Florida Senate - 2017                          SENATOR AMENDMENT
       Bill No. HB 6027
                              LEGISLATIVE ACTION                        
                    Senate             .             House              
                 Floor: WD/3R          .                                
             05/03/2017 10:23 AM       .                                

       Senator Brandes moved the following:
    1         Senate Amendment (with title amendment)
    3         Before line 13
    4  insert:
    5         Section 1. Subsection (3) of section 121.031, Florida
    6  Statutes, is amended to read
    7         121.031 Administration of system; appropriation; oaths;
    8  actuarial studies; public records.—
    9         (3) The administrator shall cause an actuarial study of the
   10  system to be made at least annually and shall report the results
   11  of such study to the Legislature Governor, the President of the
   12  Senate, and the Speaker of the House of Representatives by
   13  December 31 prior to the next legislative session. The study
   14  shall, at a minimum, conform to the requirements of s. 112.63,
   15  with the following exceptions and additions:
   16         (a) The valuation of plan assets shall be based on a 5-year
   17  averaging methodology such as that specified in the United
   18  States Department of Treasury Regulations, 26 C.F.R. s.
   19  1.412(c)(2)-1 in effect on August 16, 2006, or a similar
   20  accepted approach designed to attenuate fluctuations in asset
   21  values.
   22         (b) The study shall include a narrative explaining the
   23  changes in the covered group over the period between actuarial
   24  valuations and the impact of those changes on actuarial results.
   25         (c) When substantial changes in actuarial assumptions have
   26  been made, the study shall reflect the results of an actuarial
   27  assumption as of the current date based on the assumptions
   28  utilized in the prior actuarial report.
   29         (d) The study shall include an analysis of the changes in
   30  actuarial valuation results by the factors generating those
   31  changes. Such analysis shall reconcile the current actuarial
   32  valuation results with those results from the prior valuation.
   33         (e) The study shall include measures of funding status and
   34  funding progress designed to facilitate the assessment of trends
   35  over several actuarial valuations with respect to the overall
   36  solvency of the system. Such measures shall be adopted by the
   37  department and shall be used consistently in all actuarial
   38  valuations performed on the system.
   39         (f) The study shall include an analysis of the assumed rate
   40  of return adopted by the Florida Retirement System Actuarial
   41  Assumption Conference pursuant to s. 216.136(10). This analysis
   42  shall include specific recommendations regarding an appropriate
   43  assumed rate of return.
   44         (g)(f) The actuarial model used to determine the adequate
   45  level of funding for the Florida Retirement System shall include
   46  a specific rate stabilization mechanism, as prescribed herein.
   47  It is the intent of the Legislature to maintain as a reserve a
   48  specific portion of any actuarial surplus, and to use such
   49  reserve for the purpose of offsetting future unfunded
   50  liabilities caused by experience losses, thereby minimizing the
   51  risk of future increases in contribution rates. It is further
   52  the intent of the Legislature that the use of any excess above
   53  the reserve to offset retirement system normal costs shall be in
   54  a manner that will allow system employers to plan appropriately
   55  for resulting cost reductions and subsequent cost increases. The
   56  rate stabilization mechanism shall operate as follows:
   57         1. The actuarial surplus shall be the value of actuarial
   58  assets over actuarial liabilities, as is determined on the
   59  preceding June 30 or as may be estimated on the preceding
   60  December 31.
   61         2. The full amount of any experience loss shall be offset,
   62  to the extent possible, by any actuarial surplus.
   63         3. If the actuarial surplus exceeds 5 percent of actuarial
   64  liabilities, one-half of the excess may be used to offset total
   65  retirement system costs. In addition, if the actuarial surplus
   66  exceeds 10 percent of actuarial liabilities, an additional one
   67  fourth of the excess above 10 percent may be used to offset
   68  total retirement system costs. In addition, if the actuarial
   69  surplus exceeds 15 percent of actuarial liabilities, an
   70  additional one-fourth of the excess above 15 percent may be used
   71  to offset total retirement system costs.
   72         4. Any surplus amounts available to offset total retirement
   73  system costs pursuant to subparagraph 3. should be amortized
   74  each year over a 10-year rolling period on a level-dollar basis.
   75         Section 2. Section 121.0312, Florida Statutes, is amended
   76  to read
   77         121.0312 Acknowledgement of review Review; actuarial
   78  valuation report; contribution rate determination process.—
   79         (1) The Governor, Chief Financial Officer, and Attorney
   80  General, sitting as the Board of Trustees of the State Board of
   81  Administration, shall review the actuarial valuation report
   82  prepared in accordance with the provisions of this chapter. The
   83  Board shall review the process by which Florida Retirement
   84  System contribution rates are determined and recommend and
   85  submit any comments regarding the process to the Legislature.
   86         (2) Effective July 1, 2019, the Governor, the President of
   87  the Senate, and the Speaker of the House of Representatives
   88  shall, within 30 days of receipt, acknowledge in writing, their
   89  acceptance, and review of, the actuarial valuation report
   90  prepared in accordance with this chapter and any recommendations
   91  regarding actuarial assumptions contained therein. The
   92  department shall publish the written acknowledgements as addenda
   93  to the report.
