Bill Text: FL H5607 | 2010 | Regular Session | Engrossed

Bill Title: Retirement [WPSC]

Spectrum: Partisan Bill (Republican 1-0)

Status: (Vetoed) 2010-07-19 - Veto Message received -HJ 00011; Veto Message referred to Rules and Calendar Council -HJ 00016 [H5607 Detail]

Download: Florida-2010-H5607-Engrossed.html
HB 5607
A bill to be entitled
2An act relating to retirement; amending s. 121.091, F.S.;
3reducing the interest rate paid on deferred retirement
4benefits for members entering DROP on or after a specified
5date; amending s. 121.71, F.S.; revising the payroll
6contribution rates for the membership classes of the
7Florida Retirement System for the state fiscal years
8effective July 1, 2010, and July 1, 2011; specifying the
9required employer retirement contribution rates for each
10membership class and subclass of the system in order to
11address unfunded actuarial liabilities of the system;
12amending s. 121.74, F.S.; revising the amount that
13employers are required to contribute for administrative
14and educational expenses; requiring the state actuary to
15consider additional factors when conducting the annual
16actuarial study of the Florida Retirement System;
17specifying the factors to be considered; providing a
18declaration of important state interest; providing an
19effective date.
21Be It Enacted by the Legislature of the State of Florida:
23 Section 1. Paragraph (c) of subsection (13) of section
24121.091, Florida Statutes, is amended to read:
25 121.091 Benefits payable under the system.-Benefits may
26not be paid under this section unless the member has terminated
27employment as provided in s. 121.021(39)(a) or begun
28participation in the Deferred Retirement Option Program as
29provided in subsection (13), and a proper application has been
30filed in the manner prescribed by the department. The department
31may cancel an application for retirement benefits when the
32member or beneficiary fails to timely provide the information
33and documents required by this chapter and the department's
34rules. The department shall adopt rules establishing procedures
35for application for retirement benefits and for the cancellation
36of such application when the required information or documents
37are not received.
39subject to this section, the Deferred Retirement Option Program,
40hereinafter referred to as DROP, is a program under which an
41eligible member of the Florida Retirement System may elect to
42participate, deferring receipt of retirement benefits while
43continuing employment with his or her Florida Retirement System
44employer. The deferred monthly benefits shall accrue in the
45Florida Retirement System on behalf of the participant, plus
46interest compounded monthly, for the specified period of the
47DROP participation, as provided in paragraph (c). Upon
48termination of employment, the participant shall receive the
49total DROP benefits and begin to receive the previously
50determined normal retirement benefits. Participation in the DROP
51does not guarantee employment for the specified period of DROP.
52Participation in DROP by an eligible member beyond the initial
5360-month period as authorized in this subsection shall be on an
54annual contractual basis for all participants.
55 (c) Benefits payable under DROP.-
56 1. Effective on the date of DROP participation, the
57member's initial normal monthly benefit, including creditable
58service, optional form of payment, and average final
59compensation, and the effective date of retirement are fixed.
60The beneficiary established under the Florida Retirement System
61is the beneficiary eligible to receive any DROP benefits payable
62if the DROP participant dies before completing the period of
63DROP participation. If a joint annuitant predeceases the member,
64the member may name a beneficiary to receive accumulated DROP
65benefits payable. The retirement benefit, the annual cost of
66living adjustments provided in s. 121.101, and interest accrue
67monthly in the Florida Retirement System Trust Fund. The
68interest accrues at an effective annual rate of 6.5 percent
69compounded monthly, on the prior month's accumulated ending
70balance, up to the month of termination or death, except as
71provided in s. 121.053(7). For those members entering DROP on or
72after July 1, 2010, the interest accrues at an effective annual
73rate of 3.0 percent compounded monthly, on the prior month's
74accumulated ending balance, up to the month of termination or
75death, except as provided in s. 121.053(7).
76 2. Each employee who elects to participate in DROP may
77elect to receive a lump-sum payment for accrued annual leave
78earned in accordance with agency policy upon beginning
79participation in DROP. The accumulated leave payment certified
80to the division upon commencement of DROP shall be included in
81the calculation of the member's average final compensation. The
82employee electing the lump-sum payment is not eligible to
83receive a second lump-sum payment upon termination, except to
84the extent the employee has earned additional annual leave
85which, combined with the original payment, does not exceed the
86maximum lump-sum payment allowed by the employing agency's
87policy or rules. An early lump-sum payment shall be based on the
88hourly wage of the employee at the time he or she begins
89participation in DROP. If the member elects to wait and receive
90a lump-sum payment upon termination of DROP and termination of
91employment with the employer, any accumulated leave payment made
92at that time may not be included in the member's retirement
93benefit, which was determined and fixed by law when the employee
94elected to participate in DROP.
