Senate Bill sb0590e1

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    CS for SB 590                                  First Engrossed



  1                      A bill to be entitled

  2         An act relating to the Florida Retirement

  3         System; creating part III of chapter 121, F.S.,

  4         consisting of ss. 121.70, 121.71, 121.72,

  5         121.73, 121.74, 121.75, 121.76, 121.77, 121.78,

  6         F.S.; providing legislative purpose and intent

  7         to establish a uniform contribution rate system

  8         for the Florida Retirement System; providing

  9         for establishment of uniform rates; providing

10         allocations to Public Employee Optional

11         Retirement Program accounts; providing for

12         allocations to provide disability coverage for

13         Public Employee Optional Retirement Program

14         participants; providing administrative and

15         educational expenses; providing for transfer of

16         remaining balance to Florida Retirement System

17         Trust Fund to fund the benefit costs under the

18         Florida Retirement System Pension Plan and

19         administrative costs authorized under part I of

20         chapter 121, F.S.; providing for contributions

21         for Social Security and for the retiree health

22         insurance subsidy; granting the State Board of

23         Administration authority to allow the

24         third-party administrator to make deductions

25         from participant accounts; providing for

26         payment and distribution of contributions;

27         amending ss. 121.052, 121.055, 121.071,

28         121.571, F.S., to conform to the uniform

29         contribution rate system; amending s. 121.091,

30         F.S.; reducing contribution rates for DROP

31         payroll; amending s. 121.4501, F.S.; conforming


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    CS for SB 590                                  First Engrossed



  1         references; providing guidance to assist

  2         employers and the State Board of Administration

  3         in maintaining compliance with section 404(c)

  4         of ERISA; providing a directive to statute

  5         editors; amending section 11 of chapter

  6         2001-235, Laws of Florida, to revise annual

  7         payment amount to cover the cost for the

  8         special January 2002 benefit increase provided

  9         for certain retirees and DROP participants;

10         repealing section 23 of chapter 2000-169, Laws

11         of Florida, relating to contribution rate

12         increases scheduled to take effect on July 1,

13         2002, which are redundant; providing

14         legislative intent regarding other rate

15         changes; providing a declaration of important

16         state interest; providing an effective date.

17

18  Be It Enacted by the Legislature of the State of Florida:

19

20         Section 1.  Part III of chapter 121, Florida Statutes,

21  consisting of sections 121.70, 121.71, 121.72, 121.73, 121.74,

22  121.75, 121.76, 121.77, and 121.78, Florida Statutes, is

23  created to read:

24                             Part III

25

26           Florida Retirement System Contribution Rates

27

28         121.70  Legislative purpose and intent.--

29         (1)  This part provides for a uniform system for

30  funding benefits provided under the Florida Retirement System

31  defined benefit program established under part I of this


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    CS for SB 590                                  First Engrossed



  1  chapter (referred to in this part as the defined benefit

  2  program) and under the Public Employee Optional Retirement

  3  Program established under part II of this chapter (referred to

  4  in this part as the optional retirement program). The

  5  Legislature recognizes and declares that the Florida

  6  Retirement System is a single retirement system, consisting of

  7  two retirement plans and other nonintegrated programs.

  8  Employers participating in the Florida Retirement System

  9  collectively shall be responsible for making contributions to

10  support the benefits afforded under both plans. As provided in

11  this part, employers participating in the Florida Retirement

12  System shall make contributions based upon uniform

13  contribution rates determined as a percentage of the total

14  payroll for each class or subclass of Florida Retirement

15  System membership, irrespective of which retirement plan

16  individual employees may elect. This shall be known as a

17  uniform or blended contribution rate system.

18         (2)  In establishing a uniform contribution rate

19  system, it is the intent of the Legislature to:

20         (a)  Provide greater stability and certainty in

21  financial planning and budgeting for Florida Retirement System

22  employers by eliminating the fiscal instability that would be

23  caused by dual rates coupled with employee-selected plan

24  participation;

25         (b)  Provide greater fiscal equity and uniformity for

26  system employers by effectively distributing the financial

27  burden and benefit of short-term system deficits and

28  surpluses, respectively, in proportion to total system

29  payroll; and

30

31


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    CS for SB 590                                  First Engrossed



  1         (c)  Allow employees to make their retirement plan

  2  selection decisions free of circumstances that may cause

  3  employers to favor one plan choice over another.

  4         121.71  Uniform rates; process; calculations; levy.--

  5         (1)  In conducting the system actuarial study required

  6  under s. 121.031, the actuary shall follow all requirements

  7  specified thereunder to determine, by Florida Retirement

  8  System employee membership class, the dollar contribution

  9  amounts necessary for the forthcoming fiscal year for the

10  defined benefit program. In addition, the actuary shall

11  determine, by Florida Retirement System membership class,

12  based on an estimate for the forthcoming fiscal year of the

13  gross compensation of employees participating in the optional

14  retirement program, the dollar contribution amounts necessary

15  to make the allocations required under ss. 121.72 and 121.73.

