HB 5607

1	A bill to be entitled
2	An act relating to retirement; amending s. 121.091, F.S.;
3	reducing the interest rate paid on deferred retirement
4	benefits for members entering DROP on or after a specified
5	date; amending s. 121.71, F.S.; revising the payroll
6	contribution rates for the membership classes of the
7	Florida Retirement System for the state fiscal years
8	effective July 1, 2010, and July 1, 2011; specifying the
9	required employer retirement contribution rates for each
10	membership class and subclass of the system in order to
11	address unfunded actuarial liabilities of the system;
12	amending s. 121.74, F.S.; revising the amount that
13	employers are required to contribute for administrative
14	and educational expenses; requiring the state actuary to
15	consider additional factors when conducting the annual
16	actuarial study of the Florida Retirement System;
17	specifying the factors to be considered; providing a
18	declaration of important state interest; providing an
19	effective date.
20
21	Be It Enacted by the Legislature of the State of Florida:
22
23	Section 1.  Paragraph (c) of subsection (13) of section
24	121.091, Florida Statutes, is amended to read:
25	121.091  Benefits payable under the system.-Benefits may
26	not be paid under this section unless the member has terminated
27	employment as provided in s. 121.021(39)(a) or begun
28	participation in the Deferred Retirement Option Program as
29	provided in subsection (13), and a proper application has been
30	filed in the manner prescribed by the department. The department
31	may cancel an application for retirement benefits when the
32	member or beneficiary fails to timely provide the information
33	and documents required by this chapter and the department's
34	rules. The department shall adopt rules establishing procedures
35	for application for retirement benefits and for the cancellation
36	of such application when the required information or documents
37	are not received.
38	(13)  DEFERRED RETIREMENT OPTION PROGRAM.-In general, and
39	subject to this section, the Deferred Retirement Option Program,
40	hereinafter referred to as DROP, is a program under which an
41	eligible member of the Florida Retirement System may elect to
42	participate, deferring receipt of retirement benefits while
43	continuing employment with his or her Florida Retirement System
44	employer. The deferred monthly benefits shall accrue in the
45	Florida Retirement System on behalf of the participant, plus
46	interest compounded monthly, for the specified period of the
47	DROP participation, as provided in paragraph (c). Upon
48	termination of employment, the participant shall receive the
49	total DROP benefits and begin to receive the previously
50	determined normal retirement benefits. Participation in the DROP
51	does not guarantee employment for the specified period of DROP.
52	Participation in DROP by an eligible member beyond the initial
53	60-month period as authorized in this subsection shall be on an
54	annual contractual basis for all participants.
55	(c)  Benefits payable under DROP.-
56	1.  Effective on the date of DROP participation, the
57	member's initial normal monthly benefit, including creditable
58	service, optional form of payment, and average final
59	compensation, and the effective date of retirement are fixed.
60	The beneficiary established under the Florida Retirement System
61	is the beneficiary eligible to receive any DROP benefits payable
62	if the DROP participant dies before completing the period of
63	DROP participation. If a joint annuitant predeceases the member,
64	the member may name a beneficiary to receive accumulated DROP
65	benefits payable. The retirement benefit, the annual cost of
66	living adjustments provided in s. 121.101, and interest accrue
67	monthly in the Florida Retirement System Trust Fund. The
68	interest accrues at an effective annual rate of 6.5 percent
69	compounded monthly, on the prior month's accumulated ending
70	balance, up to the month of termination or death, except as
71	provided in s. 121.053(7). For those members entering DROP on or
72	after July 1, 2010, the interest accrues at an effective annual
73	rate of 3.0 percent compounded monthly, on the prior month's
74	accumulated ending balance, up to the month of termination or
75	death, except as provided in s. 121.053(7).
76	2.  Each employee who elects to participate in DROP may
77	elect to receive a lump-sum payment for accrued annual leave
78	earned in accordance with agency policy upon beginning
79	participation in DROP. The accumulated leave payment certified
80	to the division upon commencement of DROP shall be included in
81	the calculation of the member's average final compensation. The
82	employee electing the lump-sum payment is not eligible to
83	receive a second lump-sum payment upon termination, except to
84	the extent the employee has earned additional annual leave
85	which, combined with the original payment, does not exceed the
86	maximum lump-sum payment allowed by the employing agency's
87	policy or rules. An early lump-sum payment shall be based on the
88	hourly wage of the employee at the time he or she begins
89	participation in DROP. If the member elects to wait and receive
90	a lump-sum payment upon termination of DROP and termination of
91	employment with the employer, any accumulated leave payment made
92	at that time may not be included in the member's retirement
93	benefit, which was determined and fixed by law when the employee
94	elected to participate in DROP.
