CS/CS/HB 1307

1	A bill to be entitled
2	An act relating to state financial matters; amending s.
3	121.4501, F.S.; revising and providing definitions;
4	providing for excess account balances in the Public
5	Employee Optional Retirement Program when an employee
6	transfers to the defined benefit program; providing for
7	the use of such excess balance; requiring the State Board
8	of Administration to resolve complaints; providing for the
9	use of records in resolving such complaints; clarifying
10	the state board's rule authority with respect to the
11	program; amending s. 121.4502, F.S.; establishing a
12	forfeiture account in the Public Employee Retirement
13	Program Trust Fund; providing for the use of funds in the
14	account; amending s. 121.591, F.S.; conforming a cross-
15	reference; permitting an application for benefits under
16	the optional retirement program to be submitted by
17	electronic means; amending s. 121.74, F.S.; revising the
18	contribution rates for employers participating in the
19	Florida Retirement System; amending s. 121.78, F.S.;
20	exempting the Division of Retirement, the state board, and
21	the third-party administrator from liability for market
22	losses due to acts of God; amending s. 215.44, F.S.;
23	expanding the authority of the state board to use trust
24	agreements; requiring that the state board create an audit
25	committee for specified purposes; providing for duties,
26	membership, and term limits; requiring that the state
27	board annually produce and report to the Legislature
28	certain financial statements; requiring that such
29	statements be audited by an independent third-party firm
30	under the direction of the audit committee; requiring that
31	the state board meet at specified intervals and receive
32	reports containing certain information from specified
33	entities; amending s. 215.441, F.S.; providing minimum
34	qualifications for the executive director of the state
35	board; amending s. 215.444, F.S.; increasing membership of
36	the Investment Advisory Council; revising membership
37	requirements; providing council meeting and reporting
38	requirements; providing additional requirements for
39	council members; authorizing the council to create
40	subcommittees; amending s. 215.47, F.S.; expanding the
41	types of investments that the state board is authorized to
42	make; authorizing moneys available for investment by the
43	state board to be invested in certain federally tax-exempt
44	bonds, notes, or obligations not subject to the federal
45	alternative minimum tax; providing funds that may be
46	invested in a foreign entity; creating s. 215.4754, F.S.;
47	providing intent; requiring that the contract for an
48	investment adviser or manager include a standard of
49	conduct; providing for termination of the contract of an
50	adviser or manager who violates the standard of conduct;
51	prohibiting a member of the council from contracting with
52	or providing services for the investment of certain funds
53	during his or her service on the council and for a
54	specified period thereafter; creating s. 215.4755, F.S.;
55	requiring that an investment advisor or manager annually
56	certify to the state board certain activities regarding
57	investment decisions and standards of behavior; requiring
58	that certain disclosures be made at the request of the
59	state board regarding pecuniary interests of an investment
60	adviser or manager; amending s. 215.52, F.S.; providing
61	requirements for rules made by the state board with
62	respect to certain fiduciary duties; amending s. 218.409,
63	F.S.; providing for extending a moratorium on
64	contributions to or withdrawals from the Local Government
65	Surplus Funds Trust Fund under certain circumstances;
66	authorizing the state board to develop work products that
67	are subject to trademark, copyright, or patent; providing
68	an effective date.
69
70	Be It Enacted by the Legislature of the State of Florida:
71
72	Section 1.  Subsection (2), paragraph (e) of subsection
73	(4), subsection (6), and paragraphs (a) and (g) of subsection
74	(8) of section 121.4501, Florida Statutes, are amended to read:
75	121.4501  Public Employee Optional Retirement Program.-
76	(2)  DEFINITIONS.-As used in this part, the term:
77	(a)  "Approved provider" or "provider" means a private
78	sector company that is selected and approved by the state board
79	to offer one or more investment products or services to the
80	Public Employee optional retirement program. The term includes a
81	bundled provider that offers participants a range of
82	individually allocated or unallocated investment products and
83	may offer a range of administrative and customer services, which
84	may include accounting and administration of individual
85	participant benefits and contributions; individual participant
86	recordkeeping; asset purchase, control, and safekeeping; direct
87	execution of the participant's instructions as to asset and
88	contribution allocation; calculation of daily net asset values;
89	direct access to participant account information; periodic
90	reporting to participants, at least quarterly, on account
91	balances and transactions; guidance, advice, and allocation
92	services directly relating to the provider's its own investment
93	options or products, but only if the bundled provider complies
94	with the standard of care of s. 404(a)(1)(A-B) of the Employee
95	Retirement Income Security Act of 1974 (ERISA) and if providing
96	such guidance, advice, or allocation services does not
97	constitute a prohibited transaction under s. 4975(c)(1) of the
98	Internal Revenue Code or s. 406 of ERISA, notwithstanding that
99	such prohibited transaction provisions do not apply to the
100	optional retirement program; a broad array of distribution
101	options; asset allocation; and retirement counseling and
102	education. Private sector companies include investment
103	management companies, insurance companies, depositories, and
104	mutual fund companies.
105	(b)  "Average monthly compensation" means one-twelfth of
106	average final compensation as defined in s. 121.021(24).
107	(c)  "Covered employment" means employment in a regularly
108	established position as defined in s. 121.021(52).
109	(d)  "Defined benefit program" means the defined benefit
110	program of the Florida Retirement System administered under part
111	I of this chapter "Department" means the Department of
112	Management Services.
113	(e)  "Division" means the Division of Retirement within the
114	department of Management Services.