16  For each employee membership class and subclass, the actuarial

17  study shall establish a uniform rate necessary to fund the

18  benefit obligations under both Florida Retirement System

19  retirement plans, by dividing the sum of total dollars

20  required by the estimated gross compensation of members in

21  both plans.

22         (2)  Based on the uniform rates set forth in subsection

23  (3), employers shall make monthly contributions to the

24  Division of Retirement, which shall initially deposit the

25  funds into the Florida Retirement System Contributions

26  Clearing Trust Fund. A change in a contribution rate is

27  effective the first day of the month for which a full month's

28  employer contribution may be made on or after the beginning

29  date of the change.

30         (3)  Required employer retirement contribution rates

31  for each membership class and subclass of the Florida


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    CS for SB 590                                  First Engrossed



  1  Retirement System for both retirement plans are as follows.

  2  Rates effective July 1, 2002, reflect an offset to normal

  3  employer costs of $1,237,000,000, resulting from recognition

  4  and usage of current available excess assets of the Florida

  5  Retirement System Trust Fund as determined pursuant to s.

  6  121.031. Contribution rates that become effective July 1,

  7  2003, reflect normal system costs.

  8                                 Percentage of     Percentage of

  9                                     Gross             Gross

10                                 Compensation,     Compensation,

11                                   Effective         Effective

12  Membership Class                July 1, 2002      July 1, 2003

13

14  Regular Class                       4.50%             9.87%

15  Special Risk Class                 14.75%            22.89%

16  Special Risk Administrative

17    Support Class                     5.30%            12.58%

18  Elected Officers' Class -

19    Legislators, Governor,

20    Lt. Governor,

21    Cabinet Officers,

22    State Attorneys,

23    Public Defenders                  8.15%            15.43%

24  Elected Officers' Class -

25    Justices, Judges                 14.60%            20.54%

26  Elected Officers' Class -

27    County Elected Officers          10.60%            17.52%

28  Senior Management Class            14.02%            20.90%

29  DROP                               8.00%             11.56%

30

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    CS for SB 590                                  First Engrossed



  1         121.72  Allocations to optional retirement program

  2  participant accounts; percentage amounts.--

  3         (1)  The allocations established in subsection (4)

  4  shall fund retirement benefits under the optional retirement

  5  program and shall be transferred monthly by the Division of

  6  Retirement from the Florida Retirement System Contributions

  7  Clearing Trust Fund to the third-party administrator for

  8  deposit in each participating employee's individual account

  9  based on the membership class of the participant.

10         (2)  The allocations are stated as a percentage of each

11  optional retirement program participant's gross compensation

12  for the calendar month. A change in a contribution percentage

13  is effective the first day of the month for which a full

14  month's employer contribution may be made on or after the

15  beginning date of the change. Contribution percentages may be

16  modified by general law.

17         (3)  Employer and participant contributions to

18  participant accounts shall be accounted for separately.

19  Participant contributions may be made only if expressly

20  authorized by law. Interest and investment earnings on

21  contributions shall accrue on a tax-deferred basis until

22  proceeds are distributed.

23         (4) Effective July 1, 2002, allocations from the

24  Florida Retirement System Contributions Clearing Trust Fund to

25  optional retirement program participant accounts shall be as

26  follows:

27

28  Membership Class                         Percentage of Gross

29                                                 Compensation

30  Regular Class                                   9.00%

31  Special Risk Class                             20.00%


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    CS for SB 590                                  First Engrossed



  1  Special Risk Administrative Support Class      11.35%

  2  Elected Officers' Class -

  3    Legislators, Governor,

  4    Lt. Governor, Cabinet Officers,

  5    State Attorneys, Public Defenders            13.40%

  6  Elected Officers' Class -

  7    Justices, Judges                             18.90%

  8  Elected Officers' Class -

  9    County Elected Officers                      16.20%

10  Senior Management Service Class                10.95%

11

12         121.73  Allocations for optional retirement program

13  participant disability coverage; percentage amounts.--

14         (1)  The allocations established in subsection (3)

15  shall be used to provide disability coverage for participants

16  in the optional retirement program and shall be transferred

17  monthly by the Division of Retirement from the Florida

18  Retirement System Contributions Clearing Trust Fund to the

19  disability account of the Florida Retirement System Trust

20  Fund.

21         (2)  The allocations are stated as a percentage of each

22  optional retirement program participant's gross compensation

23  for the calendar month. A change in a contribution percentage

24  is effective the first day of the month for which a full

25  month's employer contribution may be made on or after the

26  beginning date of the change. Contribution percentages may be

27  modified by general law.

