2013 Legislature                     CS for CS for CS for SB 534
    2         An act relating to publicly funded defined benefit
    3         retirement plans; amending s. 112.63, F.S.; deleting
    4         the requirement that required actuarial reports for
    5         retirement plans include a disclosure of the present
    6         value of the plan’s benefits; amending s. 112.66,
    7         F.S.; providing that the state is not liable for
    8         shortfalls in local government retirement systems or
    9         plans; creating s. 112.664, F.S.; requiring a defined
   10         benefit system or plan to report certain information
   11         to the Department of Management Services by a certain
   12         date; requiring the plan sponsor to make certain
   13         information available on certain websites; providing
   14         consequences for failure to timely submit the required
   15         information; providing a method for a plan sponsor to
   16         request a hearing to contest such consequences;
   17         amending s. 112.665, F.S.; requiring the department to
   18         provide a fact sheet specifying certain information;
   19         providing a declaration of important state interest;
   20         providing an effective date.
   22         WHEREAS, in 2012, there were 492 local government employee
   23  defined benefit pension plans in Florida, providing pension
   24  benefits to approximately 79,000 retirees. The interests of
   25  participants in many of these plans may have property rights
   26  implications under state law, and
   27         WHEREAS, local government employee defined benefit pension
   28  plans are becoming a large financial burden on certain local
   29  governments and have already resulted in tax increases and the
   30  reduction of services, and
   31         WHEREAS, the 2012 Florida Local Government Retirement
   32  Systems Annual Report published by the Department of Management
   33  Services specifies the total unfunded actuarial accrued
   34  liability of all local government defined benefit pension plans
   35  at approximately $10 billion, and
   36         WHEREAS, some economists and observers have stated that the
   37  extent to which state or local government employee defined
   38  benefit pension plans are underfunded is obscured by
   39  governmental accounting rules and practices, particularly as
   40  they relate to the valuation of plan assets and liabilities.
   41  This results in a misstatement of the value of plan assets and
   42  an understatement of plan liabilities, a situation that poses a
   43  significant threat to the soundness of state and local budgets,
   44  and
   45         WHEREAS, there is currently a lack of meaningful disclosure
   46  regarding the value of state or local government employee
   47  defined benefit pension plan assets and liabilities. This lack
   48  of meaningful disclosure poses a direct and serious threat to
   49  the financial stability of such plans and their sponsoring
   50  governments, impairs the ability of state and local government
   51  taxpayers and officials to understand the financial obligations
   52  of their government, and reduces the likelihood that state and
   53  local government processes will be effective in assuring the
   54  prudent management of their plans, and
   55         WHEREAS, the financial health of state or local government
   56  employee pension benefit plans can have statewide public
   57  repercussions, and the meaningful disclosure of the value of
   58  their assets and liabilities is necessary and desirable in order
   59  to adequately protect plan participants and their beneficiaries
   60  as well as the general public, and to further efforts to provide
   61  for the general welfare and the free flow of commerce, NOW,
   64  Be It Enacted by the Legislature of the State of Florida:
   66         Section 1. Paragraphs (f) and (g) of subsection (1) of
   67  section 112.63, Florida Statutes, are amended to read:
   68         112.63 Actuarial reports and statements of actuarial
   69  impact; review.—
   70         (1) Each retirement system or plan subject to the
   71  provisions of this act shall have regularly scheduled actuarial
   72  reports prepared and certified by an enrolled actuary. The
   73  actuarial report shall consist of, but shall not be limited to,
   74  the following:
   75         (f) A disclosure of the present value of the plan’s accrued
   76  vested, nonvested, and total benefits, as adopted by the
   77  Financial Accounting Standards Board, using the Florida
   78  Retirement System’s assumed rate of return, in order to promote
   79  the comparability of actuarial data between local plans.
   80         (f)(g) A statement by the enrolled actuary that the report
   81  is complete and accurate and that in his or her opinion the
   82  techniques and assumptions used are reasonable and meet the
   83  requirements and intent of this act.
   85  The actuarial cost methods utilized for establishing the amount
   86  of the annual actuarial normal cost to support the promised
   87  benefits shall only be those methods approved in the Employee
   88  Retirement Income Security Act of 1974 and as permitted under
   89  regulations prescribed by the Secretary of the Treasury.
   90         Section 2. Subsection (14) is added to section 112.66,
   91  Florida Statutes, to read:
   92         112.66 General provisions.—The following general provisions
   93  relating to the operation and administration of any retirement
   94  system or plan covered by this part shall be applicable:
   95         (14) The state is not liable for any obligation relating to
   96  any current or future shortfall in any local government
   97  retirement system or plan.
   98         Section 3. Section 112.664, Florida Statutes, is created to
   99  read:
  100         112.664Reporting standards for defined benefit retirement
  101  plans or systems.—
  102         (1)In addition to the other reporting requirements of this
  103  part, within 60 days after receipt of the certified actuarial
  104  report submitted after the close of the plan year that ends on
  105  or after June 30, 2014, and thereafter in each year required
  106  under s. 112.63(2), each defined benefit retirement system or
  107  plan, excluding the Florida Retirement System, shall prepare and
  108  electronically report the following information to the
  109  Department of Management Services in a format prescribed by the
  110  department:
  111         (a)Annual financial statements that are in compliance with
  112  the requirements of the Government Accounting and Standard
  113  Board’s Statement No. 67, Financial Reporting for Pension Plans
  114  and Statement No. 68, Accounting and Financial Reporting for
  115  Pensions, using RP-2000 Combined Healthy Participant Mortality
  116  Tables, by gender, with generational projection by Scale AA.
  117         (b) Annual financial statements similar to those required
  118  under paragraph (a), but which use an assumed rate of return on
  119  investments and an assumed discount rate that are equal to 200
  120  basis points less than the plan’s assumed rate of return.
