Bill Text: FL S0632 | 2017 | Regular Session | Introduced
Bill Title: Publicly Funded Defined Benefit Retirement Plans
Spectrum: Partisan Bill (Republican 1-0)
Status: (Failed) 2017-05-05 - Died in Governmental Oversight and Accountability [S0632 Detail]
Download: Florida-2017-S0632-Introduced.html
Florida Senate - 2017 SB 632 By Senator Brandes 24-00445B-17 2017632__ 1 A bill to be entitled 2 An act relating to publicly funded defined benefit 3 retirement plans; reordering and amending s. 112.625, 4 F.S.; defining the term “long-range return rate”; 5 amending s. 112.63, F.S.; revising requirements for 6 actuarial reports submitted by a retirement plan or 7 system subject to part VII of ch. 112, F.S., to 8 conform; amending s. 112.64, F.S.; prohibiting the 9 actuarial assumed rate of return of a plan or system 10 from exceeding the long-range return rate, as of a 11 specified date; specifying the length of time that a 12 long-range return rate is in effect; specifying the 13 method of reducing the actuarial assumed rate of 14 return if certain conditions exist; prescribing 15 reporting requirements for a plan or system with an 16 actuarial assumed rate of return in excess of the 17 long-range return rate; amending ss. 175.261 and 18 185.221, F.S.; conforming cross-references; providing 19 a declaration of important state interest; providing 20 an effective date. 21 22 Be It Enacted by the Legislature of the State of Florida: 23 24 Section 1. Section 112.625, Florida Statutes, is reordered 25 and amended to read: 26 112.625 Definitions.—As used in this act: 27 (9)(1)“Retirement system or plan” means any employee 28 pension benefit plan supported in whole or in part by public 29 funds, provided such plan is not: 30 (a) An employee benefit plan described in s. 4(a) of the 31 Employee Retirement Income Security Act of 1974, which is not 32 exempt under s. 4(b)(1) of such act; 33 (b) A plan which is unfunded and is maintained by an 34 employer primarily for the purpose of providing deferred 35 compensation for a select group of management or highly 36 compensated employees; 37 (c) A coverage agreement entered into pursuant to s. 218 of 38 the Social Security Act; 39 (d) An individual retirement account or an individual 40 retirement annuity within the meaning of s. 408, or a retirement 41 bond within the meaning of s. 409, of the Internal Revenue Code 42 of 1954; 43 (e) A plan described in s. 401(d) of the Internal Revenue 44 Code of 1954; or 45 (f) An individual account consisting of an annuity contract 46 described in s. 403(b) of the Internal Revenue Code of 1954. 47 (7)(2)“Plan administrator” means the person so designated 48 by the terms of the instrument or instruments, ordinance, or 49 statute under which the plan is operated. If no plan 50 administrator has been designated, the plan sponsor shall be 51 considered the plan administrator. 52 (2)(3)“Enrolled actuary” means an actuary who is enrolled 53 under Subtitle C of Title III of the Employee Retirement Income 54 Security Act of 1974 and who is a member of the Society of 55 Actuaries or the American Academy of Actuaries. 56 (1)(4)“Benefit increase” means a change or amendment in 57 the plan design or benefit structure which results in increased 58 benefits for plan members or beneficiaries. 59 (3)(5)“Governmental entity” means the state, for the 60 Florida Retirement System, and the county, municipality, special 61 district, or district school board which is the employer of the 62 member of a local retirement system or plan. 63 (6) “Pension or retirement benefit” means any benefit, 64 including a disability benefit, paid to a member or beneficiary 65 of a retirement system or plan as defined in subsection (9)(1). 66 (10)(7)“Statement value” means the value of assets in 67 accordance with s. 302(c)(2) of the Employee Retirement Income 68 Security Act of 1974 and as permitted under regulations 69 prescribed by the Secretary of the Treasury as amended by Pub. 70 L. No. 100-203, as such sections are in effect on August 16, 71 2006. Assets for which a fair market value is not provided shall 72 be excluded from the assets used in the determination of annual 73 funding cost. 74 (5)(8)“Named fiduciary,” “board,” or “board of trustees” 75 means the person or persons so designated by the terms of the 76 instrument or instruments, ordinance, or statute under which the 77 plan is operated. 78 (8)(9)“Plan sponsor” means the local governmental entity 79 that has established or that may establish a local retirement 80 system or plan. 81 (4) “Long-range return rate” means an actuarial assumed 82 rate of return that is expected to be realized at least 50 83 percent of the time over the next 30-year period. 84 Section 2. Paragraph (c) of subsection (1) of section 85 112.63, Florida Statutes, is amended, and paragraph (h) is added 86 to that subsection, to read: 87 112.63 Actuarial reports and statements of actuarial 88 impact; review.— 89 (1) Each retirement system or plan subject to the 90 provisions of this act shall have regularly scheduled actuarial 91 reports prepared and certified by an enrolled actuary. The 92 actuarial report shall consist of, but is not limited to, the 93 following: 94 (c) A description and explanation of actuarial assumptions 95 consistent with the requirements of s. 112.64. 96 (h) A description of proposed adjustments to any actuarial 97 assumptions, if required pursuant to s. 112.64. 98 99 The actuarial cost methods utilized for establishing the amount 100 of the annual actuarial normal cost to support the promised 101 benefits shall only be those methods approved in the Employee 102 Retirement Income Security Act of 1974 and as permitted under 103 regulations prescribed by the Secretary of the Treasury. 104 Section 3. Present subsection (7) of section 112.64, 105 Florida Statutes, is renumbered as subsection (9) and a new 106 subsection (7) and subsection (8) are added to that section, to 107 read: 108 112.64 Administration of funds; amortization of unfunded 109 liability.