The House and Senate Conference Committee on the Florida Retirement System (FRS) Pension Fund met only twice in the late hours of Friday evening and resolved the differences between the two chambers on modifications to the program. The agreement yields about $1.1 billion in savings to the state, which is about 25 percent of the total savings the Legislature needs to close a projected revenue shortfall of $4 billion.
The House lead negotiator on the conference, Rep. Ritch Workman made the first offer to Sen. LizBeth Benacquisto, which was ultimately agreed to in just two hours. The agreement means the issue is “closed” to further negotiation and the results will be reduced to bill language in a conference report for Senate Bill 2100. Conference reports may only be voted up or down; they cannot be amended.
The essential elements of the negotiated agreement, effective July 1, 2011, are:
- Average Final Compensation: For employees initially enrolled in the FRS on or after July 1, 2011, benefits will be calculated using the average of the highest eight years of compensation for creditable service. For disability during the line of duty in less than eight years, benefits will be calculated using the average annual compensation of the total number years of service.
- Compulsory Enrollment in a 401(k) Investment Plan: The elimination of a mandatory enrollment into a 401(k) investment plan, as was the position of the Governor, and in earlier versions of legislative bills.
- Increase in Normal Retirement Date: From 55 to 60 years of age for employees in the Special Risk Class; and from 62 to 65 years of age for all other employee classes.
- Years of Creditable Service: From 25 to 30 years of service for employees in the Special Risk Class; and from 30 to 33 years of service for all other employee classes.
- Deferred Retirement Option Program (DROP): Maintenance of the DROP with a reduction of earned interest at an accrual rate of 1.3 percent. DROP allows an employee to retire while continuing employment for up to 60 months, or up to 96 months for certain instructional personnel.
- Pension Plan Vesting: Employees will vest in 100 percent of the state’s contribution upon completion of eight years of creditable service.
- Employee Contributions: A mandatory three percent employee contribution across all class of employees.
- Cost of Living Adjustments (COLA): Maintenance of COLA, but with a five year stay. COLAs would resume on July 1, 2016. This provision does not affect current retirees.
Governor Rick Scott had advocated a mandatory five percent employee contribution into a 401(k) investment plan, and the elimination of the defined contrition, or pension plan.
The Conference Report for SB 2100 will most likely be taken up, along with the myriad of bills that will comprise the total budget package, on May 6, the last day of the session.