The debate over the future of public employee pensions turned into a kind of actuarial trench warfare Friday, as a state-commissioned report about the Florida Retirement System came under fire before a party-line vote to overhaul the plan, reports Brandon Larrabee of the News Service of Florida.
The House Appropriations Committee voted 13-9 to approve a measure (HB 7011) that would close the traditional, “defined benefit” pension plan to all employees who are hired on or after Jan. 1.
Those employees would instead be enrolled in a 401(k)-style “defined contribution” plan.
With the vote, the bill is now one committee stop away from the House floor.
The bill passed the GOP-controlled committee despite Democratic questions about a study by Milliman, a state consultant, and objections that lawmakers still hadn’t seen a study on disability benefits, due out later Friday, or death benefits.
Meanwhile, Robert Dezube, who leads Milliman’s work on Florida’s system, apologized for the first draft of the study of the costs and benefits of moving to a defined contribution plan. That draft was later withdrawn after Milliman conceded that it made mistakes.
“I don’t have really a good answer,” Dezube said when asked why lawmakers should trust the new study. “All I know is we spent the two weeks going over this study with a fine-toothed comb.”
But critics said that the new study — which House Speaker Will Weatherford has used to argue that the plan will save Florida taxpayers $9.8 billion by 2043 — is still flawed. Weatherford, R-Wesley Chapel, has set the pension overhaul up as one of his top goals of the 2013 session.
Bradley Heinrichs, the president and CEO of consulting firm Foster & Foster, said he was confused by the study’s contention that closing the traditional pension would save money and by some of the costs that appeared in the study.
“It doesn’t pass my smell test,” said Heinrichs, whose firm works counts about 200 public employee pensions among its clients.
Sarabeth Snuggs, the retired director of the FRS pension plan, also said that the study’s conclusions were dubious. And she pointed out that one of the drivers of the report’s projected cost for the defined benefit plan was that employees enrolling in that plan seemed to be older now — something Snuggs attributed to younger workers joining the optional 401(k)-style plan the state already offers.
“If you really want to shore up the pension plan, then let’s do a study to see what closing the investment plan would do,” she said.
Democrats and other opponents of the plan say the real goal is to help the money management firms that would gain thousands of customers with the change.
“This can be characterized as a taxpayer windfall to Wall Street, who are probably smacking their lips at the access to a defined pool of money to play with,” said Rep. Darryl Rouson, D-St. Petersburg.
Republicans, though, defended the Milliman study and said that the plan would protect taxpayers from risks associated with a defined benefit plan. They also pointed out that most corporations offer a defined contribution plan now.
“I think it’s responsible, I think it’s realistic and better represents the world we live in,” said Rep. Matt Hudson, R-Naples.