IMPORTANT Bulletin Regarding Possible Changes to FRS and Health
Insurance Subsidies for Retirees.
The number of calls and emails on the various retirement bills are
becoming overwhelming. Please
understand that the Union and District’s
ability to respond to these
questions is limited. Here’s the most recent information.
FEA Statement of Position on All Retirement Bills: FEA is OPPOSED to
any changes to the Florida Retirement System.
We are opposed to any changes or the elimination of the Deferred
Retirement Option Program (DROP). We are opposed to the attempt to
reduce or eliminate the Health Insurance Subsidy (HIS). We are
opposed to out-of-pocket cost - an employee’s contribution - for
membership in the defined benefit plan. And, we are opposed to
retreating from a true Cost of Living Adjustment (COLA)
While the system experienced a short term loss in the recent market
run-down, we know that the system is invested for the long term and
is a financially sound, expertly run retirement system.
The Legislature is focusing on the Florida Retirement System (FRS)
and all employee benefits to address the state’s budget shortfall.
These bills have been filed to slow or eliminate the long-term costs
of employee benefit programs to the state.
HB 1319 by Rep. Grady, R-76, Naples:
This bill would require that public employees
hired on or after July 1, 2011 or enters the DROP program on or
after July 1, 2011,
to contribute one percent of their gross income to participate in a
primary public-sponsored retirement plan such as FRS. The
calculation of average final compensation would be revised to the
total number of years an individual has worked instead of the
current standard which is the average of the five highest years of
employment. HB 1319 would also reduce the accrual rates for the
calculation of retirement benefits. Further, the bill would remove
additional payments such as overtime payments and accumulated annual
leave as compensation in terms of calculating FRS benefits.
Public employees enrolled in the Regular Class of FRS would achieve
regular retirement after 33 years instead of the current 30 years
(effective 7/01/2011) and for public employees enrolled in the
Regular Class of FRS, the retirement age would rise to 65 years from
the current 62 years.
IMPORTANT: HB 1319 has not yet been scheduled for consideration in
the House.
Senator Alexander has a bill, SB 2022, that would likely
re-establish an employee contribution
– which has not existed since July 1, 1974. Starting July 1,
2010, the employee contribution rate will be 0.25 % of your annual
compensation. There after those rates would be set by law in
the annual rate bill. This is regardless of FRS class.
It does establish methods of refund of employee contributions if you
leave system before being vested.
On Agenda of Policy & Steering Committee on Ways and Means,
03/26/10, 1:00 pm,
412-K
Health Insurance Subsidy (HIS):
Current and future retiring
members could see a change to the HIS if the House has its way.
Currently, all retirees under the FRS receive a $5 per month subsidy
for every year they worked. The subsidy is capped to 30 years, which
equals up to $150 per month subsidy toward their monthly insurance
coverage.
The average cost of the state group health insurance plan for a
non-Medicare eligible retiree is $1,018/month. The average state
retirement benefit is only $14,000 so many retirees would have the
entire pensions wiped out by health cost. The bill would take
up to $1800 annually from teachers, police, firefighters and state
workers. House Bill CEED4 would eliminate that subsidy by December
31 2010 year.
If employees are not already receiving retirement benefits they will
not be eligible starting July 1, 2010 – regardless of when
eligibility was established, all payments will cease December 31,
2010.
Employees terminating DROP on or after June 1, 2010, will not
receive any HIS payments.
June 30, 2011 – any assets remaining in the HIS trust fund shall be
transferred to the FRS trust fund and applied to unfunded actuarial
liability in the FRS trust fund.
Again the budget is being blamed as the reason for the cut.
House members say with huge budget shortfall is the reason for the
proposal.
The Senate has not made a similar proposal. This bill is up today,
Tuesday, March 23rd, before the House Appropriations
Committee.
Deferred Retirement Option Program (DROP):
We have not seen a bill or a proposal yet but one is expected.
A
heavily cited report from the Office of Program Policy Analysis and
Government Accountability (OPPAGA) concludes that DROP is a big cost
to the state.
The report estimates that in fiscal year 2008-09, the FRS paid an
additional $71.4 million to fund DROP. It goes on to state the
higher cost occurred because DROP participants retire earlier than
they normally would have if the program was not available. This
voluntary decision increases the length of time that they draw
pension benefits and reduces the number of years in which employers
can fund their retirement benefits.
A potential bill
might look at standardizing DROP participation rules which could
eliminate the extra 36 months extension in DROP for classroom
teachers. Other
potential
suggestions include reducing or changing the 6.5-percent interest
guarantee to a "benchmark," like the consumer price index or
one-year Treasury bill yield or the prime rate charged by major
banks. Or the Legislature could simply end the entire program by
closing DROP to new enrollment at a date certain.
Please call or write your legislators to let them that they must defend and protect the Florida Retirement System.