  121         (c) Information indicating the number of months or years
  122  for which the current market value of assets are adequate to
  123  sustain the payment of expected retirement benefits as
  124  determined in the plan’s latest valuation and under the
  125  financial statements prepared pursuant to paragraphs (a) and
  126  (b).
  127         (d) Information indicating the recommended contributions to
  128  the plan based on the plan’s latest valuation, and the
  129  contributions necessary to fund the plan based on financial
  130  statements prepared pursuant to paragraphs (a) and (b), stated
  131  as an annual dollar value and a percentage of valuation payroll.
  132         (2)Each defined benefit retirement system or plan,
  133  excluding the Florida Retirement System, and its plan sponsor:
  134         (a) Shall provide the information required by this section
  135  and the funded ratio of the system or plan as determined in the
  136  most recent actuarial valuation as part of the disclosures
  137  required under s. 166.241(3) and on any website that contains
  138  budget information relating to the plan sponsor or actuarial or
  139  performance information related to the system or plan.
  140         (b) That has a publicly available website shall provide on
  141  that website:
  142         1. The plan’s most recent financial statement and actuarial
  143  valuation, including a link to the Division of Retirement
  144  Actuarial Summary Fact Sheet for that plan.
  145         2. For the previous 5 years, beginning with 2013, a side
  146  by-side comparison of the plan’s assumed rate of return compared
  147  to the actual rate of return, as well as the percentages of
  148  cash, equity, bond, and alternative investments in the plan
  149  portfolio.
  150         3. Any charts and graphs of the data provided in
  151  subparagraphs 1. and 2., presented in a standardized, user
  152  friendly, and easily interpretable format as prescribed by the
  153  department.
  154         (3) The plan shall be deemed to be in noncompliance if it
  155  has not submitted the required information to the Department of
  156  Management Services within 60 days after receipt of the
  157  certified actuarial report for the plan year for which the
  158  information is required to be submitted to the department.
  159         (a) The Department of Management Services may notify the
  160  Department of Revenue and the Department of Financial Services
  161  of the noncompliance, and the Department of Revenue and the
  162  Department of Financial Services shall withhold any funds not
  163  pledged for satisfaction of bond debt service and which are
  164  payable to the plan sponsor until the information is provided to
  165  the department. The department shall specify the date the
  166  withholding is to begin and notify the Department of Revenue,
  167  the Department of Financial Services, and the plan sponsor 30
  168  days before the specified date.
  169         (b) Within 21 days after receipt of the notice, the plan
  170  sponsor may petition the Department of Management Services for a
  171  hearing under ss. 120.569 and 120.57. The Department of Revenue
  172  and the Department of Financial Services may not be parties to
  173  the hearing, but may request to intervene if requested by the
  174  department or if the Department of Revenue or the Department of
  175  Financial Services determines its interests may be adversely
  176  affected by the hearing.
  177         Section 4. Subsection (1) of section 112.665, Florida
  178  Statutes, is amended to read:
  179         112.665 Duties of Department of Management Services.—
  180         (1) The Department of Management Services shall:
  181         (a) Gather, catalog, and maintain complete, computerized
  182  data information on all public employee retirement systems or
  183  plans in the state, based upon a review of audits, reports, and
  184  other data pertaining to the systems or plans;
  185         (b) Receive and comment upon all actuarial reviews of
  186  retirement systems or plans maintained by units of local
  187  government;
  188         (c) Cooperate with local retirement systems or plans on
  189  matters of mutual concern and provide technical assistance to
  190  units of local government in the assessment and revision of
  191  retirement systems or plans;
  192         (d) Annually issue, by January 1 annually, a report to the
  193  President of the Senate and the Speaker of the House of
  194  Representatives, which report details division activities,
  195  findings, and recommendations concerning all governmental
  196  retirement systems. The report may include legislation proposed
  197  to carry out such recommendations;
  198         (e) Provide a fact sheet for each participating local
  199  government defined benefit pension plan which summarizes
  200  summarizing the plan’s actuarial status. The fact sheet should
  201  provide a summary of the plan’s most current actuarial data,
  202  minimum funding requirements as a percentage of pay, and a 5
  203  year history of funded ratios. The fact sheet must include a
  204  brief explanation of each element in order to maximize the
  205  transparency of the local government plans. The fact sheet must
  206  also contain the information specified in s. 112.664(1). These
  207  documents shall be posted on the department’s website. Plan
  208  sponsors that have websites must provide a link to the
  209  department’s website;
  210         (f) Annually issue, by January 1 annually, a report to the
  211  Special District Information Program of the Department of
  212  Economic Opportunity which that includes the participation in
  213  and compliance of special districts with the local government
  214  retirement system provisions in s. 112.63 and the state
  215  administered retirement system provisions as specified in part I
  216  of chapter 121; and
  217         (g) Adopt reasonable rules to administer the provisions of
  218  this part.
  219         Section 5. The Legislature finds that a proper and
  220  legitimate state purpose is served when employees and retirees
  221  of the state and its political subdivisions, and the dependents,
  222  survivors, and beneficiaries of such employees and retirees, are
  223  extended the basic protections afforded by governmental
  224  retirement systems that provide fair and adequate benefits and
  225  that are managed, administered, and funded in an actuarially
  226  sound manner as required by s. 14, Article X of the State
  227  Constitution and part VII of chapter 112, Florida Statutes.
  228  Therefore, the Legislature determines and declares that this act
  229  fulfills an important state interest.
  230         Section 6. This act shall take effect July 1, 2013.