95	3.  The effective date of DROP participation and the
96	effective date of retirement of a DROP participant shall be the
97	first day of the month selected by the member to begin
98	participation in DROP, provided such date is properly
99	established, with the written confirmation of the employer, and
100	the approval of the division, on forms required by the division.
101	4.  Normal retirement benefits and any interest shall
102	continue to accrue in DROP until the established termination
103	date of DROP or until the participant terminates employment or
104	dies prior to such date, except as provided in s. 121.053(7).
105	Although individual DROP accounts shall not be established, a
106	separate accounting of each participant's accrued benefits under
107	DROP shall be calculated and provided to participants.
108	5.  At the conclusion of the participant's DROP, the
109	division shall distribute the participant's total accumulated
110	DROP benefits, subject to the following:
111	a.  The division shall receive verification by the
112	participant's employer or employers that the participant has
113	terminated all employment relationships as provided in s.
114	121.021(39).
115	b.  The terminated DROP participant or, if deceased, the
116	participant's named beneficiary, shall elect on forms provided
117	by the division to receive payment of the DROP benefits in
118	accordance with one of the options listed below. If a
119	participant or beneficiary fails to elect a method of payment
120	within 60 days after termination of DROP, the division shall pay
121	a lump sum as provided in sub-sub-subparagraph (I).
122	(I)  Lump sum.-All accrued DROP benefits, plus interest,
123	less withholding taxes remitted to the Internal Revenue Service,
124	shall be paid to the DROP participant or surviving beneficiary.
125	(II)  Direct rollover.-All accrued DROP benefits, plus
126	interest, shall be paid from DROP directly to the custodian of
127	an eligible retirement plan as defined in s. 402(c)(8)(B) of the
128	Internal Revenue Code. However, in the case of an eligible
129	rollover distribution to the surviving spouse of a deceased
130	participant, an eligible retirement plan is an individual
131	retirement account or an individual retirement annuity as
132	described in s. 402(c)(9) of the Internal Revenue Code.
133	(III)  Partial lump sum.-A portion of the accrued DROP
134	benefits shall be paid to DROP participant or surviving spouse,
135	less withholding taxes remitted to the Internal Revenue Service,
136	and the remaining DROP benefits must be transferred directly to
137	the custodian of an eligible retirement plan as defined in s.
138	402(c)(8)(B) of the Internal Revenue Code. However, in the case
139	of an eligible rollover distribution to the surviving spouse of
140	a deceased participant, an eligible retirement plan is an
141	individual retirement account or an individual retirement
142	annuity as described in s. 402(c)(9) of the Internal Revenue
143	Code. The proportions must be specified by the DROP participant
144	or surviving beneficiary.
145	c.  The form of payment selected by the DROP participant or
146	surviving beneficiary must comply with the minimum distribution
147	requirements of the Internal Revenue Code.
148	d.  A DROP participant who fails to terminate all
149	employment relationships as provided in s. 121.021(39) shall be
150	deemed as not retired, and the DROP election is null and void.
151	Florida Retirement System membership shall be reestablished
152	retroactively to the date of the commencement of DROP, and each
153	employer with whom the participant continues employment must pay
154	to the Florida Retirement System Trust Fund the difference
155	between the DROP contributions paid in paragraph (i) and the
156	contributions required for the applicable Florida Retirement
157	System class of membership during the period the member
158	participated in DROP, plus 6.5 percent interest compounded
159	annually.
160	6.  The retirement benefits of any DROP participant who
161	terminates all employment relationships as provided in s.
162	121.021(39) but is reemployed in violation of the reemployment
163	provisions of subsection (9) shall be suspended during those
164	months in which the retiree is in violation. Any retiree in
165	violation of this subparagraph and any employer that employs or
166	appoints such person without notifying the Division of
167	Retirement to suspend retirement benefits are jointly and
168	severally liable for any benefits paid during the reemployment
169	limitation period. The employer must have a written statement
170	from the retiree that he or she is not retired from a state-
171	administered retirement system. Any retirement benefits received
172	by a retiree while employed in violation of the reemployment
173	limitations must be repaid to the Florida Retirement System
174	Trust Fund, and his or her retirement benefits shall remain
175	suspended until payment is made. Benefits suspended beyond the
176	end of the reemployment limitation period apply toward repayment
177	of benefits received in violation of the reemployment
178	limitation.
179	7.  The accrued benefits of any DROP participant, and any
180	contributions accumulated under the program, are not subject to
181	assignment, execution, attachment, or any legal process
182	whatsoever, except for qualified domestic relations orders by a
183	court of competent jurisdiction, income deduction orders as
184	provided in s. 61.1301, and federal income tax levies.
185	8.  DROP participants are not eligible for disability
186	retirement benefits as provided in subsection (4).