28         (3)  Effective July 1, 2002, allocations from the FRS

29  Contribution Clearing Fund to provide disability coverage for

30  participants in the optional retirement program, and to offset

31  the costs of administering said coverage, shall be as follows:


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    CS for SB 590                                  First Engrossed



  1

  2  Membership Class                         Percentage of Gross

  3                                                  Compensation

  4  Regular Class                                   0.25%

  5  Special Risk Class                              1.33%

  6  Special Risk Administrative Support Class       0.45%

  7  Elected Officers' Class -

  8    Legislators, Governor,

  9    Lt. Governor, Cabinet Officers,

10    State Attorneys, Public Defenders             0.41%

11  Elected Officers' Class -

12    Justices, Judges                              0.73%

13  Elected Officers' Class -

14    County Elected Officers                       0.41%

15  Senior Management Service Class                 0.26%

16

17         121.74  Administrative and educational

18  expenses.--Effective July 1, 2002, in addition to

19  contributions required under s. 121.71, employers

20  participating in the Florida Retirement System shall

21  contribute an amount equal to 0.15 percent of the payroll

22  reported for each class or subclass of Florida Retirement

23  System membership, which amount shall be transferred by the

24  Division of Retirement from the Florida Retirement System

25  Contribution Clearing Trust Fund to the State Board of

26  Administration's Administrative Trust Fund to offset the costs

27  of administering the optional retirement program and the costs

28  of providing educational services to participants in the

29  defined benefit program and the optional retirement program.

30  Approval of the Trustees of the State Board of Administration

31  is required prior to the expenditure of these funds. Payments


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    CS for SB 590                                  First Engrossed



  1  for third-party administrative or educational expenses shall

  2  be made only pursuant to the terms of the approved contracts

  3  for such services.

  4         121.75  Allocation for defined benefit program.--After

  5  making the transfers required pursuant to ss. 121.71, 121.72,

  6  121.73, and 121.74, the monthly balance of funds in the

  7  Florida Retirement System Contributions Clearing Trust Fund

  8  shall be transferred to the Florida Retirement System Trust

  9  Fund to pay the costs of providing defined benefit program

10  benefits and plan administrative costs under the defined

11  benefit program.

12         121.76  Contributions for social security and for

13  retiree health insurance subsidy.--Contributions required

14  under this part shall be made or deducted, as may be

15  appropriate, for each pay period and are in addition to

16  employer and member contributions required for social security

17  and the Retiree Health Insurance Subsidy Trust Fund as

18  provided under parts I and II of this chapter.

19         121.77  Deductions from participant accounts.--The

20  State Board of Administration may authorize the third-party

21  administrator to deduct reasonable fees and apply appropriate

22  charges to optional retirement program participant accounts.

23  In no event shall administrative and educational expenses

24  exceed the portion of employer contributions earmarked for

25  such expenses under this part, except for reasonable

26  administrative charges assessed against participant accounts

27  of persons for whom no employer contributions are made during

28  the calendar quarter. Investment management fees shall be

29  deducted from participant accounts, pursuant to the terms of

30  the contract between the provider and the board.

31         121.78  Payment and distribution of contributions.--


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    CS for SB 590                                  First Engrossed



  1         (1)  Contributions made pursuant to this part shall be

  2  paid by the employer to the Division of Retirement by

  3  electronic funds transfer no later than the 5th working day of

  4  the month immediately following the month during which the

  5  payroll period ended.  Accompanying payroll data must be

  6  transmitted to the Division concurrent  with the

  7  contributions.

  8         (2)  The division, the State Board of Administration,

  9  and the third-party administrator, as applicable, shall ensure

10  that the contributions are distributed to the appropriate

11  trust funds or participant accounts in a timely manner.

12         (3)(a)  Employer contributions and accompanying payroll

13  data received after the 5th working day of the month shall be

14  considered late. The employer shall be assessed by the

15  Division a penalty of 1 percent of the contributions due for

16  each calendar month or part thereof that the contributions or

17  accompanying payroll data are late.  Proceeds from the

18  1-percent assessment against contributions made on behalf of

19  participants of the defined benefit program shall be deposited

20  in the Florida Retirement System Trust Fund, and proceeds from

21  the 1-percent assessment against contributions made on behalf

22  of participants of the optional retirement program shall be

23  transferred to the third party administrator for deposit into

24  participant accounts, as provided in paragraph (b).

25         (b)  If contributions made by an employer on behalf of

26  participants of the optional retirement program or

27  accompanying payroll data are not received within the calendar

28  month they are due and if that delinquency results in market

29  losses to participants, the employer shall reimburse each

30  participant's account for market losses resulting from the

31  late contributions. The third-party administrator, hired by


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    CS for SB 590                                  First Engrossed



  1  the board pursuant to s. 121.4501(8), shall calculate the

  2  market losses for each affected participant. When

  3  contributions made on behalf of participants of the optional

  4  retirement program or accompanying payroll data are not

  5  received within the calendar month due, the employer shall

  6  also pay the cost of the third-party administrator's

  7  calculation and reconciliation adjustments resulting from the

  8  late contributions. The third-party administrator shall notify

  9  the employer of the results of the calculations and the total

10  amount due from the employer for such losses and the costs of

11  calculation and reconciliation. The employer shall remit to

12  the Division the amount due within 10 working days after the

13  date of the penalty notice sent by the Division. The Division

14  shall transfer said amount to the third-party administrator,

15  who shall deposit proceeds from the 1-percent assessment and

16  from individual market losses into participant accounts, as

17  appropriate.  The board is authorized to adopt rules to

18  implement the provisions regarding late contributions, late

19  submission of payroll data, the process for reimbursing

20  participant accounts for resultant market losses, and the

21  penalties charged to the employers.

