Today the Florida Senate returned a “Strike-All” Amendment to Senate Bill 1130 which is meant to reform the Florida Retirement System.  The purpose of the “Strike-All” was to amend the language and stipulations of the original bill, filed by Senator Jeremy Ring.  There were also 5 additional amendments proposed changing other aspects of the proposal.

• The biggest change, as we read it, would indicate the amended version will allow for up to 500 hours of accumulated leave payments to be used in the computation of the Average Final Compensation.  (lines 208-248, and 274-308).  And further appears that for service prior to July 1, 2011 overtime is included.

This seems to be a significant compromise to the original proposal, but excludes overtime after July 1.  It does not mitigate the fact that overtime is time worked for compensation earned, and therefore, as compensation, should be used for the AFC calculation.

• Amendment 581812 to SB 1130 appears to stipulate that “employee retirement contributions for any member of the Regular Class or Special Risk Class may not exceed 2% of such member’s annual state compensation.  This line amends and addends the language mandating employee contributions.

We see this as meaning the employee contributions cannot EXCEED 2% of compensation, and allows room that the contribution may be less.

• Amendment 641980 of SB 1130 looks to raise the vesting in the Pension Plan from 6 years to 8 years, but appears to allow for “grandfathering” in all those who would have been vested under the old law at as of July 1, 2011.

It would appear this is a compromise between the current 6 years, and Governor Scott’s proposal for 10 years for vesting.

The other pertinent points would remain basically the same as those originally proposed in Florida Senate Bill 1130, but the bill is still in the committee with no votes yet taken.  We consider it a battle victory for members of the Florida Retirement System who have called and written their Senators and made their feelings know.  Senator Ring acknowledged the high number of calls he and other legislators have received.  The war is still on.  Keep manning the phones!

If you are changing jobs, planning to retire or about to exit Florida’s Drop Program and have a 401(k)  retirement plan at work, you generally have 4 options for that plan.

1. Leave the money in the old 401(k) plan.

2. Move the money to your new companies 401(k) plan

3. Withdraw the money

4. Roll the 401(k) into a IRA in your name

If you have any questions on these options please read further or click here to have a free consultation with a Orlando Insurance Advice Rep.

Benefits of Rolling Your 401(k) into an IRA

When you leave your company, what happens to your 401(k)? Depending on a variety of factors, pay out of your 401(k) account balance shortly after your separation from service may be required. You then have the option to roll the account over to an IRA, new employers qualified retirement plan or to take a lump sum distribution. When thinking about these options, consider moving your account into a rollover IRA. Whether retirement is around the corner or many years away, rolling your 401(k) into an IRA offers you a number of benefits listed below:

Postpone paying taxes and penalties.

Taking a lump sum distribution from your company’s 401(k) plan can be very expensive. Taxes are payable at your income tax rate and a 10 percent federal penalty may apply if you are under the age of 59 1/2. Lump sum distributions do provide cash but can be very expensive. A Rollover IRA gives your retirement plan assets the ability to continue to grow tax-deferred. You will also avoid having 20 percent withheld for income taxes, potentially paying income taxes by not taking a cash distribution.

Widen Your Investment Choices

You have more investments to choose from in your own IRA, not just those available to you through your company’s plan.

Extend distributions over the life of your designated beneficiary

Some 401(k) retirement plans severly limit the number of years for the distribution of benefits to a deceased employers beneficiary. As of January 1, 2010 however, all qualified retirement plans are required to offer spousal and non-spousal beneficiaries the opportunity to make a direct rollover of an inherited plan acount balance to an inherited IRA from which strech distributions can occur.

Combine Retirement Assets

Use a rollover IRA to consolidate all your retirement investments into a single account. It can be confusing at times keeping up with paper work from a number of differernt accounts, this eliminates the problem.

Keep contributing

While you can no longer contribute to your former employers 401(k), you can make contributions to your Rollover IRA assuming you have an earned income and are under the age of 70 1/2. Contributions of up to $5,000 a year may be possible. If you are age 50 or older, you can contribute an extra $1,000 for a total of $6,000. Should your new employer offer a 401(k) plan, you can contribute to that plan while also contributing to your IRA.