Align state employee pension contributions with other states

Pension changes mean government employees must now contribute to their retirement

Updated: Tuesday, May 31st, 2011 | By Aaron Sharockman

Florida Gov. Rick Scott didn't get all of the pension reforms he wanted for state employees during the 2011 legislative session.

But he got a lot.

For the first time in decades, state employees will be required to redirect part of their salaries to pay for part of their retirement benefits. Beginning July 1, 2011, all state employees will be required to put 3 percent of their salaries toward retirement.

Scott signed the pension reforms into law May 26, 2011, which puts Florida more in line with other states. (PolitiFact Florida recently found that only state employees in Tennessee and Utah are not being required to contribute salary toward their own retirement).

The law, SB 2100, affects about 655,000 current state and local government employees, and includes Tallahassee-based government workers along with teachers and many police officers and firefighters throughout the state.

The Miami Herald's Mary Ellen Klas provided an easy-to-understand summary of the changes. Along with making workers contribute salary toward their retirement, the changes include:

• Eliminating service credits for cost-of-living adjustments for workers between July 1, 2011, and July 1, 2016. Workers currently receive annual credits that help determine cost-of-living adjustments upon retiring. Suspending those credits will change the cost-of-living adjustments retirees receive.

• Reducing the interest future retirees receive if they decide to enter the Deferred Retirement Option Program, or DROP. DROP allows workers nearing retirement age to accumulate five years' worth of retirement pay, while they continue to work so that they can gather a lump sum upon retirement. The new law lowers the amount of interest retirees earn on that money from 6.5 percent to 1.3 percent.

• Raising the retirement age for new workers. Workers hired after July 1 will vest into the state retirement system after eight years, instead of five. Employees hired after July 1 who are regular class, senior management class and elected officials class can receive normal retirement benefits if they retire after 65 years of age or 33 years of service (current law is 62 years old, or 30 years of service). Special-risk class like police officers and firefighters hired after July 1 can retire after 60 years of age or 30 years of service or, if they have served four years in the U.S. military, they can retire after 57 years of age and 30 years of service (current law is 55 years old, or 25 years of service).

The changes, while significant, are not as drastic as what Scott first proposed. Scott wanted employees to contribute 5 percent of their salary to their retirement, proposed ending DROP all together, and called for ending the traditional defined benefit retirement plan. Scott wanted workers to join a new defined contribution, or 401(k)-style, retirement plan.

Still, the changes to the retirement system will save about $1.18 billion for state and local governments. (Scott said his plan would have saved about $1.4 billion.)

When considering the breadth of the change, the difference in dollar amounts isn't enough to dock Scott points. He consistently pushed for a plan that would require government employees to contribute part of their salary toward their retirement, as is common in most other states. He got that plan passed. We rate this Promise Kept.

Sources:

SB 2100, accessed May 31, 2011

St. Petersburg Times, "Pension deal requires Florida workers to contribute 3 percent to retirement," May 1, 2011

St. Petersburg Times, "Gov. Rick Scott signs pension reform into law," May 27, 2011

Miami Herald, "A primer for FL pension changes," May 28, 2011

Legislators join Scott's call to make state employees contribute to their retirement

Updated: Monday, January 31st, 2011 | By Aaron Sharockman

Legislators who need to identify at least $3.6 billion in cuts to balance the 2011-2012 state budget are climbing onto a campaign promise of Gov. Rick Scott to make state employees contribute to their own retirement.

During the campaign, Scott promised to align "state employee pension contributions with other states" to save almost $1.4 billion. Scott hasn't let up in the months since his election.

In a speech to the business community on Nov. 18, 2010, Scott said that "Florida has to bring its pension system into line with other states' plans by increasing employee contributions. Doing that will save almost $1.4 billion."

And then during a meeting with state legislators on Dec. 14, Scott claimed that Florida is "the only state in the country that state employees don't contribute (to their pensions)." PolitiFact Florida looked into that claim and found it Mostly True, noting that many employees in Tennessee and Utah still do not have to contribute toward their own retirement, although other employees in those states do.

The state retirement system covers state workers, county school teachers, state university employees and many local government employees. The system, called the Florida Retirement System, has 655,000 active members and another 304,000 people retired and receiving benefits.

In 2010, state and local governments contributed nearly $3.4 billion to the fund. Governments typically contribute between 9 and 10 percent of an employee's annual income toward retirement. (Pension plans for police and firefighters, which pay better benefits, receive contributions equal to more than 22 percent of their income.) In every case, employees are not required to contribute anything.

Like Scott, legislators have started to discuss making employees contribute to their own retirement.

"Our state employees have the best deal in the country," said Sen. Jeremy Ring, D-Margate, who chairs a committee overseeing pension policy. "They don't contribute and that's wrong."

"All government workers have to understand the pension system for the government worker cannot be superior to the private sector," added Senate President Mike Haridopolos, R-Merritt Island. "Government service comes at a price."

We've yet to see a concrete plan detailing what employees would be required to contribute, if that contribution would be offset by any type of raise -- state workers haven't received a general pay raise since 2006 -- and how much money pension reform would save. But it's clear that Scott's promise is moving along. We rate this promise In the Works.

Sources:

Florida Times-Union, Florida lawmakers turning toward pension plan cuts, Jan. 27, 2011

Miami Herald, Florida pension fund is not broke, AFL-CIO claims, Jan. 10, 2011

St. Petersburg Times, Rick Scott lays out agenda in private speech to business groups, Nov. 18, 2010

PolitiFact Florida, Rick Scott targets government pension plans as a way to cut costs, suggests employees should contribute, Dec. 15, 2010

Daytona Beach News-Journal, Haridopolos: Spend less, offer stability and predictability, Jan. 24, 2011

Florida Tribune, Showdown looming over Florida's pension plan, Dec. 7, 2010