New state and county employees and teachers will be shut out of Florida's traditional pension plan under a bill passed by the Florida House on Friday.
The bill (HB 7011), passed by a 74-42 vote, does away with guaranteed pensions for workers hired as of Jan. 1, 2014. The measure -- a priority of Speaker Will Weatherford -- replaces pensions with individual investment accounts similar to 401(k) plans, but it does grandfather current employees in the existing pension plan.
The bill must be approved by the Senate and signed by Gov. Rick Scott before becoming law. Compromise may be arduous - the Senate's plan keeps traditional pensions but makes investment accounts the default option for new hires. A Scott spokeswoman said the governor is watching both bills.
Rep. J.W. Grant, a Tampa Republican, summed up his party's feelings about the state pension fund - which is about 87 percent funded - by making a veiled comparison to the Titanic.
"At one point, the front page of the New York Times advertised the greatest ship in the world," Grant said. "It was more than 87 percent afloat when it ended its voyage."
Florida and other states are following the lead of many American companies. They've generally moved from pensions to 401(k)-style plans over the last few decades because they cost employers less money and shift retirement investment risk from employers to employees.
Moreover, pension plans offer reliable income; states generally have to guarantee them with general revenue funds. But a retiree invested in a 401(k)-style plan is at the mercy of the market. Those now in the Florida Retirement System can select a traditional pension or a 401(k)-style plan.
House members themselves prefer old-fashioned pensions, records show. Seventy-three members are currently in the traditional pension plan, 37 are in the state's 401(k)-style plan and 10 are not enrolled.
Republicans and business groups have supported the bill, while Democrats and labor unions have opposed it.
"This bill is going to pass today, and that's sad," said Rep. Larry Lee, a Port St. Lucie Democrat and insurance agent. "The reason I left teaching is because of the pay. But one thing Florida has to encourage teachers is a great - could be a great - benefits package," including pensions.
Rep. Dwayne Taylor, a Daytona Beach Democrat, said he was mourning the death of the existing pension fund "because you're killing it."
By cutting off the pension plan from new members, lawmakers also are cutting off the revenue stream of employee and employer contributions that feed the fund, he said.
"They've addressed an imaginary crisis of their own making with a radical change that disrespects school employees, first responders, and other public workers who enhance the quality of life in Florida," said Alan Stonecipher, director of the Florida Retirement Security Coalition, which is aligned with public-employee labor unions.
More than 900,000 current employees and retirees belong to the state's pension plan. State workers make up about a quarter; the rest are teachers and local government workers, such as law enforcement officers and firefighters.
Florida's overall pension fund, valued at roughly $133 billion, recently had been estimated to have a $19.2 billion gap between the money it has and the money it needs to cover current and future benefits. Rep. Dana Young, a Tampa Republican, said the state recently had to kick in another $500 million to shore up the fund.
Financial experts say pension plans that are at least 80 percent funded are considered healthy because employees retire at different times.
Gov. Rick Scott has voiced doubts about the pension fund's long-term stability. A law backed by Scott that went into effect July 2011 requires teachers, state and county workers and some municipal employees to contribute 3 percent of their pay toward their pensions.
It also repealed the 3 percent annual cost-of-living salary increases, leading workers to complain that Scott's requirement amounted to a pay cut. After a lawsuit, the Florida Supreme Court upheld the law by a 4-3 vote.
Rep. Richard Stark, a Weston Democrat, later changed his vote on the bill from yes to no, making the official tally 73-43.