115	(f)  "Electronic means" means by telephone, if the required
116	information is received on a recorded line, or through Internet
117	access, if the required information is captured online.
118	(g)(f)  "Eligible employee" means an officer or employee,
119	as defined in s. 121.021, who:
120	1.  Is a member of, or is eligible for membership in, the
121	Florida Retirement System, including any renewed member of the
122	Florida Retirement System initially enrolled before July 1,
123	2010; or
124	2.  Participates in, or is eligible to participate in, the
125	Senior Management Service Optional Annuity Program as
126	established under s. 121.055(6), the State Community College
127	System Optional Retirement Program as established under s.
128	121.051(2)(c), or the State University System Optional
129	Retirement Program established under s. 121.35.
130
131	The term does not include any member participating in the
132	Deferred Retirement Option Program established under s.
133	121.091(13), a retiree of a state-administered retirement system
134	initially reemployed on or after July 1, 2010, or a mandatory
135	participant of the State University System Optional Retirement
136	Program established under s. 121.35.
137	(h)(g)  "Employer" means an employer, as defined in s.
138	121.021(10), of an eligible employee.
139	(i)  "Optional retirement program" or "optional program"
140	means the Public Employee Optional Retirement Program
141	established under this part.
142	(j)(h)  "Participant" means an eligible employee who elects
143	to participate in the Public Employee Optional Retirement
144	Program and enrolls in the such optional program as provided in
145	subsection (4) or a terminated Deferred Retirement Option
146	Program participant as described in subsection (21).
147	(i)  "Public Employee Optional Retirement Program,"
148	"optional program," or "optional retirement program" means the
149	alternative defined contribution retirement program established
150	under this section.
151	(k)(j)  "Retiree" means a former participant of the Florida
152	Retirement System Public Employee optional retirement program
153	who has terminated employment and has taken a distribution as
154	provided in s. 121.591, except for a mandatory distribution of a
155	de minimis account authorized by the state board.
156	(k)  "State board" or "board" means the State Board of
157	Administration.
158	(l)  "Trustees" means Trustees of the State Board of
159	Administration.
160	(l)(m)  "Vested" or "vesting" means the guarantee that a
161	participant is eligible to receive a retirement benefit upon
162	completion of the required years of service under the Public
163	Employee optional retirement program.
164	(4)  PARTICIPATION; ENROLLMENT.-
165	(e)  After the period during which an eligible employee had
166	the choice to elect the defined benefit program or the Public
167	Employee optional retirement program, or the month following the
168	receipt of the eligible employee's plan election, if sooner, the
169	employee shall have one opportunity, at the employee's
170	discretion, to choose to move from the defined benefit program
171	to the Public Employee optional retirement program or from the
172	Public Employee optional retirement program to the defined
173	benefit program. Eligible employees may elect to move between
174	Florida Retirement System programs only if they are earning
175	service credit in an employer-employee relationship consistent
176	with the requirements under s. 121.021(17)(b), excluding leaves
177	of absence without pay. Effective July 1, 2005, such elections
178	are shall be effective on the first day of the month following
179	the receipt of the election by the third-party administrator and
180	are not subject to the requirements regarding an employer-
181	employee relationship or receipt of contributions for the
182	eligible employee in the effective month, except that the
183	employee must meet the conditions of the previous sentence when
184	the election is received by the third-party administrator. This
185	paragraph is shall be contingent upon approval from the Internal
186	Revenue Service for including the choice described herein within
187	the programs offered by the Florida Retirement System.
188	1.  If the employee chooses to move to the Public Employee
189	optional retirement program, the applicable provisions of this
190	section shall govern the transfer.
191	2.  If the employee chooses to move to the defined benefit
192	program, the employee must transfer from his or her Public
193	Employee optional retirement program account, and from other
194	employee moneys as necessary, a sum representing the present
195	value of that employee's accumulated benefit obligation
196	immediately following the time of such movement, determined
197	assuming that attained service equals the sum of service in the
198	defined benefit program and service in the Public Employee
199	optional retirement program. Benefit commencement occurs on the
200	first date the employee is would become eligible for unreduced
201	benefits, using the discount rate and other relevant actuarial
202	assumptions that were used to value the Florida Retirement
203	System defined benefit plan liabilities in the most recent
204	actuarial valuation. For any employee who, at the time of the
205	second election, already maintains an accrued benefit amount in
206	the defined benefit program plan, the then-present value of the
207	such accrued benefit shall be deemed part of the required
208	transfer amount described in this subparagraph. The division
209	shall ensure that the transfer sum is prepared using a formula
210	and methodology certified by an enrolled actuary.
211	3.  Notwithstanding subparagraph 2., an employee who
212	chooses to move to the defined benefit program and who became
213	eligible to participate in the Public Employee optional
214	retirement program by reason of employment in a regularly
215	established position with a state employer after June 1, 2002; a
216	district school board employer after September 1, 2002; or a
217	local employer after December 1, 2002, must transfer from his or
218	her Public Employee optional retirement program account, and,
219	from other employee moneys as necessary, a sum representing the
220	that employee's actuarial accrued liability.
221	4.  An employee's Employees' ability to transfer from the
222	Florida Retirement System defined benefit program to the Public
223	Employee optional retirement program pursuant to paragraphs (a)-
224	(d), and the ability of a for current employee employees to have
225	an option to later transfer back into
226	program under subparagraph 2., shall be
227	system amendment. Pursuant to s.