95 3. The effective date of DROP participation and the
96effective date of retirement of a DROP participant shall be the
97first day of the month selected by the member to begin
98participation in DROP, provided such date is properly
99established, with the written confirmation of the employer, and
100the approval of the division, on forms required by the division.
101 4. Normal retirement benefits and any interest shall
102continue to accrue in DROP until the established termination
103date of DROP or until the participant terminates employment or
104dies prior to such date, except as provided in s. 121.053(7).
105Although individual DROP accounts shall not be established, a
106separate accounting of each participant's accrued benefits under
107DROP shall be calculated and provided to participants.
108 5. At the conclusion of the participant's DROP, the
109division shall distribute the participant's total accumulated
110DROP benefits, subject to the following:
111 a. The division shall receive verification by the
112participant's employer or employers that the participant has
113terminated all employment relationships as provided in s.
115 b. The terminated DROP participant or, if deceased, the
116participant's named beneficiary, shall elect on forms provided
117by the division to receive payment of the DROP benefits in
118accordance with one of the options listed below. If a
119participant or beneficiary fails to elect a method of payment
120within 60 days after termination of DROP, the division shall pay
121a lump sum as provided in sub-sub-subparagraph (I).
122 (I) Lump sum.-All accrued DROP benefits, plus interest,
123less withholding taxes remitted to the Internal Revenue Service,
124shall be paid to the DROP participant or surviving beneficiary.
125 (II) Direct rollover.-All accrued DROP benefits, plus
126interest, shall be paid from DROP directly to the custodian of
127an eligible retirement plan as defined in s. 402(c)(8)(B) of the
128Internal Revenue Code. However, in the case of an eligible
129rollover distribution to the surviving spouse of a deceased
130participant, an eligible retirement plan is an individual
131retirement account or an individual retirement annuity as
132described in s. 402(c)(9) of the Internal Revenue Code.
133 (III) Partial lump sum.-A portion of the accrued DROP
134benefits shall be paid to DROP participant or surviving spouse,
135less withholding taxes remitted to the Internal Revenue Service,
136and the remaining DROP benefits must be transferred directly to
137the custodian of an eligible retirement plan as defined in s.
138402(c)(8)(B) of the Internal Revenue Code. However, in the case
139of an eligible rollover distribution to the surviving spouse of
140a deceased participant, an eligible retirement plan is an
141individual retirement account or an individual retirement
142annuity as described in s. 402(c)(9) of the Internal Revenue
143Code. The proportions must be specified by the DROP participant
144or surviving beneficiary.
145 c. The form of payment selected by the DROP participant or
146surviving beneficiary must comply with the minimum distribution
147requirements of the Internal Revenue Code.
148 d. A DROP participant who fails to terminate all
149employment relationships as provided in s. 121.021(39) shall be
150deemed as not retired, and the DROP election is null and void.
151Florida Retirement System membership shall be reestablished
152retroactively to the date of the commencement of DROP, and each
153employer with whom the participant continues employment must pay
154to the Florida Retirement System Trust Fund the difference
155between the DROP contributions paid in paragraph (i) and the
156contributions required for the applicable Florida Retirement
157System class of membership during the period the member
158participated in DROP, plus 6.5 percent interest compounded
160 6. The retirement benefits of any DROP participant who
161terminates all employment relationships as provided in s.
162121.021(39) but is reemployed in violation of the reemployment
163provisions of subsection (9) shall be suspended during those
164months in which the retiree is in violation. Any retiree in
165violation of this subparagraph and any employer that employs or
166appoints such person without notifying the Division of
167Retirement to suspend retirement benefits are jointly and
168severally liable for any benefits paid during the reemployment
169limitation period. The employer must have a written statement
170from the retiree that he or she is not retired from a state-
171administered retirement system. Any retirement benefits received
172by a retiree while employed in violation of the reemployment
173limitations must be repaid to the Florida Retirement System
174Trust Fund, and his or her retirement benefits shall remain
175suspended until payment is made. Benefits suspended beyond the
176end of the reemployment limitation period apply toward repayment
177of benefits received in violation of the reemployment
179 7. The accrued benefits of any DROP participant, and any
180contributions accumulated under the program, are not subject to
181assignment, execution, attachment, or any legal process
182whatsoever, except for qualified domestic relations orders by a
183court of competent jurisdiction, income deduction orders as
184provided in s. 61.1301, and federal income tax levies.
185 8. DROP participants are not eligible for disability
186retirement benefits as provided in subsection (4).
