2010 Legislative Session -- Retirement Bills Information

2. 2010 Legislative Session -- Retirement Bills Information

3. PREFACE • The 2010 Florida Legislature is considering many ideas to reduce State spending, in light of significant deficits. The Florida Retirement System and retirement benefits are under review in both Houses, and it is likely that some changes will be implemented, although probably not all. Some of the proposed changes are extremely dramatic, and some less so.

4. College employees are encouraged to take these seriously, and to address their concerns to their Legislators. However, employees are also encouraged to consider providing ideas for how the FRS could be changed to reduce costs.

5. The most critical proposals: • Changes to the “average final compensation” calculations. • One proposal amends the calculation so that pensions are based on the life-time earnings, rather than the average the highest five years.  This would be dramatic. If this moves forward, it is possible it would be applied only to new employees, or those not vested, but could apply to all employees. • Additional proposals disallow including overloads (e.g. overtime, leave payouts, sick leave payout, contract payouts) in the calculation.

6. Reducing the “multiplier” in the calculation for all classes of employees • For example, for “regular class” employees, the current 1.6% factor for every year of service would be lowered to 1.44%.

7. Requiring employee contributions to their own retirement • Currently employees contribute zero to their FRS plans, but proposals would have employees pay from .25% to 1% of their gross salary into their retirement, basically a salary reduction. (For example, at 1%, an employee with a $50,000 annual salary would pay a $500 contribution, annually.)

8. Extending the time to retirement • Proposals would require FRS regular class employees reach 33 years, instead of the current 30 years and the retirement age at 65 instead of the current 62.  • Total elimination of the Defined Retirement Benefit Plan (FRS) after 1/1/2011 • Eliminate DROP as a future option !!!

9. Eliminating the Health Insurance Subsidy (HIS) for retirees • Current and future thirty-year retirees will lose an $1800 annual subsidy to pay for health insurance.    • (This may very well pass. We are working hard to limit it)   

10. HB 1543 by Zapata – withdrawn on 3-24-10 • Eliminates all other retirement classes (Senior Management, Elected Officers, Judges) except “Regular Class” and “Special Risk” • Reduces the number of positions included in “Special Risk”Eliminates “Senior Management Optional” Retirement program • Retains “Community College Optional” Retirement program • Effective on or after January 1, 1980 Pensions may not exceed 100% of highest annual base pay • Effective on or after July 1, 2010 Pensions may not exceed 70% of highest annual base pay • Effective July 1, 2010 overtime and other forms of compensation (leave payouts) may not be included in calculating the five year annual average compensation • Effective July 1, 2010 elected officials convicted and/or resigning their position as a result of a plea bargain forfeit any pension benefit

11. HB 1319 by Grady • Known as the “Public Employee Retirement Preservation Act” • Employees hired on or after July 1, 2011 and employees entering DROP on or after July 1, 2011 shall pay 1% of their gross salary to the retirement system (FRS) • Employees retiring on or after July 1, 2010 may not exceed 80% their average final compensation • Overtime and other types of compensation (leave payouts) may not be included in pension calculations • The definition of average final salary calculation is changed from the highest five years to the average of all years of total service and salary • Vesting changes to be effective July 1, 2011 (eligibility for retirement) changes as follows: • From 6 years and age 62 to 6 years and age 65 • From 30 years at any age to 33 years at any age

12. HB 1319 continued • The annual pension percentage rate of accrual effective October 1, 2011 changes from 1.6% to 1.44% for regular class employees (Not sure if this affects current employees) • Effective between July 1, 2010 and July 1, 2011 the following annual pension percentage rate of accrual for additional service beyond 33 years is as follows: • 34th year 1.87% • 35th year 3.125% • 36th year and on 5% • Effective after July 1, 2011 the annual pension percentage rate of accrual reverts to the following: • 34th year 1.63% • 35th year 1.65% • 36th year and on 1.68%

13. HB 413 by Wood, Precourt, Mayfield / SB 660 Fasono (identical) • Eliminates “Defined Benefit” retirement plan (Pension) for all employees hired after January 1, 2011 • Creates and defines the “Defined Contribution” plan for all new hires on or after January 1, 2011 • Employer contribution to newly created “Defined Contribution” plan determined annually

14. SB 2022 by Alexander (formerly a shell bill) • Requires and establishes procedures for employee contributions to the Florida Retirement System (FRS) effective January 1, 2011. • Provides that employees participating in the Florida Retirement System (FRS) shall contribute .25% of their salary to FRS effective January 1, 2011.

15. For more information, please visit: http://www.facc.org/retirementinfo