228	unfunded liability arising from actual original transfers from
229	the defined benefit program to the optional program must shall
230	be amortized within 30 plan years as a separate unfunded
231	actuarial base independent of the reserve stabilization
232	mechanism defined in s. 121.031(3)(f). For the first 25 years, a
233	no direct amortization payment may not shall be calculated for
234	this base. During this 25-year period, the such separate base
235	shall be used to offset the impact of employees exercising their
236	second program election under this paragraph. It is the
237	legislative intent of the Legislature that the actuarial funded
238	status of the Florida Retirement System defined benefit program
239	not be affected plan is neither beneficially nor adversely
240	impacted by such second program elections in any significant
241	manner, after due recognition of the separate unfunded actuarial
242	base. Following the this initial 25-year period, any remaining
243	balance of the original separate base shall be amortized over
244	the remaining 5 years of the required 30-year amortization
245	period.
246	5.  If the employee chooses to transfer from the optional
247	retirement program to the defined benefit program and retains an
248	excess account balance in the optional program after satisfying
249	the buy-in requirements under this paragraph, the excess may not
250	be distributed until the member retires from the defined benefit
251	program. The excess account balance may be rolled over to the
252	defined benefit program and used to purchase service credit or
253	upgrade creditable service in that program.
254	(6)  VESTING REQUIREMENTS.-
255	(a)1.  With respect to employer contributions paid on
256	behalf of the participant to the Public Employee optional
257	retirement program, plus interest and earnings thereon and less
258	investment fees and administrative charges, a participant is
259	shall be vested after completing 1 work year, as defined in s.
260	121.021(54), with an employer, including any service while the
261	participant was a member of the defined benefit retirement
262	program or an optional retirement program authorized under s.
263	121.051(2)(c) or s. 121.055(6).
264	2.  If the participant terminates employment before prior
265	to satisfying the vesting requirements, the nonvested
266	accumulation must shall be transferred from the participant's
267	accounts to the state board for deposit and investment by the
268	state board in the suspense account created within of the Public
269	Employee Optional Retirement Program Trust Fund of the board. If
270	the terminated participant is reemployed as an eligible employee
271	within 5 years, the state board shall transfer to the
272	participant's account any amount of the moneys previously
273	transferred from the participant's accounts to the suspense
274	account of the Public Employee Optional Retirement Program Trust
275	Fund, plus the actual earnings on such amount while in the
276	suspense account.
277	(b)1.  With respect to amounts transferred from the defined
278	benefit program to the investment program, plus interest and
279	earnings, and less investment fees and administrative charges, a
280	participant shall be vested in the amount transferred from the
281	defined benefit program, plus interest and earnings thereon and
282	less administrative charges and investment fees, upon meeting
283	the service requirements for the participant's membership class
284	as set forth in s. 121.021(29). The third-party administrator
285	shall account for such amounts for each participant. The
286	division shall notify the participant and the third-party
287	administrator when the participant has satisfied the vesting
288	period for Florida Retirement System purposes.
289	2.  If the participant terminates employment before prior
290	to satisfying the vesting requirements, the nonvested
291	accumulation must shall be transferred from the participant's
292	accounts to the state board for deposit and investment by the
293	state board in the suspense account created within of the Public
294	Employee Optional Retirement Program Trust Fund of the board. If
295	the terminated participant is reemployed as an eligible employee
296	within 5 years, the state board shall transfer to the
297	participant's account any amount of the moneys previously
298	transferred from the participant's accounts to the suspense
299	account of the Public Employee Optional Retirement Program Trust
300	Fund, plus the actual earnings on such amount while in the
301	suspense account.
302	(c)  Any nonvested accumulations transferred from a
303	participant's account to the suspense account shall be forfeited
304	by the participant if the participant is not reemployed as an
305	eligible employee within 5 years after termination.
306	(8)  ADMINISTRATION OF PROGRAM.-
307	(a)  The Public Employee optional retirement program shall
308	be administered by the state board and affected employers. The
309	board may is authorized to require oaths, by affidavit or
310	otherwise, and acknowledgments from persons in connection with
311	the administration of its statutory duties and responsibilities
312	for this program under this chapter. An No oath, by affidavit or
313	otherwise, may not shall be required of an employee participant
314	at the time of enrollment election. Acknowledgment of an
315	employee's election to participate in the program shall be no
316	greater than necessary to confirm the employee's election. The
317	state board shall adopt rules to carry out its statutory duties
318	with respect to administering the optional retirement program,
319	including establishing the roles role and responsibilities of
320	affected state, local government, and education-related
321	employers, the state board, the department, and third-party
322	contractors in administering the Public Employee optional
323	retirement program. The department shall adopt rules necessary
324	to administer implement the optional program in coordination
325	with the defined benefit retirement program and the disability
326	benefits available under the optional program.
