of the contribution into their retirement plan, and the employer makes a matching contribution.  A typical plan calls for the employer to contribute one dollar for every two the employee puts in.  Compare that with FRS’ current program where the employer makes 100% of the contribution, and it is pretty easy to see how it cuts costs dramatically.

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Welcome to Florida Retirement System Options

Congratulations! , for being in a position to begin considering your retirement options within the Florida
Retirement System (FRS). The decision to retire requires considerations that will affect your
comfort and financial well being for the rest of your life.

Congratulations

for being in a position to begin considering your retirement options within the Florida Retirement System (FRS). The decision to retire requires considerations that will affect your comfort and financial well being for the rest of your life. FRS requires that you make those decisions in a timely manner, and must be completed with in the “election period” allotted.  You must consider your pension and what it provides; income to cover living expenses, earnings from other investments, how your FRS options might affect your personal net worth, the need for insurance, and any tax ramifications your choices may make. Many of the decisions you must make are irreversible, therefore it is important that you educate yourself.  Some things we suggest:

§ Research your options through the Division of Retirement

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Florida Retirement System – Should I Drop? – Civilian Participants

With the Investment Plan, employees can opt out of the pension plan at retirement, and transfer the entire value of their retirement benefit into the Investment Plan. This is known as a “lump sum rollover”.

So … Should I Drop ????? for Civilian participants.

Before we decide, let’s take a look at why we even have a decision to make. FRS added the DROP program to the Pension in 1998 as a way to induce employees to work longer. Prior to 1998, an FRS participant had no options – they retired and received a monthly pension check.  End of story!  FRS further expanded the range of retirement options in 2002 with the addition of the FRS Investment Plan. This change was significant! Now a FRS Participant has several different retirement options to choose from.  There is still the basic Pension, there is a combination Pension and the DROP (Deferred Retirement Option Program), and after 2002, a third alternative whereby you can participate in the FRS Investment Plan, and take control of how your retirement money is invested.  You also have a fourth option, which is to “roll the current value of your retirement into a self-directed IRA account at retirement.

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The DROP basics for Civilian Participants

Since public sector employees may find it difficult to accumulate significant wealth on their often moderate salaries and have had little chance to accumulate wealth in a retirement plan (outside of IRAs or Deferred Comp), the DROP was initially very attractive. It was the only real way to get a decent pension, AND a nice lump sum of money.

The DROP basics for Civilian Participants

DROP is an acronym for Deferred Retirement Option Program. FRS added the DROP program to the Pension in 1998 as a way to induce employees to work longer, in an attempt to keep employees from retiring as soon as they are first eligible. Agencies realized that it cost far less to provide a DROP benefit for a current employee than it would cost to recruit and train a NEW employee. So, in 1998 the Florida Retirement System (FRS) instituted a program that could entice experienced employees to continue to work for up to five more years and at the same time allow them to accumulate a lump sum of money that would be available at retirement – the DROP.

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FRS Investment Plan Basics

The FRS Investment Plan is a “defined contribution” plan as determined by Section 401(a) of the Internal Revenue Code – meaning it is comprised of money the employer deposits into your retirement account, plus any interest, earnings or growth from the investments in the account, less expenses.You have a say in the way your money is invested within the scope of the investments offered within the plan.

FRS Investment Plan Basics

The FRS Investment Plan is a “defined contribution” plan as determined by Section 401(a) of the Internal Revenue Code – meaning it is comprised of money the employer deposits into your retirement account, plus any interest, earnings or growth from the investments in the account, less expenses. The amount of the contributions are determined by law and based on your “membership class”. You have a say in the way your money is invested within the scope of the investments offered within the plan.  You select from a variety of investment funds which in turn are invested in stocks, bonds, foreign companies, foreign bonds, money markets, or portfolio’s managed by FRS.

You must elect to participate in the FRS Investment Plan within the first five months after you are hired.  New employees are automatically enrolled in the FRS Pension Plan when they are hired.  The FRS Investment Plan was designed for shorter term and mobile employees, and specifically for those who may not intend to work for the six years required to vest in the FRS Pension Plan.  If you meet this description, it is possible you should elect the FRS Investment Plan as soon as possible after your start date.  If you don’t meet this description, meaning you intend to put in your 25 years, you will probably want to stay in the Pension Plan until just prior to the date that you retire.

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The DROP basics for Special Risk Participants

“DROP” is an acronym for Deferred Retirement Option Program. FRS added the DROP program to the Pension in 1998 as a way to induce employees to work longer, in an attempt to keep employees from retiring as soon as they are first eligible. Agencies realized that it cost far less to provide a DROP benefit for a current employee than it would cost to recruit and train a NEW employee. So, in 1998 the Florida Retirement System (FRS) instituted a program that could entice experienced employees to continue to work for up to five more years and at the same time allow them to accumulate a lump sum of money that would be available at retirement – the DROP.

The DROP basics for Special Risk Participants

DROP is an acronym for Deferred Retirement Option Program. FRS added the DROP program to the Pension in 1998 as a way to induce employees to work longer, in an attempt to keep employees from retiring as soon as they are first eligible. Agencies realized that it cost far less to provide a DROP benefit for a current employee than it would cost to recruit and train a NEW employee. So, in 1998 the Florida Retirement System (FRS) instituted a program that could entice experienced employees to continue to work for up to five more years and at the same time allow them to accumulate a lump sum of money that would be available at retirement – the DROP.

Continue reading “The DROP basics for Special Risk Participants”

Florida Retirement System – Should I DROP? – Special Risk Participant

The Florida Retirement System added the DROP program to the Pension in 1998 as a way to induce employees to work longer. So, should I DROP???? MAYBE! Contrary to popular belief, the DROP is not the end-all for everybody.

So … Should I Drop ????? for Special Risk participants.

Before we decide, let’s take a look at why we even have a decision to make. FRS added the DROP program to the Pension in 1998 as a way to induce employees to work longer. Prior to 1998, an FRS participant had no options – they retired and received a monthly pension check.  End of story!  FRS further expanded the range of retirement options in 2002 with the addition of the FRS Investment Plan. This change was significant! Now a FRS Participant has several different retirement options to choose from.  There is still the basic Pension, there is a combination Pension and the DROP (Deferred Retirement Option Program), and after 2002, a third alternative whereby you can participate in the FRS Investment Plan, and take control of how your retirement money is invested.  You also have a fourth option, which is to “roll the current value of your retirement into a self-directed IRA account at retirement.

Continue reading “Florida Retirement System – Should I DROP? – Special Risk Participant”