22         (c)  Delinquency fees may be waived by the division,

23  with regard to defined benefit program contributions, and by

24  the State Board of Administration, with regard to optional

25  retirement program contributions, only when, in the opinion of

26  the division or the board, as appropriate, exceptional

27  circumstances beyond the employer's control prevented

28  remittance by the prescribed due date notwithstanding the

29  employer's good faith efforts to effect delivery.  Such a

30  waiver of delinquency may be granted an employer only one time

31  each state fiscal year.


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    CS for SB 590                                  First Engrossed



  1         Section 2.  Subsection (7) of section 121.052, Florida

  2  Statutes, is amended to read:

  3         121.052  Membership class of elected officers.--

  4         (7)  CONTRIBUTIONS.--

  5         (a)  The following table states the required retirement

  6  contribution rates for members of the Elected Officers' Class

  7  and their employers in terms of a percentage of the member's

  8  gross compensation. A change in a contribution rate is

  9  effective with the first salary paid on or after the beginning

10  date of the change. Contributions shall be made or deducted as

11  may be appropriate for each pay period and are in addition to

12  the contributions required for social security and the Retiree

13  Health Insurance Subsidy Trust Fund.

14

15  Dates of Contribution

16    Rate Changes                             Members   Employers

17  1.  Effective July 1,

18  2001, through June 30, 2002

19    Legislators                                 0%       15.14%

20    Governor, Lt. Governor, Cabinet

21    Officers                                    0%       15.14%

22    State Attorneys, Public Defenders           0%       15.14%

23    Justices, Judges                            0%       20.61%

24    County Elected Officers                     0%       17.61%

25         2.  Effective July 1, 2002, the required retirement

26  contribution rates shall be specified in s. 121.71.

27

28         (b)  The employer paying the salary of a member of the

29  Elected Officers' Class shall contribute an amount as

30  specified in this subsection or s. 121.71, as appropriate,

31  which shall constitute the entire employer retirement


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    CS for SB 590                                  First Engrossed



  1  contribution with respect to such member.  The employer shall

  2  also withhold one-half of the entire contribution of the

  3  member required for social security coverage.

  4         (c)  The following table states the required employer

  5  contribution on behalf of each member of the Elected Officers'

  6  Class in terms of a percentage of the member's gross

  7  compensation. Such contribution constitutes the entire health

  8  insurance subsidy contribution with respect to each such the

  9  member. A change in the contribution rate is effective with

10  the first salary paid on or after the beginning date of the

11  change. The retiree health insurance subsidy contribution rate

12  is as follows:

13

14  Dates of Contribution                             Contribution

15    Rate Changes                                        Rate

16

17  October 1, 1987, through December 31, 1988             0.24%

18  January 1, 1989, through December 31, 1993             0.48%

19  January 1, 1994, through December 31, 1994             0.56%

20  January 1, 1995, through June 30, 1998                 0.66%

21  July 1, 1998, through June 30, 2001                    0.94%

22  Effective July 1, 2001                                 1.11%

23

24  Such contributions shall be deposited by the administrator in

25  the Retiree Health Insurance Subsidy Trust Fund.

26         Section 3.  Subsection (3) of section 121.055, Florida

27  Statutes, is amended to read:

28         121.055  Senior Management Service Class.--There is

29  hereby established a separate class of membership within the

30  Florida Retirement System to be known as the "Senior

31


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    CS for SB 590                                  First Engrossed



  1  Management Service Class," which shall become effective

  2  February 1, 1987.

  3         (3)(a)  The following table states the required

  4  retirement contribution rates for members of the Senior

  5  Management Service Class and their employers in terms of a

  6  percentage of the member's gross compensation. A change in the

  7  contribution rate is effective with the first salary paid on

  8  or after the beginning date of the change.  Contributions

  9  shall be made for each pay period and are in addition to the

10  contributions required for social security and the Retiree

11  Health Insurance Subsidy Trust Fund.

12

13  Dates of Contribution

14    Rate Changes                          Members   Employers

15  1.  Effective July 1,                     0%       11.73%

16  2001, through June 30, 2002

17         2.  Effective July 1, 2002, the required retirement

18  contribution rate shall be as specified in s. 121.71.

19

20         (b)  The employer paying the salary of a member of the

21  Senior Management Service Class shall contribute an amount as

22  specified in this section or s. 121.71, as appropriate, which

23  shall constitute the entire employer retirement contribution

24  with respect to such member.  The employer shall also withhold

25  one-half of the entire contribution of the member required for

26  social security coverage.