327	(g)  The state board shall receive and resolve participant
328	complaints against the program, the third-party administrator,
329	or any program vendor or provider; shall resolve any conflict
330	between the third-party administrator and an approved provider
331	if when such conflict threatens the implementation or
332	administration of the program or the quality of services to
333	employees; and may resolve any other conflicts. The third-party
334	administrator shall retain all participant records for at least
335	5 years for use in resolving any participant conflicts. The
336	state board, the third-party administrator, or a provider is not
337	required to produce documentation or an audio recording to
338	justify action taken with regard to a participant if the action
339	occurred 5 or more years before the complaint is submitted to
340	the state board. It is presumed that all action taken 5 or more
341	years before the complaint is submitted was taken at the request
342	of the participant and with the participant's full knowledge and
343	consent. To overcome this presumption, the participant must
344	present documentary evidence or an audio recording demonstrating
345	otherwise.
346	Section 2.  Subsection (3) is added to section 121.4502,
347	Florida Statutes, to read:
348	121.4502  Public Employee Optional Retirement Program Trust
349	Fund.-
350	(3)  A forfeiture account shall be created within the
351	Public Employee Optional Retirement Program Trust Fund to hold
352	the assets derived from the forfeiture of benefits by
353	participants. Pursuant to a private letter ruling from the
354	Internal Revenue Service, the forfeiture account may be used
355	only for paying expenses of the Public Employee Optional
356	Retirement Program and reducing future employer contributions to
357	the program. Consistent with Rulings 80-155 and 74-340 of the
358	Internal Revenue Service, unallocated reserves within the
359	forfeiture account must be used as quickly and as prudently as
360	possible considering the state board's fiduciary duty. Expected
361	withdrawals from the account must endeavor to reduce the account
362	to zero each fiscal year.
363	Section 3.  Paragraphs (a) and (b) of subsection (1) of
364	section 121.591, Florida Statutes, are amended to read:
365	121.591  Benefits payable under the Public Employee
366	Optional Retirement Program of the Florida Retirement System.-
367	Benefits may not be paid under this section unless the member
368	has terminated employment as provided in s. 121.021(39)(a) or is
369	deceased and a proper application has been filed in the manner
370	prescribed by the state board or the department. The state board
371	or department, as appropriate, may cancel an application for
372	retirement benefits when the member or beneficiary fails to
373	timely provide the information and documents required by this
374	chapter and the rules of the state board and department. In
375	accordance with their respective responsibilities as provided
376	herein, the State Board of Administration and the Department of
377	Management Services shall adopt rules establishing procedures
378	for application for retirement benefits and for the cancellation
379	of such application when the required information or documents
380	are not received. The State Board of Administration and the
381	Department of Management Services, as appropriate, are
382	authorized to cash out a de minimis account of a participant who
383	has been terminated from Florida Retirement System covered
384	employment for a minimum of 6 calendar months. A de minimis
385	account is an account containing employer contributions and
386	accumulated earnings of not more than $5,000 made under the
387	provisions of this chapter. Such cash-out must either be a
388	complete lump-sum liquidation of the account balance, subject to
389	the provisions of the Internal Revenue Code, or a lump-sum
390	direct rollover distribution paid directly to the custodian of
391	an eligible retirement plan, as defined by the Internal Revenue
392	Code, on behalf of the participant. If any financial instrument
393	issued for the payment of retirement benefits under this section
394	is not presented for payment within 180 days after the last day
395	of the month in which it was originally issued, the third-party
396	administrator or other duly authorized agent of the State Board
397	of Administration shall cancel the instrument and credit the
398	amount of the instrument to the suspense account of the Public
399	Employee Optional Retirement Program Trust Fund authorized under
400	s. 121.4501(6). Any such amounts transferred to the suspense
401	account are payable upon a proper application, not to include
402	earnings thereon, as provided in this section, within 10 years
403	after the last day of the month in which the instrument was
404	originally issued, after which time such amounts and any
405	earnings thereon shall be forfeited. Any such forfeited amounts
406	are assets of the Public Employee Optional Retirement Program
407	Trust Fund and are not subject to the provisions of chapter 717.
408	(1)  NORMAL BENEFITS.-Under the Public Employee Optional
409	Retirement Program:
410	(a)  Benefits in the form of vested accumulations as
411	described in s. 121.4501(6) are payable under this subsection in
412	accordance with the following terms and conditions:
413	1.  To the extent vested, benefits are payable only to a
414	participant.
415	2.  Benefits shall be paid by the third-party administrator
416	or designated approved providers in accordance with the law, the
417	contracts, and any applicable board rule or policy.
418	3.  To receive benefits, the participant must be terminated
419	from all employment with all Florida Retirement System
420	employers, as provided in s. 121.021(39).
421	4.  Benefit payments may not be made until the participant
422	has been terminated for 3 calendar months, except that the board
423	may authorize by rule for the distribution of up to 10 percent
424	of the participant's account after being terminated for 1
425	calendar month if the participant has reached the normal
426	retirement date as defined in s. 121.021 of the defined benefit
427	plan.
428	5.  If a member or former member of the Florida Retirement
429	System receives an invalid distribution from the Public Employee
430	Optional Retirement Program Trust Fund, such person must repay
431	the full invalid distribution to the trust fund within 90 days
432	after receipt of final notification by the state board or the
433	third-party administrator that the distribution was invalid. If
434	such person fails to repay the full invalid distribution within
435	90 days after receipt of final notification, the person may be
436	deemed retired from the optional retirement program by the state
437	board, as provided pursuant to s. 121.4501(2)(k)(j), and is
438	subject to s. 121.122. If such person is deemed retired by the
439	state board, any joint and several liability set out in s.
