Thoughts from a non FRS member!

Scapegoating public employees seems to be more of an assault on working people and the middle-class,

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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Think Twice?

The sales piece presents the information on the basis that you could be making a “costly mistake” and giving up “valuable benefits available to you only in the Investment Plan”. Which benefit can FRS offer that no one else can? Let’s review the claims one by one.

We have received several calls over the last week or so in regard to a new “alert” that appears on the MyFRS.com website, under the “alerts and hot topics” banner.  The piece is titled “THINK TWICE BEFORE ROLLING OUT OF THE INVESTMENT PLAN”. Some of the calls were questioning a few of the points made in the “alert”, and several were more interested in why FRS would post such an “alert” in the first place.

Let’s start with the last question first.  Why?  Why would the Florida Retirement System post such a letter on their Pension website?  We can only imagine it is a sales piece produced by the administrators of the Investment Plan for the purpose of “selling” participants on the idea of maintaining their Investment Plan with FRS as opposed to participants rolling their lump sum out of FRS and into a “rollover IRA” with an independent investment firm.   It is likely the administrators of the assets are paid based on the total sum of the assets they administer, so keeping more money in FRS is beneficial for them.   While it is understandable, it does bring up a few other questions that are interesting.

The sales piece presents the information on the basis that you could be making a “costly mistake” and giving up “valuable benefits available to you only in the FRS Investment Plan”.  This point was the impetus of many of our calls.  Which benefit can FRS offer that no one else can?  Let’s review the claims one by one.

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Your Nest Egg in Volatile times

Seems like wherever we turn, we are at risk of losing our hard earned savings. Interestingly, it is just that volatility that makes them attractive. We have all heard the adage, no pain no gain.

We have spent a great deal of time lately dwelling on potential changes in Florida Retirement System benefits.  Since the legislative session is over until next winter, we can breathe easy at least until then.  In the meantime, the news is full of dire financial news and predictions.  We are in year three of a terrible recession, and the devastating crash in real estate prices has set us all back a few years.   So what is a person to do to try and protect their nest egg?

In order to discuss how to protect one’s nest egg, we should probably start with trying to figure out what risk is, and how do we deal with it.  For this discussion, let’s define risk as the possibility of losing money!  Does that sound fair?  The legislature has added risk to our pensions by threatening us with the loss of benefits we thought were secure.  The real estate market has become risky as the value of our homes has declined, and the stock market goes up and down on a regular basis.  Seems like wherever we turn, we are at risk of losing our hard earned savings.  Interestingly, it is just that volatility that makes them attractive.  We have all heard the adage, no pain no gain.  Without risk, there can really be no reward!

Over the last twenty five years, I have witnessed some seemingly cataclysmic events – all having dire consequences on savings and investments.  Remember the stock market crash of 1987?  That was probably my first real taste of risk.  I was old enough to have some assets and investments and remember being horrified that they were losing money so quickly.  When something like that happens, it is easy to err on the side of fear, and sell into the panic.  The fight or flight mechanism kicks in and since we don’t really understand what is going on, we run!  Unfortunately, as often as it happens – we know it will be a mistake.  The average investor buys when they should be selling, and sells when they should be buying.  After several hundred years of experience, we know that time will cure most of the markets ills.  The crash of 1987 was regained in a mere two years.  The fall after 9-11 took less than six months.  Even the devastation after the fall of Lehman Brothers in September of 2008 triggered the worst financial panic in our history was regained in about 18 months.  The Florida Retirement System Pension plan has rebounded to $118 billion from a low of $83 billion (Current FRS Plan Balance).  Had you sold into the panic, those losses become real, with no real way of regaining your losses.  On the contrary, had you maintained your holdings in a well diversified portfolio, you would have been made whole in relatively short order!

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HB 5701 Dropped. H.I.S. stays!!!

FRSOptions.info has just learned that HB 5701 has been dropped. The Health Insurance Subsidy benefit will not be lost!

FRSOptions.info has just learned that HB 5701 has been dropped.  The Health Insurance Subsidy benefit will not be lost!!!!  This is great news.  It seems your calls and letters have once again worked their magic!  Congratulations!

It is possible it will be re-visited in the future, but for now it is safe.  250,000 retirees will keep this benefit!!  The Health Insurance Subsidy is a benefit for Florida Retirement System members that provides up to $150 per month to offset the cost of health care in retirement. 

While this is a short term victory, PLEASE keep those calls and letters going to your Representitives and Senators.  It is your voices that have made, and will make a difference in whether your benefits are changed.  You have been promised those benefits, and you deserve to keep those benefits!

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It ain't over, A further call to action for FRS benefits!

this plan is being endorsed by the legislature, and by publicizing it around the state, it becomes propaganda to endorse the bills to cut your benefits. I also thought it was interesting that some of our elected officials were on the task force.

Yesterday there was an interesting “letter to the editor” in the “Sarasota Herald Tribune”, called “State Budget Sense”.  The letter was submitted by the CEO of a Tallahassee organization called Florida Tax Watch, and lists “87 ideas worth $3.25 billion” to reduce spending.  I’m not really sure who the group is, nor  their function, but on their website states that they are “supported by voluntary, tax-deductible memberships and grants” and that “policy makers and government employees have implemented three-fourths of Florida TaxWatch′s cost-saving recommendations, saving the taxpayers of Florida more than $6.2 billion”.  It sounds like a lobbyist group, which would answer the question of, why would the CEO of a Tallahassee Group, write a letter to the Sarasota Herald Tribune?  I was intrigued enough to go to the site, and look at the 125 page report.   Among their suggestions, which have pretty much ALL appeared in recent legislative proposals:  Employee contributions to the plan of 5% (SB2022 is starting the process at a lower number to get in the door),  Reduce the Credit for Special Risk from 3% to 2%, and for Senior Management from 2% to 1.6% (Think HB 1319 and 1543), Re-evaluate and reduce the who is considered Special Risk, Up the vesting schedule from six years to ten years and last-but-not-least, adjust the 3% COLA increases to the actual Consumer Price Index with a maximum of 3%.  Obviously this plan is being endorsed by the legislature, and by publicizing it around the state, it becomes propaganda to endorse the bills to cut your benefits.  I also thought it was interesting that some of our elected officials were on the task force.  They are as follows:

Senator JD Alexander, Chairman of the Senate Policy and Steering Committee on Ways and Means and  Designee of the Senate President to the committee.

Bill McCollum, Attorney General for the State of Florida.

Continue reading “It ain't over, A further call to action for FRS benefits!”

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.

Continue reading “A battle won, but the War is still on to preserve your benefits.”

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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FRS Pension Basics 2010

Your FRS Pension is a “defined benefit plan” which means any contributions made by your employer on your behalf have no real bearing on the amount of your pension benefit.

PENSION Basics

Your FRS Pension is a “defined benefit plan” which means any contributions made by your employer on your behalf have no real bearing on the amount of your pension benefit.  Instead, your pension benefit is determined by a percentage of what you were earning in the last few years prior to retirement. An alternative plan is a “defined contribution plan” such as the FRS Investment Plan, deferred compensation, or a 401K.  In a defined contribution plan your retirement benefit is determined by the value of the accumulated contributions to your account, plus the investment returns the account has achieved. Your income will only determine how much you can contribute!

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