Florida Senate - 2013              PROPOSED COMMITTEE SUBSTITUTE
       Bill No. SB 534
                                Barcode 499878                          
       Proposed Committee Substitute by the Committee on Governmental
       Oversight and Accountability
    1                        A bill to be entitled                      
    2         An act relating to publicly funded defined benefit
    3         retirement plans; amending s. 112.66, F.S.; providing
    4         that the state is not liable for shortfalls in local
    5         government retirement systems or plans; creating s.
    6         112.664, F.S.; requiring a defined benefit system or
    7         plan to report certain information to the Department
    8         of Management Services by a certain date and
    9         specifying the assumptions and methods to be used in
   10         determining the information submitted; requiring the
   11         plan sponsor to make certain information available on
   12         certain websites; providing consequences for failure
   13         to timely submit the required information; providing a
   14         method for a plan sponsor to request a hearing to
   15         contest such consequences; amending s. 112.665, F.S.;
   16         requiring the department to provide a fact sheet
   17         specifying certain information; providing a
   18         declaration of important state interest; providing an
   19         effective date.
   21         WHEREAS, in 2012, there were 492 local government employee
   22  defined benefit pension plans in Florida, providing pension
   23  benefits to approximately 79,000 retirees. The interests of
   24  participants in many of these plans may have property rights
   25  implications under state law, and
   26         WHEREAS, local government employee defined benefit pension
   27  plans are becoming a large financial burden on certain local
   28  governments and have already resulted in tax increases and the
   29  reduction of services, and
   30         WHEREAS, the 2012 Florida Local Government Retirement
   31  Systems Annual Report published by the Department of Management
   32  Services specifies the total unfunded actuarial accrued
   33  liability of all local government defined benefit pension plans
   34  at approximately $10 billion, and
   35         WHEREAS, some economists and observers have stated that the
   36  extent to which state or local government employee defined
   37  benefit pension plans are underfunded is obscured by
   38  governmental accounting rules and practices, particularly as
   39  they relate to the valuation of plan assets and liabilities.
   40  This results in a misstatement of the value of plan assets and
   41  an understatement of plan liabilities, a situation that poses a
   42  significant threat to the soundness of state and local budgets,
   43  and
   44         WHEREAS, there is currently a lack of meaningful disclosure
   45  regarding the value of state or local government employee
   46  defined benefit pension plan assets and liabilities. This lack
   47  of meaningful disclosure poses a direct and serious threat to
   48  the financial stability of such plans and their sponsoring
   49  governments, impairs the ability of state and local government
   50  taxpayers and officials to understand the financial obligations
   51  of their government, and reduces the likelihood that state and
   52  local government processes will be effective in assuring the
   53  prudent management of their plans, and
   54         WHEREAS, the financial health of state or local government
   55  employee pension benefit plans can have statewide public
   56  repercussions, and the meaningful disclosure of the value of
   57  their assets and liabilities is necessary and desirable in order
   58  to adequately protect plan participants and their beneficiaries
   59  as well as the general public, and to further efforts to provide
   60  for the general welfare and the free flow of commerce, NOW,
   63  Be It Enacted by the Legislature of the State of Florida:
   65         Section 1. Subsection (14) is added to section 112.66,
   66  Florida Statutes, to read:
   67         112.66 General provisions.—The following general provisions
   68  relating to the operation and administration of any retirement
   69  system or plan covered by this part shall be applicable:
   70         (14) The state is not liable for any obligation relating to
   71  any current or future shortfall in any local government
   72  retirement system or plan.
   73         Section 2. Section 112.664, Florida Statutes, is created to
   74  read:
   75         112.664Reporting standards for defined benefit retirement
   76  plans or systems.—
   77         (1)In addition to the other reporting requirements of this
   78  part, within 180 days after the close of the first plan year
   79  that ends on or after June 30, 2013, and thereafter in each year
   80  required under s. 112.63(2), each defined benefit retirement
   81  system or plan, including the Florida Retirement System, shall
   82  electronically report the following information to the
   83  Department of Management Services in a format prescribed by the
   84  department:
   85         (a)The long-term funded ratio calculated in a manner
   86  similar to the Government Accounting Standards Board’s Statement
   87  No. 67, Financial Reporting for Pension Plans, including the
   88  market value of its assets, the value of its actuarial
   89  liabilities, and the amount of its unfunded accrued liability,
   90  if any.
   91         (b) The dollar value of the unfunded accrued liability, if
   92  any, of the plan.
   93         (c) The number of months or years for which the current
   94  market value of assets are adequate to sustain the payment of
   95  expected retirement benefits.
   96         (d) The recommended contributions to the plan under the
   97  calculations required under paragraph (a) stated as an annual
   98  dollar value and a percentage of valuation payroll.
   99         (2)Each defined benefit retirement system or plan shall
  100  use the following assumptions and methods in determining the
  101  information required under subsection (1):
  102         (a)The actuarial cost method, which is the Entry Age
  103  Normal method.
  104         (b)The assumed rate of return on investments and the
  105  assumed discount rate, which are the adjusted 24-month average
  106  corporate bond segment rates determined under s.
  107  430(h)(2)(C)(iv) of the Internal Revenue Code by the Department
  108  of the Treasury.