187 Section 2. Subsection (3) of section 121.71, Florida
188Statutes, is amended, present subsection (4) of that section is
189renumbered as subsection (5), and a new subsection (4) is added
190to that section, to read
191 121.71 Uniform rates; process; calculations; levy.-
192 (3) Required employer retirement contribution rates for
193each membership class and subclass of the Florida Retirement
194System for both retirement plans are as follows:
Membership ClassPercentage of Gross Compensation,Effective July 1, 2010 2009Percentage of Gross Compensation,Effective July 1, 2011 2010
Regular Class9.76% 8.69%9.76% 9.63%
Special Risk Class22.15% 19.76%22.15% 22.11%
Special Risk Administrative Support Class11.24% 11.39%11.24% 12.10%
Elected Officers' Class - Legislators, Governor, Lt. Governor, Cabinet Officers, State Attorneys, Public Defenders14.38% 13.32%14.38% 15.20%
Elected Officers' Class - Justices, Judges19.39% 18.40%19.39% 20.65%
Elected Officers' Class - County Elected Officers16.62% 15.37%16.62% 17.50%
Senior Management Class11.70% 11.96%11.70% 13.43%
DROP10.07% 9.80%10.07% 11.14%
204 (4) In order to address unfunded actuarial liabilities of
205the system, the additional required employer retirement
206contribution rates for each membership class and subclass of the
207Florida Retirement System for both retirement plans are as
Membership ClassPercentage of Gross Compensation,Effective July 1, 2010Percentage of Gross Compensation,Effective July 1, 2011
Regular Class0.00%1.74%
Special Risk Class0.00%6.57%
Special Risk Administrative Support Class0.00%17.57%
Elected Officers' Class - Legislators, Governor, Lt. Governor, Cabinet Officers, State Attorneys, Public Defenders0.00%18.76%
Elected Officers' Class - Justices, Judges0.00%12.10%
Elected Officers' Class - County Elected Officers0.00%21.73%
Senior Management Class0.00%10.19%
218 Section 3. Section 121.74, Florida Statutes, is amended to
220 121.74 Administrative and educational expenses.-In
221addition to contributions required under ss. s. 121.71 and
222121.73, effective July 1, 2010, through June 30, 2014, employers
223participating in the Florida Retirement System shall contribute
224an amount equal to 0.03 0.05 percent of the payroll reported for
225each class or subclass of Florida Retirement System membership.
226Effective July 1, 2014, the contribution rate shall be 0.04
227percent of the payroll reported for each class or subclass of
228membership. The, which amount contributed shall be transferred
229by the Division of Retirement from the Florida Retirement System
230Contributions Clearing Trust Fund to the State Board of
231Administration's Administrative Trust Fund to offset the costs
232of administering the optional retirement program and the costs
233of providing educational services to participants in the defined
234benefit program and the optional retirement program. Approval of
235the trustees of the State Board of Administration is required
236before prior to the expenditure of these funds. Payments for
237third-party administrative or educational expenses shall be made
238only pursuant to the terms of the approved contracts for such
240 Section 4. As part of the actuarial study required by s.
241121.031(3), Florida Statutes, based on the results of June 30,
2422010, the administrator of the Florida Retirement System shall
243contract with the state actuary to conduct an actuarial study of
244the Florida Retirement System which considers the following
245methods of funding the Deferred Retirement Option Program:
246 (1) Through a separate contribution rate regardless of the
247participant's membership class, which had been the principle
248method through the 2009 valuation;
249 (2) Treat participants as retirees such that the payroll
250associated with the participants is not used to develop the
251contribution rates for the respective membership class, and the
252employer is not required to make contributions on such payroll
253except for unfunded actuarial liability contributions; and
254 (3) Treat participants as active members such that the
255payroll associated with the participants is used to develop the
256contribution rates for the respective membership class, and the
257employer is required to make contributions on the payroll at the
258same contribution rate as the employer pays for an active member
259of the applicable class.
260 Section 5. The Legislature finds that a proper and
261legitimate state purpose is served when employees and retirees
262of the state and its political subdivisions, and the dependents,
263survivors, and beneficiaries of such employees and retirees, are
264extended the basic protections afforded by governmental
265retirement systems. These persons must be provided benefits that
266are fair and adequate and that are managed, administered, and
267funded in an actuarially sound manner, as required by s. 14,
268Article X of the State Constitution and part VII of chapter 112,
269Florida Statutes. Therefore, the Legislature determines and
270declares that this act fulfills an important state interest.
271 Section 6. This act shall take effect July 1, 2010.
CODING: Words stricken are deletions; words underlined are additions.