440	121.091(9)(d)2. becomes null and void, and the state board, the
441	department, or the employing agency is not liable for gains on
442	payroll contributions that have not been deposited to the
443	person's account in the retirement program, pending resolution
444	of the invalid distribution. The member or former member who has
445	been deemed retired or who has been determined by the board to
446	have taken an invalid distribution may appeal the agency
447	decision through the complaint process as provided under s.
448	121.4501(9)(g)3. As used in this subparagraph, the term "invalid
449	distribution" means any distribution from an account in the
450	optional retirement program which is taken in violation of this
451	section, s. 121.091(9), or s. 121.4501.
452	(b)  If a participant elects to receive his or her benefits
453	upon termination of employment as defined in s. 121.021, the
454	participant must submit a written application or an application
455	by electronic means an equivalent form to the third-party
456	administrator indicating his or her preferred distribution date
457	and selecting an authorized method of distribution as provided
458	in paragraph (c). The participant may defer receipt of benefits
459	until he or she chooses to make such application, subject to
460	federal requirements.
461	Section 4.  Section 121.74, Florida Statutes, is amended to
462	read:
463	121.74  Administrative and educational expenses.-In
464	addition to contributions required under s. 121.71, effective
465	July 1, 2010, through June 30, 2014, employers participating in
466	the Florida Retirement System shall contribute an amount equal
467	to 0.03 0.05 percent of the payroll reported for each class or
468	subclass of Florida Retirement System membership; effective July
469	1, 2014, the contribution rate shall be 0.04 percent of the
470	payroll reported for each class or subclass of membership. The,
471	which amount contributed shall be transferred by the Division of
472	Retirement from the Florida Retirement System Contributions
473	Clearing Trust Fund to the State Board of Administration's
474	Administrative Trust Fund to offset the costs of administering
475	the optional retirement program and the costs of providing
476	educational services to participants in the defined benefit
477	program and the optional retirement program. Approval of the
478	trustees of the State Board of Administration is required before
479	prior to the expenditure of these funds. Payments for third-
480	party administrative or educational expenses shall be made only
481	pursuant to the terms of the approved contracts for such
482	services.
483	Section 5.  Subsection (3) of section 121.78, Florida
484	Statutes, is amended to read:
485	121.78  Payment and distribution of contributions.-
486	(3)(a)  Employer contributions and accompanying payroll
487	data received after the 5th working day of the month are shall
488	be considered late. The employer shall be assessed by the
489	Division of Retirement a penalty of 1 percent of the
490	contributions due for each calendar month or part thereof that
491	the contributions or accompanying payroll data are late.
492	Proceeds from the 1-percent assessment against contributions
493	made on behalf of participants of the defined benefit program
494	shall be deposited in the Florida Retirement System Trust Fund,
495	and proceeds from the 1-percent assessment against contributions
496	made on behalf of participants of the optional retirement
497	program shall be transferred to the third-party administrator
498	for deposit into participant accounts, as provided in paragraph
499	(b).
500	(b)  If contributions made by an employer on behalf of
501	participants of the optional retirement program or accompanying
502	payroll data are not received within the calendar month they are
503	due, including, but not limited to, contribution adjustments as
504	a result of employer errors or corrections, and if that
505	delinquency results in market losses to participants, the
506	employer shall reimburse each participant's account for market
507	losses resulting from the late contributions. If a participant
508	has terminated employment and taken a distribution, the
509	participant is responsible for returning any excess
510	contributions erroneously provided by employers, adjusted for
511	any investment gain or loss incurred during the period such
512	excess contributions were in the participant's Public Employee
513	Optional Retirement Program account. The state board of
514	Administration or its designated agent shall communicate to
515	terminated participants any obligation to repay such excess
516	contribution amounts. However, the state board of
517	Administration, its designated agents, the Public Employee
518	Optional Retirement Program Trust Fund, the department of
519	Management Services, or the Florida Retirement System Trust Fund
520	may shall not incur any loss or gain as a result of an
521	employer's correction of such excess contributions. The third-
522	party administrator, hired by the state board pursuant to s.
523	121.4501(8), shall calculate the market losses for each affected
524	participant. If When contributions made on behalf of
525	participants of the optional retirement program or accompanying
526	payroll data are not received within the calendar month due, the
527	employer shall also pay the cost of the third-party
528	administrator's calculation and reconciliation adjustments
529	resulting from the late contributions. The third-party
530	administrator shall notify the employer of the results of the
531	calculations and the total amount due from the employer for such
532	losses and the costs of calculation and reconciliation. The
533	employer shall remit to the Division of Retirement the amount
534	due within 30 10 working days after the date of the penalty
535	notice sent by the division. The division shall transfer that
536	said amount to the third-party administrator, which who shall
537	deposit proceeds from the 1-percent assessment and from
538	individual market losses into participant accounts, as
539	appropriate. The state board may is authorized to adopt rules to
540	administer implement the provisions regarding late
541	contributions, late submission of payroll data, the process for
542	reimbursing participant accounts for resultant market losses,
543	and the penalties charged to the employers.
544	(c)  Delinquency fees may be waived by the Division of
545	Retirement, with regard to defined benefit program
546	contributions, and by the state board of Administration, with
547	regard to optional retirement program contributions, only if
548	when, in the opinion of the division or the board, as
549	appropriate, exceptional circumstances beyond the employer's
550	control prevented remittance by the prescribed due date
551	notwithstanding the employer's good faith efforts to effect
552	delivery. Such a waiver of delinquency may be granted an
553	employer only once one time each state fiscal year.
