Florida's Senate approved a bill that would close the $183.1 billion Florida Retirement System Pension Plan to most new hires.
The bill, approved Thursday 24-16, would close the defined benefit plan to most new hires starting June 30, 2022 and automatically enroll them in the Florida Retirement System Investment Plan, the state's $15.3 billion 401(a) plan.
New hires currently have the option of joining either plan when they become state employees. "Special risk" employees in areas such as criminal detention, emergency medical care, firefighting and law enforcement would still have that option under the terms of the bill.
Senate President Wilton Simpson issued a news release Thursday citing the Florida Retirement System's funding ratio as a reason for the reform bill. According to FRS' most recent actuarial valuation as of July 1, its funding ratio was 82%.
"We have seen examples in other states of how quickly conditions can change and a government can experience financial crisis under the weight of its future retirement obligations," Mr. Simpson said in the news release. "Waiting until conditions worsen in Florida to fix these problems is like closing the barn door after the horses are out."
John Kuczwanski, spokesman of the Florida State Board of Administration, Tallahassee, which oversees the money management of the pension fund and 401(a) plan, said Executive Director and Chief Investment Officer Ash Williams would be speaking with trustees Friday about the bill.
In March 9 testimony before Gov. Ron Desantis and his cabinet, Mr. Williams said that one of the issues raised by the legislation is that "the structure of the retirement system is unsustainable and that's why we have an unfunded actuarial liability," a video of his testimony shows.
"That statement overlooks the reality of history which is when the Florida Retirement System was created in the early '70s, it had a funding ratio in the low 40s," Mr. Williams said. "The low 40s. That's awful. That's terrible by any measure, but through reasonable benefits, responsible funding and prudent investing, that funding ratio over the years with the support of the legislature ... climbed and climbed and climbed to 118% in the late '90s."
Sen. Ray Rodrigues, the sponsor of the bill, said in Mr. Simpson's news release that "traditional pension plans place investment risk for changes in economic conditions that impact the retirement plan's funded status squarely on the taxpayers, and provide little benefit to employees who do not spend their entire career in government." His spokesman Timothy Morris didn't immediately provide further comment.
Katie Betta, Mr. Simpson's spokeswoman, said the bill will go to the House of Representatives next week and the House will decide then whether to take on the Senate bill or put together its own committee bill. When asked whether there is an adequate amount of support for the bill in the House, Ms. Betta said Mr. Simpson has "some good conversations with House members that are interested in taking a look at it."
The bill has been opposed by organizations such as the Florida Retired Educators Association. In a news release Wednesday, it said the "legislation is fiscally irresponsible, would damage the education workforce and plays favorites among sectors of the public workforce."