27         (c)  The following table states the required employer

28  contribution on behalf of each member of the Senior Management

29  Service Class in terms of a percentage of the member's gross

30  compensation.  Such contribution constitutes the entire health

31  insurance subsidy contribution with respect to each such the


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    CS for SB 590                                  First Engrossed



  1  member. A change in the contribution rate is effective with

  2  the first salary paid on or after the beginning date of the

  3  change.  The retiree health insurance subsidy contribution

  4  rate is as follows:

  5

  6  Dates of Contribution                             Contribution

  7    Rate Changes                                        Rate

  8  October 1, 1987, through December 31, 1988             0.24%

  9  January 1, 1989, through December 31, 1993             0.48%

10  January 1, 1994, through December 31, 1994             0.56%

11  January 1, 1995, through June 30, 1998                 0.66%

12  July 1, 1998, through June 30, 2001                    0.94%

13  Effective July 1, 2001                                 1.11%

14

15  Such contributions shall be deposited by the administrator in

16  the Retiree Health Insurance Subsidy Trust Fund.

17         Section 4.  Subsections (1), (2), (3), (4), and (5) of

18  section 121.071, Florida Statutes, are amended to read:

19         121.071  Contributions.--Contributions to the system

20  shall be made as follows:

21         (1)  The following tables state the required retirement

22  contribution rates for members of the Regular Class, Special

23  Risk Class, or Special Risk Administrative Support Class and

24  their employers in terms of a percentage of the member's gross

25  compensation.  A change in a contribution rate is effective

26  with the first salary paid on or after the beginning date of

27  the change. Contributions shall be made or deducted as may be

28  appropriate for each pay period and are in addition to the

29  contributions required for social security and the Retiree

30  Health Insurance Subsidy Trust Fund.

31


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    CS for SB 590                                  First Engrossed



  1         (a)1.  Retirement contributions for regular members are

  2  as follows:

  3

  4  Dates of Contribution

  5    Rate Changes                             Members   Employers

  6  Effective July 1, 2001,

  7  through June 30, 2002                         0%        9.91%

  8         2.  Effective July 1, 2002, the retirement

  9  contributions for regular members shall be specified in s.

10  121.71.

11

12         (b)1.  Retirement contributions for special risk

13  members are as follows:

14

15  Dates of Contribution

16    Rate Changes                             Members   Employers

17  Effective July 1,

18  2001, through June 30, 2002                   0%       22.07%

19         2.  Effective July 1, 2002, retirement contributions

20  for special risk members shall be specified in s. 121.71.

21

22         (c)1.  Retirement contributions for special risk

23  administrative support members are as follows:

24

25  Dates of Contribution

26    Rate Changes                             Members   Employers

27  Effective July 1, 2001, through               0%       12.55%

28  June 30, 2002

29         2.  Effective July 1, 2002, retirement contributions

30  for special risk administrative support members shall be

31  specified in s. 121.71.


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    CS for SB 590                                  First Engrossed



  1

  2         (2)(a)  Effective January 1, 1975, or October 1, 1975,

  3  as applicable, each employer shall accomplish the increased

  4  contribution required by subsection (1) by a procedure in

  5  which no employee's gross salary shall be reduced.

  6         (b)  Upon termination of employment for any reason

  7  other than retirement, a member shall be entitled to a full

  8  refund of the contributions he or she has made prior or

  9  subsequent to participation in the noncontributory plan,

10  subject to the restrictions otherwise provided in this

11  chapter.

12         (3)  The employer paying the salary of a member shall

13  contribute an amount as specified in this section or s.

14  121.71, as appropriate, which shall constitute the entire

15  employer retirement contribution with respect to such member.

16  The employer shall also withhold one-half of the entire

17  contribution of the member required for social security

18  coverage.  Contributions for social security by each member

19  and each employer, in the amount required for social security

20  coverage as now or hereafter provided by the federal Social

21  Security Act, shall be in addition to contributions specified

22  in subsection (1).

23         (4)  The following table states the required employer

24  contribution on behalf of each member of the Regular Class,

25  Special Risk Class, or Special Risk Administrative Support

26  Class in terms of a percentage of the member's gross

27  compensation.  Such contribution constitutes the entire health

28  insurance subsidy contribution with respect to each such the

29  member.  A change in the contribution rate is effective with

30  the first salary paid on or after the beginning date of the

31


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    CS for SB 590                                  First Engrossed



  1  change. The retiree health insurance subsidy contribution rate

  2  is as follows:

  3

  4  Dates of Contribution                             Contribution

  5    Rate Changes                                        Rate

  6  October 1, 1987, through December 31, 1988             0.24%

  7  January 1, 1989, through December 31, 1993             0.48%

  8  January 1, 1994, through December 31, 1994             0.56%

  9  January 1, 1995, through June 30, 1998                 0.66%

10  July 1, 1998, through June 30, 2001                    0.94%

11  Effective July 1, 2001                                 1.11%

12

13  Such contributions shall be deposited by the administrator in

14  the Retiree Health Insurance Subsidy Trust Fund.