554	(d)  If contributions made by an employer on behalf of
555	participants in the optional retirement program are delayed in
556	posting to participant accounts due to acts of God beyond the
557	control of the Division of Retirement, the state board, or the
558	third-party administrator, as applicable, market losses
559	resulting from the late contributions are not payable to the
560	participants.
561	Section 6.  Subsections (1) and (2) of section 215.44,
562	Florida Statutes, are amended to read:
563	215.44  Board of Administration; powers and duties in
564	relation to investment of trust funds.-
565	(1)  Except when otherwise specifically provided by the
566	State Constitution and subject to any limitations of the trust
567	agreement relating to a trust fund, the Board of Administration,
568	hereinafter sometimes referred to in this chapter as "board," or
569	"Trustees of the State Board of Administration," composed of the
570	Governor as chair, the Chief Financial Officer, and the Attorney
571	General, shall invest all the funds in the System Trust Fund, as
572	defined in s. 121.021(36), and all other funds specifically
573	required by law to be invested by the board pursuant to ss.
574	215.44-215.53 to the fullest extent that is consistent with the
575	cash requirements, trust agreement, and investment objectives of
576	the fund. Notwithstanding any other law to the contrary, the
577	State Board of Administration may invest any funds of any state
578	agency, any state university or college, or any unit of local
579	government, or any direct-support organization thereof pursuant
580	to the terms of a trust agreement with the head of the state
581	agency or the governing body of the state university or college,
582	unit of local government, or direct-support organization
583	thereof, or pursuant to the enrollment requirements stated in s.
584	218.407, and may invest such funds in the Local Government
585	Surplus Funds Trust Fund created by s. 218.405., which trust
586	agreement shall govern the investment of such funds, provided
587	that The board shall approve the undertaking of investments
588	subject to a trust agreement such investment before execution of
589	such the trust agreement by the State Board of Administration.
590	The funds and the earnings therefrom are exempt from the service
591	charge imposed by s. 215.20. As used in this subsection, the
592	term "state agency" has the same meaning as that provided in s.
593	216.011 216.001, and the terms "governing body" and "unit of
594	local government" have the same meaning as that provided in s.
595	218.403.
596	(2)(a)  The board shall have the power to make purchases,
597	sales, exchanges, investments, and reinvestments for and on
598	behalf of the funds referred to in subsection (1), and it shall
599	be the duty of the board to see that moneys invested under the
600	provisions of ss. 215.44-215.53 are at all times handled in the
601	best interests of the state.
602	(b)  In exercising investment authority pursuant to s.
603	215.47, the board may retain investment advisers or managers, or
604	both, external to in-house staff, to assist the board in
605	carrying out the power specified in paragraph (a).
606	(c)  The board shall create an audit committee to assist
607	the board in fulfilling its oversight responsibilities. The
608	committee shall consist of three members appointed by the board.
609	Members shall be appointed for 4-year terms. A vacancy shall be
610	filled for the remainder of the unexpired term. The committee
611	shall annually elect a chair and vice chair from its membership.
612	A member may not be elected to consecutive terms as chair or
613	vice chair. Persons appointed to the audit committee must have
614	relevant knowledge and expertise as determined by the board. The
615	audit committee shall serve as an independent and objective
616	party to monitor processes for financial reporting, internal
617	controls and risk assessment, audit processes, and compliance
618	with laws, rules, and regulations. The audit committee shall
619	direct the efforts of the board's independent external auditors
620	and the board's internal audit staff. The committee shall
621	periodically, but not less than quarterly, report to the board
622	and the executive director of the board.
623	(d)  The board shall produce a set of financial statements
624	for the Florida Retirement System on an annual basis, which
625	shall be reported to the Legislature and audited by a commercial
626	independent third-party audit firm.
627	(e)  The board shall meet at least quarterly and shall
628	receive reports from the audit committee, the investment
629	advisory committee, the inspector general, the general counsel,
630	the executive director, and such other persons or entities as
631	the board may require about the financial status, operations,
632	and investment activities of the board.
633	Section 7.  Section 215.441, Florida Statutes, is amended
634	to read:
635	215.441  Board of Administration; appointment of executive
636	director.-The appointment of the executive director of the State
637	Board of Administration shall be subject to the approval by a
638	majority vote of the Board of Trustees of the State Board of
639	Administration, and the Governor must vote on the prevailing
640	side. Such appointment must be reaffirmed in the same manner by
641	the board of trustees on an annual basis. The executive director
642	shall, at a minimum, possess substantial experience, knowledge,
643	and expertise in the oversight of investment portfolios and must
644	meet any other requirements determined by the board to be
645	necessary to the overall management and investment of funds.
646	Section 8.  Section 215.444, Florida Statutes, is amended
647	to read:
648	215.444  Investment Advisory Council.-
649	(1)  There is created a six-member Investment Advisory
650	Council to review the investments made by the staff of the Board
651	of Administration and to make recommendations to the board
652	regarding investment policy, strategy, and procedures. Beginning
653	February 1, 2011, the membership of the council shall be
654	expanded to nine members. The council shall meet with staff of
655	the board at least once each quarter and shall provide a
656	quarterly report directly to the Board of Trustees of the State
657	Board of Administration at a meeting of the board.
658	(2)  The members of the council shall be appointed by the
659	board as a resource to the Board of Trustees of the State Board
660	of Administration and shall be subject to confirmation by the
661	Senate. These individuals shall possess special knowledge,
662	experience, and familiarity with financial investments and
663	portfolio management, institutional investments, and fiduciary
664	responsibilities. Members shall be appointed for 4-year terms. A
665	vacancy shall be filled for the remainder of the unexpired term.
