By Brandon Larrabee, The News Service of Florida
The House is still considering two approaches to an overhaul of the state’s retirement system, Speaker Will Weatherford said Wednesday, indicating that a pension measure filed Monday by a leading senator might not be the final say.
In an interview with The News Service of Florida, Weatherford said his chamber was considering both the “cash balance” system proposed by Senate Community Affairs Chairman Wilton Simpson, R-Trilby, and a “hybrid” plan that would combine elements of a traditional pension and a 401(k)-style investment plan.
The speaker said House leaders were still waiting for the results of an accounting study on the Legislature’s options.
“Until the actuary gives us a report, it’s kind of hard for us to say whether or not we favor one over the other,” said Weatherford, R-Wesley Chapel. But he added that he was “very sensitive to the fact that the Senate is favorable to the cash balance plan.”
Revamping the state’s pension system has been a top priority for Weatherford, who last year pushed a more far-reaching plan to force all new employees into the investment plan. That proposal failed after running into strong opposition from a group of renegade Republican senators.
Weatherford and other supporters of changes to the system say the state has to figure out how to stop making annual payments of $500 million a year to the pension fund.
“We think that we can make the current system sustainable, make the new benefit that we create a very good one still for our future employees and protect the state of Florida from what is plaguing other states, which is a huge unfunded liability,” Weatherford said.
Both plans would exempt current employees as well as law enforcement officers and firefighters, who fall into a category called “special risk.” The inclusion of special risk employees in last year’s proposal was one of the reasons it failed in the Senate.
Either a cash balance plan or a hybrid would be a dramatic reshaping of the Florida Retirement System, which currently guarantees monthly pension payments to retirees based on their incomes and lengths of service to the state.
Under the Senate measure (SPB 7046), employees would have de facto accounts set up and would be guaranteed a return of at least 2 percent a year on the money in their accounts. If the plan’s investments made more than 2 percent, then three-quarters of the extra money would go to employees.
A hybrid plan would essentially split an employee’s account into two, with part of it being invested in the traditional pension system and the other half going into the investment plan.
During presentations Wednesday to two House committees, Rowland Davis, a pension consultant with the firm Hewitt EnnisKnupp, said that the hybrid plan would better serve employees who work with the state for their entire careers, while the cash-balance plan would be better for those who only work for the state for a part of their careers.
The hybrid plan would also be easier for the state to set up, Davis said.
“You basically just start using the two pieces that you already have in a different fashion for new hires,” he said.
Weatherford said the House would unveil its plan “here in the next couple of weeks.” State Affairs Committee Chairman Jim Boyd, a Bradenton Republican whose panel would consider any pension legislation, said the accounting study was not set to be done for another five to six weeks.
That could put the release of a proposal in the middle of the 60-day legislative session that begins March 4.
In either case, Democrats say they’re still wary of any sweeping changes to a retirement system that has one of the highest rates of funding in the nation.
“The pension is healthy,” said Rep. Dwayne Taylor, D-Daytona Beach and a member of Boyd’s committee. “There are no major issues with it. I think when someone is healthy, I think they don’t need to be operated on.”