15         (5)  Contributions made in accordance with subsections

16  (1), (2), (3), and (4), and s. 121.71 shall be paid by the

17  employer into the system trust funds in accordance with rules

18  adopted by the administrator pursuant to chapter 120. Such

19  contributions are due and payable no later than the 25th day

20  of the month immediately following the month during which the

21  payroll period ended. The department may, by rule, establish a

22  different due date, which shall supersede the date specified

23  herein; however, such due date may not be established earlier

24  than the 20th day of the month immediately following the month

25  during which the payroll period ended. Effective January 1,

26  1984, contributions made in accordance with subsection (3)

27  shall be paid by the employer into the system trust fund in

28  accordance with rules adopted by the administrator pursuant to

29  chapter 120.  For any payroll period ending any day of the

30  month before the 16th day of the month, such contributions are

31  due and payable no later than the 20th day of the month; and,


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    CS for SB 590                                  First Engrossed



  1  for any payroll periods ending any day of the month after the

  2  15th day of the month, such contributions are due and payable

  3  no later than the 5th day of the next month. Contributions

  4  received in the offices of the department after the prescribed

  5  date shall be considered delinquent unless, in the opinion of

  6  the department, exceptional circumstances beyond an employer's

  7  control prevented remittance by the prescribed due date

  8  notwithstanding such employer's good faith efforts to effect

  9  delivery; and, with respect to retirement contributions due

10  under subsections (1) and (4), each employer shall be assessed

11  a delinquent fee of 1 percent of the contributions due for

12  each calendar month or part thereof that the contributions are

13  delinquent. Such a waiver of the delinquency fee by the

14  department may be granted an employer only one time each

15  fiscal year. Delinquent social security contributions shall be

16  assessed a delinquent fee as authorized by s. 650.05(4).  The

17  delinquent fee assessable for an employer's first delinquency

18  after July 1, 1984, shall be as specified in s. 650.05(4),

19  and, beginning with the second delinquency in any fiscal year

20  by the employer subsequent to July 1, 1984, all subsequent

21  delinquency fees shall be assessed against the employer at

22  twice the applicable percentage rate specified in s.

23  650.05(4).

24         Section 5.  Effective July 1, 2002, paragraph (i) of

25  subsection (13) of section 121.091, Florida Statutes, is

26  amended to read:

27         121.091  Benefits payable under the system.--Benefits

28  may not be paid under this section unless the member has

29  terminated employment as provided in s. 121.021(39)(a) or

30  begun participation in the Deferred Retirement Option Program

31  as provided in subsection (13), and a proper application has


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    CS for SB 590                                  First Engrossed



  1  been filed in the manner prescribed by the department. The

  2  department may cancel an application for retirement benefits

  3  when the member or beneficiary fails to timely provide the

  4  information and documents required by this chapter and the

  5  department's rules. The department shall adopt rules

  6  establishing procedures for application for retirement

  7  benefits and for the cancellation of such application when the

  8  required information or documents are not received.

  9         (13)  DEFERRED RETIREMENT OPTION PROGRAM.--In general,

10  and subject to the provisions of this section, the Deferred

11  Retirement Option Program, hereinafter referred to as the

12  DROP, is a program under which an eligible member of the

13  Florida  Retirement System may elect to participate, deferring

14  receipt of retirement benefits while continuing employment

15  with his or her Florida Retirement System employer. The

16  deferred monthly benefits shall accrue in the System Trust

17  Fund on behalf of the participant, plus interest compounded

18  monthly, for the specified period of the DROP participation,

19  as provided in paragraph (c). Upon termination of employment,

20  the participant shall receive the total DROP benefits and

21  begin to receive the previously determined normal retirement

22  benefits. Participation in the DROP does not guarantee

23  employment for the specified period of DROP.

24         (i)  Contributions.--

25         1.  All employers paying the salary of a DROP

26  participant filling a regularly established position shall

27  contribute 8.0 11.56 percent of such participant's gross

28  compensation for the period of July 1, 2002, through June 30,

29  2003, and 11.56 percent of such compensation thereafter, which

30  shall constitute the entire employer DROP contribution with

31  respect to such participant.  Such contributions, payable to


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  1  the System Trust Fund in the same manner as required in s.

  2  121.071, shall be made as appropriate for each pay period and

  3  are in addition to contributions required for social security

  4  and the Retiree Health Insurance Subsidy Trust Fund.  Such

  5  employer, social security, and health insurance subsidy

  6  contributions are not included in the DROP.

  7         2.  The employer shall, in addition to subparagraph 1.,

  8  also withhold one-half of the entire social security

  9  contribution required for the participant.  Contributions for

10  social security by each participant and each employer, in the

11  amount required for social security coverage as now or

12  hereafter provided by the federal Social Security Act, shall

13  be in addition to contributions specified in subparagraph 1.