666	The council shall annually elect a chair and a vice chair from
667	its membership. A member may not be elected to consecutive terms
668	as chair or vice chair.
669	(3)  The council members must undergo regular fiduciary
670	training as required by the board and must complete an annual
671	conflict disclosure statement. In carrying out their duties,
672	council members must make recommendations consistent with the
673	fiduciary standards applicable to the board.
674	(4)  The council may create subcommittees as necessary to
675	carry out its duties and responsibilities.
676	Section 9.  Paragraphs (b) and (c) of subsection (1),
677	paragraph (a) of subsection (2), and subsection (5) of section
678	215.47, Florida Statutes, are amended, paragraph (o) is added to
679	subsection (1) of that section, and subsection (20) is added to
680	that section, to read:
681	215.47  Investments; authorized securities; loan of
682	securities.-Subject to the limitations and conditions of the
683	State Constitution or of the trust agreement relating to a trust
684	fund, moneys available for investments under ss. 215.44-215.53
685	may be invested as follows:
686	(1)  Without limitation in:
687	(b)  State Bonds, notes, or obligations of any state or
688	organized territory of the United States or the District of
689	Columbia that pledge pledging the full faith and credit of the
690	state, territory, or district; and revenue bonds, notes, or
691	obligations of any state or organized territory of the United
692	States or the District of Columbia additionally secured by the
693	full faith and credit of the state, territory, or district.
694	(c)  Bonds, notes, or obligations of the several counties
695	or districts in any the state or organized territory of the
696	United States or the District of Columbia containing a pledge of
697	the full faith and credit of the county or district involved.
698	(o)  Bonds, notes, or obligations described in 26 U.S.C. s.
699	149(g)(3)(B), if investment in such bonds, notes, or obligations
700	is necessary in order to comply with covenants in documents or
701	proceedings relating to bonds issued pursuant to s. 215.555(6).
702	Investments made pursuant to this paragraph may be purchased
703	only from the proceeds of bonds issued pursuant to s. 215.555(6)
704	and must be authorized under documents or proceedings relating
705	to such bonds.
706	(2)  With no more than 25 percent of any fund in:
707	(a)  Bonds, notes, or obligations of any state or organized
708	territory of the United States or the District of Columbia; of
709	any municipality or political subdivision or any agency,
710	district, or authority thereof; or of any agency or authority of
711	this state, if the obligations are rated investment grade by at
712	least one nationally recognized statistical rating organization.
713	(5)  With no more than 25 percent of any fund in corporate
714	obligations and securities of any kind of a foreign corporation
715	or a foreign commercial entity having its principal office
716	located in any country other than the United States of America
717	or its possessions or territories, not including United States
718	dollar-denominated securities listed and traded on a United
719	States exchange which are a part of the ordinary investment
720	strategy of the board.
721	(20)  Notwithstanding the provisions in subsection (5)
722	limiting such investments to 25 percent of any fund, the board
723	may invest no more than 35 percent of any fund in corporate
724	obligations and securities of any kind of a foreign corporation
725	or a foreign commercial entity having its principal office
726	located in any country other than the United States or its
727	possessions or territories, not including United States dollar-
728	denominated securities listed and traded on a United States
729	exchange that are a part of the ordinary investment strategy of
730	the board.
731	Section 10.  Section 215.4754, Florida Statutes, is created
732	to read:
733	215.4754  Ethics requirements for investment advisers and
734	managers and members of the Investment Advisory Council.-The
735	intent of this section is to promote independence and the
736	avoidance of conflicts and improper influence by certain
737	investment advisers and managers without creating unnecessary
738	barriers to the board performing its investment duties
739	consistent with its fiduciary standards, investment performance,
740	and business relationships.
741	(1)  A contract under which an investment adviser or
742	manager has been retained to exercise investment authority on
743	behalf of the board for direct holdings shall require that the
744	investment adviser or manager abide by a standard of conduct
745	pursuant to s. 215.4755. Any such contract may be terminated by
746	the board if the investment adviser or manager violates such
747	standard of conduct.
748	(2)  An Investment Advisory Council member or any business
749	organization or any affiliate thereof that is owned by or
750	employs such member may not directly or indirectly contract with
751	or provide any services for the investment of trust funds
752	invested by the board during the time of such member's service
753	on the council or for 2 years thereafter.
754	Section 11.  Section 215.4755, Florida Statutes, is created
755	to read:
756	215.4755   Certification and disclosure requirements for
757	investment advisers and managers.-
758	(1)  An investment adviser or manager who has discretionary
759	investment authority for direct holdings and who is retained as
760	provided in s. 215.44(2)(c) shall agree pursuant to contract to
761	annually certify in writing to the board that:
762	(a)  All investment decisions made on behalf of the trust
763	funds and the board are made in the best interests of the trust
764	funds and the board and not made in a manner to the advantage of
765	such investment adviser or manager, other persons, or clients to
766	the detriment of the trust funds and the board.
