The Florida House of Representatives has approved a bill that proposes changes to the state’s retirement system, including shifting its members from defined benefit plans into defined contribution plans.
Members of the Florida Retirement System (FRS) currently have the option to choose either a defined benefit plan or a defined contribution plan. Under the current rules, members who do not choose a plan are automatically enrolled into the defined benefit pension plan. However, the proposed legislation would change the default enrollment to a defined contribution plan.
The bill would also prohibit newly elected officials, such as state lawmakers, judges, county commissioners, cabinet members, and school board members, from joining the defined benefit pension plan after July 1, 2018. Those members would instead receive their retirement benefits through the defined contribution plan.
Additionally, the bill would limit pension benefits for judges by reducing the annual rate for accruing their retirement benefits from 3.3% to 3% beginning July 1.
At the request of the Speaker of the House of Representatives, Richard Corcoran, actuarial and consulting firm Milliman conducted several studies to determine the fiscal impact of the changes. It analyzed the effect of requiring new enrollees who participate in the elected officers’ class to participate in the defined contribution plan; changing the default for employees who don’t choose a type of plan; establishing a new in-line-of-duty death benefit; authorizing renewed membership in the investment plan; and reducing the accrual rate for certain members who participate in the elected officers’ class.
Based on the results of the special studies, the benefit changes proposed by the bill are projected to have a total negative fiscal impact of $17.3 million in fiscal year 2018. The results of the annual actuarial valuation are expected to have a total negative fiscal impact of $141.2 million in fiscal year 2018.
The FRS is a multiple-employer, contributory plan that provides retirement income benefits for employees of the state and county government agencies, district school boards, state colleges, and universities. It also provides the retirement plan for participating employees of the cities, independent hospitals, and special districts that have chosen to join the system.
As of June 30, 2016, the FRS provided retirement income benefits to more than 630,000 active members, nearly 395,000 retired members and beneficiaries, and 29,600 members of the deferred retirement option program.