  109         (c)Preretirement mortality calculated using the RP-2000
  110  Mortality Tables for male and female employees which accounts
  111  for generational mortality improvements. Postretirement
  112  mortality is calculated using the RP-2000 Mortality Tables for
  113  healthy white-collar employees, as projected from the year 2000
  114  to the valuation year using Projection Scale AA.
  115         (d)The asset valuation method, which is the market value
  116  less the value of any deferred retirement option program
  117  accounts.
  118         (e) The actuarial accrued liabilities, excluding the value
  119  of any deferred retirement option program accounts.
  120         (f)All other assumptions and methods used by the system or
  121  plan in its latest valuation.
  122         (3) Each defined benefit retirement system or plan and its
  123  plan sponsor:
  124         (a) Shall provide the information required by this section
  125  and the funded ratio of the system or plan as determined in the
  126  most recent actuarial valuation as part of the disclosures
  127  required under s. 166.241(3) and on any website that contains
  128  budget information relating to the plan sponsor or actuarial or
  129  performance information related to the system or plan. The
  130  Executive Office of the Governor shall comply with this
  131  subsection by making the information and funded ratio relating
  132  to the Florida Retirement System available on the website
  133  described in s. 215.985 which contains state financial
  134  information.
  135         (b) That have a publicly available website shall provide
  136  the plan’s most recent financial statement and actuarial
  137  valuation on that website.
  138         (4)The plan shall be deemed to be in noncompliance if it
  139  has not submitted the required information to the Department of
  140  Management Services within 30 days after receipt of the
  141  certified actuarial report for the plan year for which the
  142  information is required to be submitted to the department.
  143         (a) The department may notify the Department of Revenue and
  144  the Department of Financial Services of the noncompliance, and
  145  the Department of Revenue and the Department of Financial
  146  Services shall withhold any funds not pledged for satisfaction
  147  of bond debt service and which are payable to the plan sponsor
  148  until the information is provided to the department. The
  149  department shall specify the date the withholding is to begin
  150  and notify the Department of Revenue, the Department of
  151  Financial Services, and the plan sponsor 30 days before the
  152  specified date.
  153         (b) Within 21 days after receipt of the notice, the plan
  154  sponsor may petition the department for a hearing under ss.
  155  120.569 and 120.57. The Department of Revenue and the Department
  156  of Financial Services may not be parties to the hearing, but may
  157  request to intervene if requested by the Department of
  158  Management Services or if the Department of Revenue or the
  159  Department of Financial Services determines its interests may be
  160  adversely affected by the hearing.
  161         Section 3. Subsection (1) of section 112.665, Florida
  162  Statutes, is amended to read:
  163         112.665 Duties of Department of Management Services.—
  164         (1) The Department of Management Services shall:
  165         (a) Gather, catalog, and maintain complete, computerized
  166  data information on all public employee retirement systems or
  167  plans in the state, based upon a review of audits, reports, and
  168  other data pertaining to the systems or plans;
  169         (b) Receive and comment upon all actuarial reviews of
  170  retirement systems or plans maintained by units of local
  171  government;
  172         (c) Cooperate with local retirement systems or plans on
  173  matters of mutual concern and provide technical assistance to
  174  units of local government in the assessment and revision of
  175  retirement systems or plans;
  176         (d) Annually issue, by January 1 annually, a report to the
  177  President of the Senate and the Speaker of the House of
  178  Representatives, which report details division activities,
  179  findings, and recommendations concerning all governmental
  180  retirement systems. The report may include legislation proposed
  181  to carry out such recommendations;
  182         (e) Provide a fact sheet for each participating local
  183  government defined benefit pension plan which summarizes
  184  summarizing the plan’s actuarial status. The fact sheet should
  185  provide a summary of the plan’s most current actuarial data,
  186  minimum funding requirements as a percentage of pay, and a 5
  187  year history of funded ratios. The fact sheet must include a
  188  brief explanation of each element in order to maximize the
  189  transparency of the local government plans. The fact sheet must
  190  also contain the information specified in s. 112.664(1). These
  191  documents shall be posted on the department’s website. Plan
  192  sponsors that have websites must provide a link to the
  193  department’s website;
  194         (f) Annually issue, by January 1 annually, a report to the
  195  Special District Information Program of the Department of
  196  Economic Opportunity which that includes the participation in
  197  and compliance of special districts with the local government
  198  retirement system provisions in s. 112.63 and the state
  199  administered retirement system provisions as specified in part I
  200  of chapter 121; and
  201         (g) Adopt reasonable rules to administer the provisions of
  202  this part.
  203         Section 4. The Legislature finds that a proper and
  204  legitimate state purpose is served when employees and retirees
  205  of the state and its political subdivisions, and the dependents,
  206  survivors, and beneficiaries of such employees and retirees, are
  207  extended the basic protections afforded by governmental
  208  retirement systems that provide fair and adequate benefits and
  209  that are managed, administered, and funded in an actuarially
  210  sound manner as required by s. 14, Article X of the State
  211  Constitution and part VII of chapter 112, Florida Statutes.
  212  Therefore, the Legislature determines and declares that this act
  213  fulfills an important state interest.
  214         Section 5. This act shall take effect July 1, 2013.