767	(b)  Appropriate policies, procedures, or other safeguards
768	have been adopted and implemented to ensure that relationships
769	with any affiliated persons or entities do not adversely
770	influence the investment decisions made on behalf of the trust
771	funds and the board.
772	(c)  A written code of ethics, conduct, or other set of
773	standards, which governs the professional behavior and
774	expectations of owners, general partners, directors or managers,
775	officers, and employees of the investment adviser or manager,
776	has been adopted and implemented and is effectively monitored
777	and enforced. The investment advisers' and managers' code of
778	ethics shall require that:
779	1.  Officers and employees involved in the investment
780	process refrain from personal business activity that could
781	conflict with the proper execution and management of the
782	investment program over which the investment adviser or manager
783	has discretionary investment authority or that could impair
784	their ability to make impartial decisions with respect to such
785	investment program; and
786	2.  Officers and employees refrain from undertaking
787	personal investment transactions with the same individual with
788	whom business is conducted on behalf of the board.
789	(d)  The investment adviser or manager has proactively and
790	promptly disclosed to the board, notwithstanding subsection (2),
791	any known circumstances or situations that a prudent person
792	could expect to create an actual, potential, or perceived
793	conflict of interest, including specifically:
794	1.  Any material interests in or with financial
795	institutions with which officers and employees conduct business
796	on behalf of the trust funds and the board; and
797	2.  Any personal financial or investment positions of the
798	investment advisor or manager that could be related to the
799	performance of an investment program over which the investment
800	adviser or manager has discretionary investment authority on
801	behalf of the board.
802	(2)  At the board's request, an investment adviser or
803	manager who has discretionary investment authority over direct
804	holdings and who is retained as provided in s. 215.44(2)(c)
805	shall disclose in writing to the board:
806	(a)  Any nonconfidential, nonproprietary information or
807	reports to substantiate the certifications required under
808	subsection (1).
809	(b)  All direct or indirect pecuniary interests that the
810	investment adviser or manager has in or with any party to a
811	transaction with the board, if the transaction is related to any
812	discretionary investment authority that the investment adviser
813	or manager exercises on behalf of the board.
814	(3)  An investment adviser or manager certification
815	required under subsection (1) shall be provided annually, no
816	later than January 31, for the reporting period of the previous
817	calendar year on a form prescribed by the board.
818	Section 12.  Section 215.52, Florida Statutes, is amended
819	to read:
820	215.52  Rules and regulations.-The board shall have the
821	power and authority to make reasonable rules and regulations
822	necessary to carry out the provisions of ss. 215.44-215.53. The
823	rules shall provide for full transparency and accountability in
824	fulfillment of the board's fiduciary duties in the areas of
825	compliance, ethics, training, and audit procedures.
826	Section 13.  Paragraph (a) of subsection (8) of section
827	218.409, Florida Statutes, is amended to read:
828	218.409  Administration of the trust fund; creation of
829	advisory council.-
830	(8)(a)  The principal, and any part thereof, of each and
831	every account constituting the trust fund is shall be subject to
832	payment at any time from the moneys in the trust fund. However,
833	the executive director may, in good faith, on the occurrence of
834	an event that has a material impact on liquidity or operations
835	of the trust fund, for 48 hours limit contributions to or
836	withdrawals from the trust fund to ensure that the board can
837	invest moneys entrusted to it in exercising its fiduciary
838	responsibility. Such action must shall be immediately disclosed
839	to all participants, the trustees, the Joint Legislative
840	Auditing Committee, the Investment Advisory Council, and the
841	Participant Local Government Advisory Council. The trustees
842	shall convene an emergency meeting as soon as practicable from
843	the time the executive director has instituted such measures and
844	review the necessity of those measures. If the trustees are
845	unable to convene an emergency meeting before the expiration of
846	the 48-hour moratorium on contributions and withdrawals, the
847	moratorium may be extended by the executive director until the
848	trustees are able to meet to review the necessity for the
849	moratorium. If the trustees agree with such measures, the
850	trustees shall vote to continue the measures for up to an
851	additional 15 days. The trustees must convene and vote to
852	continue any such measures before prior to the expiration of the
853	time limit set, but in no case may the time limit set by the
854	trustees exceed 15 days.
855	Section 14.  Trademarks, copyrights, or patents.-The State
856	Board of Administration, on behalf of the Florida Retirement
857	System or any other trust fund under its jurisdiction, may
858	develop work products that are subject to trademark, copyright,
859	or patent statutes. The board may, in its own name or through
860	the growth initiative program created pursuant to s. 215.47(7),
861	Florida Statutes, or any other program developed with or for the
862	board:
863	(1)  Perform all things necessary to secure letters of
864	patent, copyrights, or trademarks on any work products and
865	enforce its rights therein.
866	(2)  License, lease, assign, or otherwise give written
867	consent to any person for the manufacture or use of its work
868	products on a royalty basis or for such other consideration as
869	the board deems proper.
870	(3)  Take any action necessary, including legal action, to
871	protect its work products against improper or unlawful use or
872	infringement.
873	(4)  Enforce the collection of any sums due the board for
874	the manufacture or use of its work products by any other party.
875	(5)  Sell any of its work products and execute all
876	instruments necessary to consummate any such sale.
877	(6)  Do all other acts necessary and proper for the
878	execution of powers and duties provided under this section.
879	Section 15.  This act shall take effect July 1, 2010.

CODING: Words stricken are deletions; words underlined are additions.