A retirement crisis looms in the nation, and the Florida Legislature seems intent on making it worse for Floridians.
Studies show that more than half of Americans are at risk of a reduced standard of living in retirement as a consequence of the financial meltdown. Decreasing that number requires a commitment to bolster retirement income, not reduce it.
Yet reducing retirement security is what legislative leaders are doing, while costing taxpayers more money, too.
They want to carve up the state retirement system that provides basic retirement security for more than a million teachers, firefighters and law enforcement officers throughout the state.
Thereís no good reason to do it ó no crisis and no emergency ó except in their imagination.
The Florida Retirement System is known as one of the best-funded state plans in the nation. For decades it has functioned well, providing modest benefits in retirement to public employees already underpaid in comparison to other states and to workers in the private sector.
Retirees in the state retirement system certainly arenít getting rich, receiving an average monthly benefit of $1,500.
But legislative leaders would take away the security that comes with a pension. They want to end the pension plan by moving newly hired public workers into 401(k)-style accounts. New workers would assume 100 percent of the risk for their retirement savings ó and the state none ó while being at the mercy of Wall Street financial firms and the ups and downs of financial markets.
This is a prescription for lower retirement savings because 401(k)-style accounts are inferior to pensions, earning 1 percent to 2.5 percent less each year than professionally managed pension plans. A smaller nest egg leaves retired public workers in Florida at risk of having to rely on public services like food stamps and Medicaid.
But the damage isnít limited to future retirees. Taxpayers will suffer, too. Investment returns cover less of pension costs once contributions for new employees go to separate accounts (not the pension asset pool) so somebody has to plug the hole. Either taxpayers will have to pay more, or current employees ó who have already seen their pay reduced by 3 percent through new payments for retirement ó would be forced to pay even more or suffer cuts in the benefits they expect when they retire.
Thereís no need for the Legislature to hit taxpayers and public employees this way. The Legislature should heed a simple message: Donít mess with the FRS.