Reason for 1974 Switch Away from Employee Retirement Contributions

A 1974 pension document shows how the state benefited from a switch away from employee contributions. A copy of the August 1974 Florida Retirement Bulletin, unearthed by a member of the Public Pensions Trustees Association, gives a glimpse into why the state stopped requiring employees to contribute part of their salaries to the Florida Retirement System: to save the state money. Here's the 36-year-old document:Download 1974 Florida Retirement Bulletin
Back in 1974, employees contributed 4 percent of their salaries to their retirement fund while special risk members (police, firefighters, etc.) contributed 8 percent. But if those employees left the state workforce, they were entitled to have their contribution returned to them in the form of a refund -- costing the state that year a whopping $30 million and setting up an unfunded liability. "The primary purpose in changing FRS to a non-contributory plan is to help eliminate the unfunded liability documented in past actuarial studies of state retirement systems," the newsletter states.
The end result of the change was to increase the state's contribution from 4 to 9 percent for regular class members -- where it remains today -- and from 8 to 13 percent for special risk members.
Today, Gov. Rick Scott wants state and local government to withdraw 5 percent of its contributions and have employees make up the difference. He is doing it to save the state money again -- only it's the reverse of 1974, with the money flowing into the retirement system coming from employees, not employers. The governor gets a $1.3 billion savings to the state by withholding 5 percent of the state's contribution to the FRS or, in the case of local governments, from local government revenue sharing plans. It's not clear whether employees could withdraw that money if they leave the FRS, under Scott's plan, as they did in the past.
So far, the Florida Senate is considering asking employees to shift money from employee paychecks to their retirement accounts at rates of about 2 percent of their salaries, while the House has yet to propose a plan.