Jeff Bergosh Blog: Update from Tallahassee Pension Reform Legislative Hearings, from Mixon and Associates

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Friday, February 18, 2011

Update from Tallahassee Pension Reform Legislative Hearings, from Mixon and Associates

Mixon and associates provided the below email update from Tallahassee this afternoon on the status of some of the pension bills.....

The Senate Governmental Oversight Committee has been meeting all morning work shopping the local and FRS retirement bills. They started with the local government bill first and it appears that the Committee will not hear from the public on the FRS bill today. They will begin testimony on the FRS bill next Thursday. The Chair, Senator Ring, a Democrat from Broward County provided a quick summary of the FRS bill. He stated that the bill:

1). Does not change the accrual rate.

2). Maintains the DROP program.

3). Preserves COLA (no freeze or reduction).

4). Keeps retirement age for current members.

5). Makes no changes in membership classifications.

6). Does not set employee contribution rate.

The bill ,Senate Bill 1130, DOES the following:

1). Closes the defined benefit (DB) program to new employees as of July 1, 2011.

2). Changes vesting in the defined contribution (DC) to a five year plan.

3). Requires employee contribution to retirement plan but not retroactive.

4). Maintains death benefit.

5). Includes a portability provision in and out of the system. M&A has worked this issue very hard.

6). Commences benefits for retirees for those employed after 7/1/11 at age 65 rather than 62.

It is expected that some amendments will be made to the Bill this next week. Number 5 above will be amended into the bill at that time. The actual employee contribution rate will be determined by the Budget Committee later in the Session. In addition, there will be a reduction in the DROP interest rate from 6.5% to an amount which will also be determined by the same committee. I expect that the employee contribution rate will be between 2-3%. Each % yields approximately $316 million in savings to the State and hence school districts The DROP rate should be between 1.6% (current CPI) and 3% based upon my conversations with staff. The adjustment in interest would yield about $89 million in savings.