Labor groups warn against changes to Florida's pension program
Proposed legislation in the Florida House would force new state employees hired after 2014 to use a 401k-style retirement fund instead of the current pension program. During a conference call Wednesday, critics of the measure said the change would hurt public employees. Diane Oakley, executive director for the National Institute on Retirement Security said seniors enrolled in the type of retirement program being proposed are nine times more likely to live in poverty during their final years.
â€œThe federal government and state and local governments would have had to provide for them, in 2009 alone, over $8 billion in public assistance helping to alleviate their levels of poverty or their needs for housing assistance, assistance with healthcare or food assistance..â€
The bill was filed by Republican Orlando-area Representative Jason Brodeur who did not return requests for comment. Other Republicans supporting the bill have argued that it will save the stateâ€™s retirement system from eventually becoming insolvent even though it isnâ€™t at that point yet. But Ray Edmondson,CEO of the Florida Public Pension Trustees Association said changing the system from a defined benefit program to a contribution program isnâ€™t going to help the state or its workers.
â€œThe only people that benefit from those plans are the people that sponsor them and the people that invest in them. The person that actually contributes to it has to put in at least $14,000 a year to get the same benefit that he would get on the defined benefit plan.â€
Instead, Edmondson argues that the current pension system is mutually beneficial.
â€œRealize that the way the private sector operates is inadequate. Thereâ€™s millions and millions of people living below the poverty level who have retired. We would think that the defined benefit plan is not only good for the public sector, but for the private sector also.â€
According to the National Institute on Retirement Securityâ€™s Oakley, state workers enrolled in a contribution plan â€“ one similar to a 401k â€“ would have to put more into their retirement because the system would likely not support someone for the average duration of their retirement.
â€œWhere the pension, because itâ€™s dealing with large numbers, only has to save for the average life expectancy because they will bring those numbers together and get that added benefit.â€
And she said beneficiaries donâ€™t have to worry about their benefit amount changing in the current pension program.
â€œThe defined benefit plan can stay forever young and so it can develop a consistent allocation and that also delivers a benefit.â€
And as for the argument that the stateâ€™s pension program will inevitably become insolvent â€“ Edmondson, head of the Florida Public Pension Trustees Association doesnâ€™t think thatâ€™s likely. He said Floridaâ€™s pension plan has never been less than 86% funded and the goal in both the private and public sectors is to be at least 80% funded.
â€œSo this is not a financial problem, situation, this is not a transfer of risk or anything else they are trying to say. This is strictly a political move to push the defined benefit plans out and bring in defined contribution-type 401k plans.â€
If the bill passes as-is, state workers hired on or after January 1, 2014 would not have the option of using the stateâ€™s defined benefit program. Workers currently enrolled would be able to keep their same retirement plan. The bill was filed last week and has not entered a committee yet.comments powered by Disqus