14         3.  All employers paying the salary of a DROP

15  participant filling a regularly established position shall

16  contribute the percent of such participant's gross

17  compensation required in s. 121.071(4), which shall constitute

18  the employer's health insurance subsidy contribution with

19  respect to such participant. Such contributions shall be

20  deposited by the administrator in the Retiree Health Insurance

21  Subsidy Trust Fund.

22         Section 6.  Subsections (1), (5), and (15) of section

23  121.4501, Florida Statutes, is amended to read:

24         121.4501  Public Employee Optional Retirement

25  Program.--

26         (1)  The Trustees of the State Board of Administration

27  shall establish an optional defined contribution retirement

28  program for members of the Florida Retirement System under

29  which retirement benefits will be provided for eligible

30  employees who elect to participate in the program. The

31  benefits to be provided for or on behalf of participants in


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    CS for SB 590                                  First Engrossed



  1  such optional retirement program shall be provided through

  2  employee-directed investments, in accordance with s. 401(a) of

  3  the Internal Revenue Code and its related regulations. The

  4  employers shall contribute, as provided in this section s.

  5  121.71, and s. 121.571, to the Public Employee Optional

  6  Retirement Program Trust Fund toward the funding of such

  7  optional benefits.

  8         (5)  CONTRIBUTIONS.--

  9         (a)  Each employer shall contribute on behalf of each

10  participant in the Public Employee Optional Retirement

11  Program, as provided in part III of this chapter an amount

12  based on a percentage of the employee's monthly compensation

13  as set forth in s. 121.571. The state board, acting as plan

14  fiduciary, shall ensure that all plan assets are held in a

15  trust, pursuant to s. 401 of the Internal Revenue Code. The

16  employer shall forward all contributions under this program to

17  the third-party administrator. The fiduciary shall ensure that

18  said contributions are allocated as follows:

19         1.  The portion earmarked for participant accounts

20  shall be used to purchase interests in the appropriate

21  investment vehicles for the accounts of each participant as

22  specified by the participant, or in accordance with paragraph

23  (4)(d).

24         2.  The portion earmarked for administrative and

25  educational expenses shall be transferred to the board.

26         3.  The portion earmarked for disability benefits shall

27  be transferred to the department.

28         (b)  Employers are responsible for notifying

29  participants regarding maximum contribution levels permitted

30  under the Internal Revenue Code. If a participant contributes

31  to any other tax-deferred plan, he or she is responsible for


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    CS for SB 590                                  First Engrossed



  1  ensuring that total contributions made to the optional program

  2  and to any other such plan do not exceed federally permitted

  3  maximums.

  4         (15)  STATEMENT OF FIDUCIARY STANDARDS AND

  5  RESPONSIBILITIES.--

  6         (a)  Investment of optional defined contribution

  7  retirement plan assets shall be made for the sole interest and

  8  exclusive purpose of providing benefits to plan participants

  9  and beneficiaries and defraying reasonable expenses of

10  administering the plan. The program's assets are to be

11  invested, on behalf of the program participants, with the

12  care, skill, and diligence that a prudent person acting in a

13  like manner would undertake. The performance of the investment

14  duties set forth in this paragraph shall comply with the

15  fiduciary standards set forth in the Employee Retirement

16  Income Security Act of 1974 at 29 U.S.C. s. 1104(a)(1)(A)-(C).

17  In case of conflict with other provisions of law authorizing

18  investments, the investment and fiduciary standards set forth

19  in this subsection shall prevail.

20         (b)  If a participant or beneficiary of the Public

21  Employee Optional Retirement Program exercises control over

22  the assets in his or her account, as determined by reference

23  to regulations of the United States Department of Labor under

24  s. 404(c) of the Employee Retirement Income Security Act of

25  1974 and all applicable laws governing the operation of the

26  program, no program fiduciary shall be liable for any loss to

27  a participant's or beneficiary's account which results from

28  such participant's or beneficiary's exercise of control.

29         (c)  Subparagraph (8)(b)4. and paragraph (15)(b)

30  incorporate the federal law concept of participant control,

31  established by regulations of the U.S. Department of Labor


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    CS for SB 590                                  First Engrossed



  1  under section 404(c) of the Employee Retirement Income

  2  Security Act of 1974 (ERISA).  The purpose of this paragraph

  3  is to assist employers and the State Board of Administration

  4  in maintaining compliance with section 404(c), while avoiding

  5  unnecessary costs and eroding participant benefits under the

  6  Public Employee Optional Retirement Program.  Pursuant to 29

  7  C.F.R. s. 2550.404c-1(b)(2)(i)(B)(1)(viii), the State Board of

  8  Administration or its designated agents shall deliver to

  9  participants of the Public Employee Optional Retirement

10  Program a copy of the prospectus most recently provided to the

11  plan, or shall provide such participants an opportunity to

12  obtain this information, except that:

13         1.  The requirement to deliver a prospectus shall be

14  deemed to be satisfied by delivery of a fund profile that

15  contains the information that would be included in a summary

16  prospectus as described by Rule 498 under the Securities Act

17  of 1933, 17 C.F.R. s. 230.498.  When the transaction fees,

18  expense information or other information provided by a mutual

19  fund in the prospectus does not reflect terms negotiated by

20  the State Board of Administration or its designated agents,

21  the aforementioned requirement is deemed to be satisfied by

22  delivery of a separate document described by Rule 498

23  substituting accurate information; and

24         2.  Delivery shall be deemed to have been effected if

25  delivery is through electronic means and the following

26  standards are satisfied:

27         a.  Electronically-delivered documents are prepared and

28  provided consistent with style, format, and content

29  requirements applicable to printed documents;

30         b.  Each participant is provided timely and adequate

31  notice of the documents that are to be delivered and their


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    CS for SB 590                                  First Engrossed



  1  significance thereof, and of the participant's right to obtain

  2  a paper copy of such documents free of charge;

  3         c.(I)  Participants have adequate access to the

  4  electronic documents, at locations such as their worksites or

  5  public facilities, and have the ability to convert the

  6  documents to paper free of charge by the State Board of

  7  Administration, and the Board or its designated agents take

  8  appropriate and reasonable measures to ensure that the system

  9  for furnishing electronic documents results in actual receipt,

10  or

11         (II)  Participants have provided consent to receive

12  information in electronic format, which consent may be

13  revoked; and

14         d.  The State Board of Administration, or its

15  designated agent, actually provides paper copies of the

16  documents free of charge, upon request.

17         Section 7.  Section 121.571, Florida Statutes, is

18  amended to read:

19         (Substantial rewording of section.  See

20         s. 121.571, F.S., for present text.)

21         121.571  Contributions.--Contributions to the Public

22  Employee Optional Retirement Program shall be made as follows:

23         (1)  NONCONTRIBUTORY PLAN.--Each employer shall

24  accomplish the contributions required by s. 121.71 by a

25  procedure in which no employee's gross salary shall be

26  reduced.

27         (2)  CONTRIBUTION RATES GENERALLY.--Contributions to

28  fund the retirement and disability benefits provided under

29  this part shall be based on the uniform contribution rates

30  established by s. 121.71 and on the membership class or

31


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    CS for SB 590                                  First Engrossed



  1  subclass of the participant.  Such contributions shall be

  2  allocated as provided in ss. 121.72 and 121.73.

  3         (3)  CONTRIBUTIONS FOR SOCIAL SECURITY COVERAGE AND FOR

  4  RETIREE HEALTH INSURANCE SUBSIDY.--Contributions required

  5  under this section shall be in addition to employer and member

  6  contributions required for social security and the Retiree

  7  Health Insurance Subsidy Trust Fund as provided in ss.

  8  112.363, 121.052, 121.055, and 121.071, as appropriate.

  9         Section 8.  Section 11 of chapter 2001-235, Laws of

10  Florida, is amended to read:

11         Section 11.  It is the intent of the Legislature that

12  the costs attributable to the additional cost-of-living

13  increase for special risk retirees and Deferred Retirement

14  Option Program participants as provided under section 2 shall

15  be funded by recognition of excess actuarial assets, amortized

16  over 30 years with the payments assumed to remain relatively

17  stable when expressed as a percentage of payroll. For fiscal

18  year 2001-2002, the payment shall be $9.3 million. For fiscal

19  year 2002-2003, the payment shall be $15.1 $19 million, and,

20  thereafter, payments shall increase by 5 percent per year. If

21  insufficient funds are available to fund this additional cost

22  through recognition of excess actuarial assets in fiscal year

23  2002-2003 and any year thereafter, and there remains an

24  unfunded actuarial liability attributable to the one-time

25  cost-of-living increase provided under section 2, the payroll

26  contribution rate for the Special Risk Class of the Florida

27  Retirement System shall be increased by .93 percent effective

28  July 1 of that year, unless the Legislature provides an

29  alternative funding mechanism before that date.

30         Section 9.  Section 23 of chapter 2000-169, Laws of

31  Florida, is hereby repealed.


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  1         Section 10.  The contribution rates proposed in this

  2  act shall be in addition to all other changes to such

  3  contribution rates which may be enacted into law to take

  4  effect on July 1, 2002. The Division of Statutory Revision is

  5  directed to adjust the contribution rates set forth herein

  6  accordingly.

  7         Section 11.  The Legislature finds that a proper and

  8  legitimate state purpose is served when employees, officers,

  9  retirees of the state and its political subdivisions, and the

10  dependents, survivors, and beneficiaries of such employees,

11  officers, and retirees, are extended the basic protections

12  afforded by governmental retirement systems that provide fair

13  and adequate benefits and that are managed, administered, and

14  funded in an actuarially sound manner, as required by Section

15  14, Article X of the State Constitution and part VII of

16  chapter 112, Florida Statutes. Therefore, the Legislature

17  hereby determines and declares that the provisions of this act

18  fulfill an important state interest.

19         Section 12.  Except as otherwise provided herein, this

20  act shall take effect June 30, 2002.

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