FRS Update # 7 (3/16/2011)

FRS Update # 7 (3/16/2011)

March 17th, 2011 // 3:49 pm @

Greetings,        

I hope everyone has been enjoying the great weather we have had the last few weeks.  If not, take some time and enjoy it, because it will be hot before we know it.  Although our weather has been enjoyable, the proposed changes to the FRS have not been so enjoyable.  Today I want to update you on the latest news about the proposed changes to the FRS.  The Senate Committee on Government Oversight and Accountability approved a version of Senator Ring’s proposed SB1130 by a vote of 12 to 1.  At the same time HB1405 was filed by Rep. Workman.  Below I will give you a short overview of the two bills, and as you will see, the two bills are very different.  For a bill to become a law they MUST pass through the House and Senate with the EXACT same language.  Though they differ now, we do not know what political deals might be agreed upon to make these two bills match.  We will have to watch these two bills to see how they end up.

 SB1130 

 – Eliminates the Pension Plan for all new employees hired after 7/1/2011 that make MORE than $75,000 per year.  This means that they will have to go into the Investment Plan.

 – Allows 300 hours of overtime and up to 500 hours of accrued leave for service before 7/1/2011.  It does away with all accumulated annual leave pay for service after 7/1/2011.

 – New employees will contribute into their FRS INVESTMENT PLAN.  The contribution amount will depend on how much the NEW employee makes and can ranges from 0% to 4%.

 – There isn’t anything in the bill that states current FRS Pension Plan members will have to make contributions; however, there is also nothing in the bill that says they won’t have to contribute.  There is some NEW wording that reads that NO employee contributions would be required for years in which the plan is 100% funded. 

 – For all NEW employees entering the Investment plan, there will be a vesting period for employer contributions (all employee contributions are vested immediately).  After five completed years they will be fully vested.

 – No change to the NORMAL RETIREMENT AGE.

 – No change to the Cost of Living Adjustment (COLA); it will still be 3% per year.

 Although we would like to see no changes to the FRS, these proposed changes are a BIG improvement from the original proposed bill.

 HB1405 

 – DROP will end for NEW participants effective 7/1/2011.  So if this bill passes as is, you will need to have entered DROP by 6/1/2011 in order to be eligible for DROP.

 – No COLA for future years of service after 7/1/2011

 – All Employee contributions at 5% of gross compensation into the FRS Investment Plan

 – It does not end the Pension Plan.

 My advice is that if you think that these proposed changes could impact your decision on when to retire or when to enter DROP, PLEASE email me ASAP to schedule a time to meet and discuss.  We want to make EDUCATED decisions to make sure you have the best retirement possible. 

 If you know anyone who would benefit from my FRS updates please forward my email to them OR send me their name and email address and I will add them to my email list.

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