   94         Section 3. Paragraph (g) of subsection (4) of section
   95  121.4501, Florida Statutes, is amended to read:
   96         121.4501 Florida Retirement System Investment Plan.—
   98         (g) After the period during which an eligible employee had
   99  the choice to elect the pension plan or the investment plan, or
  100  the month following the receipt of the eligible employee’s plan
  101  election, if sooner, the employee shall have one opportunity, at
  102  the employee’s discretion, to choose to move from the pension
  103  plan to the investment plan or from the investment plan to the
  104  pension plan. Eligible employees may elect to move between plans
  105  only if they are earning service credit in an employer-employee
  106  relationship consistent with s. 121.021(17)(b), excluding leaves
  107  of absence without pay. Effective July 1, 2005, such elections
  108  are effective on the first day of the month following the
  109  receipt of the election by the third-party administrator and are
  110  not subject to the requirements regarding an employer-employee
  111  relationship or receipt of contributions for the eligible
  112  employee in the effective month, except when the election is
  113  received by the third-party administrator. This paragraph is
  114  contingent upon approval by the Internal Revenue Service.
  115         1. If the employee chooses to move to the investment plan,
  116  the provisions of subsection (3) govern the transfer.
  117         2. If the employee chooses to move to the pension plan, the
  118  employee must transfer from his or her investment plan account,
  119  and from other employee moneys as necessary, a sum representing
  120  the present value of that employee’s accumulated benefit
  121  obligation immediately following the time of such movement,
  122  determined assuming that attained service equals the sum of
  123  service in the pension plan and service in the investment plan.
  124  Benefit commencement occurs on the first date the employee is
  125  eligible for unreduced benefits, using the discount rate and
  126  other relevant actuarial assumptions that were used to value the
  127  pension plan liabilities in the most recent actuarial valuation.
  128  For any employee who, at the time of the second election,
  129  already maintains an accrued benefit amount in the pension plan,
  130  the then-present value of the accrued benefit is deemed part of
  131  the required transfer amount. The division must ensure that the
  132  transfer sum is prepared using a formula and methodology
  133  certified by an enrolled actuary. A refund of any employee
  134  contributions or additional member payments made which exceed
  135  the employee contributions that would have accrued had the
  136  member remained in the pension plan and not transferred to the
  137  investment plan is not permitted.
  138         3. Notwithstanding subparagraph 2., an employee who chooses
  139  to move to the pension plan and who became eligible to
  140  participate in the investment plan by reason of employment in a
  141  regularly established position with a state employer after June
  142  1, 2002; a district school board employer after September 1,
  143  2002; or a local employer after December 1, 2002, must transfer
  144  from his or her investment plan account, and from other employee
  145  moneys as necessary, a sum representing the employee’s actuarial
  146  accrued liability. A refund of any employee contributions or
  147  additional participant payments made which exceed the employee
  148  contributions that would have accrued had the member remained in
  149  the pension plan and not transferred to the investment plan is
  150  not permitted.
  151         4. An employee’s ability to transfer from the pension plan
  152  to the investment plan pursuant to paragraphs (a)-(d), and the
  153  ability of a current employee to have an option to later
  154  transfer back into the pension plan under subparagraph 2., shall
  155  be deemed a significant system amendment. Pursuant to s.
  156  121.031(4), any resulting unfunded liability arising from actual
  157  original transfers from the pension plan to the investment plan
  158  must be amortized within 30 plan years as a separate unfunded
  159  actuarial base independent of the reserve stabilization
  160  mechanism defined in s. 121.031(3)(g) s. 121.031(3)(f). For the
  161  first 25 years, a direct amortization payment may not be
  162  calculated for this base. During this 25-year period, the
  163  separate base shall be used to offset the impact of employees
  164  exercising their second program election under this paragraph.
  165  The actuarial funded status of the pension plan will not be
  166  affected by such second program elections in any significant
  167  manner, after due recognition of the separate unfunded actuarial
  168  base. Following the initial 25-year period, any remaining
  169  balance of the original separate base shall be amortized over
  170  the remaining 5 years of the required 30-year amortization
  171  period.
  172         5. If the employee chooses to transfer from the investment
  173  plan to the pension plan and retains an excess account balance
  174  in the investment plan after satisfying the buy-in requirements
  175  under this paragraph, the excess may not be distributed until
  176  the member retires from the pension plan. The excess account
  177  balance may be rolled over to the pension plan and used to
  178  purchase service credit or upgrade creditable service in the
  179  pension plan.
  181  ================= T I T L E  A M E N D M E N T ================
  182  And the title is amended as follows:
  183         Delete line 2
  184  and insert:
  185         An act relating to financial reporting; amending s.
  186         121.031; providing criteria to be included in the
  187         annual actuarial valuation report; amending s.
  188         121.0312; requiring acknowledgement and review of the
  189         report; amending s. 121.4501, F.S.; conforming a
  190         cross-reference; amending ss.