— 110 (7) Beginning January 1, 2021, the actuarial assumed rate 111 of return for each plan year may not be greater than the long 112 range return rate. Beginning with the 2021 plan year, the long 113 range return rate is effective for each plan or system for a 5 114 year period, and must be reevaluated and reestablished for each 115 subsequent 5-year period thereafter and be consistent with the 116 definition in s. 112.625(4). Each plan or system with an 117 actuarial assumed rate of return greater than the long-range 118 return rate on or after January 1, 2021, shall reduce the 119 actuarial assumed rate of return for the next plan year by at 120 least 25 basis points and shall continue to reduce the actuarial 121 assumed rate by at least an additional 25 basis points for each 122 subsequent plan year until the actuarial assumed rate of return 123 is equal to or less than the long-range return rate. 124 (8) Any plan or system that for any plan year has an 125 actuarial assumed rate of return greater than the long-range 126 return rate shall include at least the following information in 127 any report required under s. 112.63: 128 (a) The total necessary adjustment required to bring the 129 actuarial assumed rate of return in compliance with the long 130 range return rate currently in effect. 131 (b) The number of plan years required to bring the 132 actuarial assumed rate of return in compliance with the long 133 range return rate currently in effect. 134 (c) Any change to the plan investment strategy, including, 135 but not limited to, changes to asset class allocations, and any 136 change to actuarial methodology which results in a change to 137 either the long-range return rate or the actuarial assumed rate 138 of return of the plan. 139 (d) The additional cost to the plan or system resulting 140 from any changes required to be made to the actuarial assumed 141 rate of return using the long-range return rate currently in 142 effect. 143 Section 4. Paragraph (b) of subsection (2) of section 144 175.261, Florida Statutes, is amended to read: 145 175.261 Annual report to Division of Retirement; actuarial 146 valuations.—For any municipality, special fire control district, 147 chapter plan, local law municipality, local law special fire 148 control district, or local law plan under this chapter, the 149 board of trustees for every chapter plan and local law plan 150 shall submit the following reports to the division: 151 (2) With respect to local law plans: 152 (b) In addition to annual reports provided under paragraph 153 (a), an actuarial valuation of the retirement plan must be made 154 at least once every 3 years, as provided in s. 112.63, 155 commencing 3 years from the last actuarial valuation of the plan 156 or system for existing plans, or commencing 3 years from 157 issuance of the initial actuarial impact statement submitted 158 under s. 112.63 for newly created plans. Such valuation shall be 159 prepared by an enrolled actuary, subject to the following 160 conditions: 161 1. The assets shall be valued as provided in s. 112.625(10) 162s. 112.625(7). 163 2. The cost of the actuarial valuation must be paid by the 164 individual firefighters’ retirement fund or by the sponsoring 165 municipality or special fire control district. 166 3. A report of the valuation, including actuarial 167 assumptions and type and basis of funding, shall be made to the 168 division within 3 months after the date of valuation. If any 169 benefits are insured with a commercial insurance company, the 170 report must include a statement of the relationship of the 171 retirement plan benefits to the insured benefits, the name of 172 the insurer, the basis of premium rates, and the mortality 173 table, interest rate, and method used in valuing the retirement 174 benefits. 175 Section 5. Paragraph (b) of subsection (2) of section 176 185.221, Florida Statutes, is amended to read: 177 185.221 Annual report to Division of Retirement; actuarial 178 valuations.—For any municipality, chapter plan, local law 179 municipality, or local law plan under this chapter, the board of 180 trustees for every chapter plan and local law plan shall submit 181 the following reports to the division: 182 (2) With respect to local law plans: 183 (b) In addition to annual reports provided under paragraph 184 (a), an actuarial valuation of the retirement plan must be made 185 at least once every 3 years, as provided in s. 112.63, 186 commencing 3 years from the last actuarial valuation of the plan 187 or system for existing plans, or commencing 3 years from 188 issuance of the initial actuarial impact statement submitted 189 under s. 112.63 for newly created plans. Such valuation shall be 190 prepared by an enrolled actuary, subject to the following 191 conditions: 192 1. The assets shall be valued as provided in s. 112.625(10) 193s. 112.625(7). 194 2. The cost of the actuarial valuation must be paid by the 195 individual police officer’s retirement trust fund or by the 196 sponsoring municipality. 197 3. A report of the valuation, including actuarial 198 assumptions and type and basis of funding, shall be made to the 199 division within 3 months after the date of the valuation. If any 200 benefits are insured with a commercial insurance company, the 201 report must include a statement of the relationship of the 202 retirement plan benefits to the insured benefits, the name of 203 the insurer, the basis of premium rates, and the mortality 204 table, interest rate, and method used in valuing the retirement 205 benefits. 206 Section 6. The Legislature finds that a proper and 207 legitimate state purpose is served when employees and retirees 208 of the state and its political subdivisions, and the dependents, 209 survivors, and beneficiaries of such employees and retirees, are 210 extended the basic protections afforded by governmental 211 retirement systems that provide fair and adequate benefits and 212 that are managed, administered, and funded in an actuarially 213 sound manner as required by s. 14, Article X of the State 214 Constitution and part VII of chapter 112, Florida Statutes. 215 Therefore, the Legislature determines and declares that this act 216 fulfills an important state interest. 217 Section 7. This act shall take effect July 1, 2017.