187	Section 2.  Subsection (3) of section 121.71, Florida
188	Statutes, is amended, present subsection (4) of that section is
189	renumbered as subsection (5), and a new subsection (4) is added
190	to that section, to read
191	121.71  Uniform rates; process; calculations; levy.-
192	(3)  Required employer retirement contribution rates for
193	each membership class and subclass of the Florida Retirement
194	System for both retirement plans are as follows:
	Membership Class Percentage of Gross Compensation,Effective July 1, 2010 2009 Percentage of Gross Compensation,Effective July 1, 2011 2010
195
	Regular Class 9.76% 8.69% 9.76% 9.63%
196
	Special Risk Class 22.15% 19.76% 22.15% 22.11%
197
	Special Risk Administrative  Support Class 11.24% 11.39% 11.24% 12.10%
198
	Elected Officers' Class -  Legislators, Governor,  Lt. Governor,  Cabinet Officers,  State Attorneys,  Public Defenders 14.38% 13.32% 14.38% 15.20%
199
	Elected Officers' Class -  Justices, Judges 19.39% 18.40% 19.39% 20.65%
200
	Elected Officers' Class -  County Elected Officers 16.62% 15.37% 16.62% 17.50%
201
	Senior Management Class 11.70% 11.96% 11.70% 13.43%
202
	DROP 10.07% 9.80% 10.07% 11.14%
203
204	(4)  In order to address unfunded actuarial liabilities of
205	the system, the additional required employer retirement
206	contribution rates for each membership class and subclass of the
207	Florida Retirement System for both retirement plans are as
208	follows:
	Membership Class Percentage of Gross Compensation,Effective July 1, 2010 Percentage of Gross Compensation,Effective July 1, 2011
209
	Regular Class 0.00% 1.74%
210
	Special Risk Class 0.00% 6.57%
211
	Special Risk Administrative  Support Class 0.00% 17.57%
212
	Elected Officers' Class -  Legislators, Governor,  Lt. Governor,  Cabinet Officers,  State Attorneys,  Public Defenders 0.00% 18.76%
213
	Elected Officers' Class -  Justices, Judges 0.00% 12.10%
214
	Elected Officers' Class -  County Elected Officers 0.00% 21.73%
215
	Senior Management Class 0.00% 10.19%
216
	DROP 0.00% 5.47%
217
218	Section 3.  Section 121.74, Florida Statutes, is amended to
219	read:
220	121.74  Administrative and educational expenses.-In
221	addition to contributions required under ss. s. 121.71 and
222	121.73, effective July 1, 2010, through June 30, 2014, employers
223	participating in the Florida Retirement System shall contribute
224	an amount equal to 0.03 0.05 percent of the payroll reported for
225	each class or subclass of Florida Retirement System membership.
226	Effective July 1, 2014, the contribution rate shall be 0.04
227	percent of the payroll reported for each class or subclass of
228	membership. The, which amount contributed shall be transferred
229	by the Division of Retirement from the Florida Retirement System
230	Contributions Clearing Trust Fund to the State Board of
231	Administration's Administrative Trust Fund to offset the costs
232	of administering the optional retirement program and the costs
233	of providing educational services to participants in the defined
234	benefit program and the optional retirement program. Approval of
235	the trustees of the State Board of Administration is required
236	before prior to the expenditure of these funds. Payments for
237	third-party administrative or educational expenses shall be made
238	only pursuant to the terms of the approved contracts for such
239	services.
240	Section 4.  As part of the actuarial study required by s.
241	121.031(3), Florida Statutes, based on the results of June 30,
242	2010, the administrator of the Florida Retirement System shall
243	contract with the state actuary to conduct an actuarial study of
244	the Florida Retirement System which considers the following
245	methods of funding the Deferred Retirement Option Program:
246	(1)  Through a separate contribution rate regardless of the
247	participant's membership class, which had been the principle
248	method through the 2009 valuation;
249	(2)  Treat participants as retirees such that the payroll
250	associated with the participants is not used to develop the
251	contribution rates for the respective membership class, and the
252	employer is not required to make contributions on such payroll
253	except for unfunded actuarial liability contributions; and
254	(3)  Treat participants as active members such that the
255	payroll associated with the participants is used to develop the
256	contribution rates for the respective membership class, and the
257	employer is required to make contributions on the payroll at the
258	same contribution rate as the employer pays for an active member
259	of the applicable class.
260	Section 5.  The Legislature finds that a proper and
261	legitimate state purpose is served when employees and retirees
262	of the state and its political subdivisions, and the dependents,
263	survivors, and beneficiaries of such employees and retirees, are
264	extended the basic protections afforded by governmental
265	retirement systems. These persons must be provided benefits that
266	are fair and adequate and that are managed, administered, and
267	funded in an actuarially sound manner, as required by s. 14,
268	Article X of the State Constitution and part VII of chapter 112,
269	Florida Statutes. Therefore, the Legislature determines and
270	declares that this act fulfills an important state interest.
271	Section 6.  This act shall take effect July 1, 2010.

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