Florida Senate - 2021 SB 1870 By Senator Ausley 3-01716A-21 20211870__ Page 1 of 12 CODING: Words stricken are deletions; words underlined are additions. A bill to be entitled 1

An act relating to the Florida Retirement System; 2 amending s. 121.051, F.S.; providing for compulsory 3 membership in the Florida Retirement System for 4 certain governing bodies established on or after a 5 specified date; amending s. 121.091, F.S.; requiring 6 certain benefits be paid to a beneficiary who does not 7 qualify as a joint annuitant; providing an exception 8 to the employment after retirement limitations for 9 retirees who hold an elective office with a covered 10 employer; amending s. 121.4501, F.S.; authorizing 11 eligible employees an additional opportunity to 12 transfer from the investment plan to the pension plan 13 within a specified timeframe; amending s. 121.71, 14 F.S.; authorizing pension plan members to contribute 15 amounts in addition to the required member rate to the 16 Florida Retirement System for a specified purpose; 17 providing a declaration of important state interest; 18 providing an effective date. 19 20 Be It Enacted by the Legislature of the State of Florida: 21 22

Section 1. Paragraph (

b) of subsection (2) of

section 23 121.051, Florida Statutes, is amended to read: 24 121.051 Participation in the system.— 25

(2) OPTIONAL PARTICIPATION.— 26 (b)1. Before July 1, 2021, the governing body of any 27 municipality, metropolitan planning organization, or special 28 district in the state may elect to participate in the Florida 29

Florida Senate - 2021 SB 1870 3-01716A-21 20211870__ Page 2 of 12 CODING: Words stricken are deletions; words underlined are additions. Retirement System upon proper application to the administrator 30 and may cover all of its units as approved by the Secretary of 31 Health and Human Services and the administrator. The department 32 shall adopt rules establishing procedures for the submission of 33 documents necessary for such application.

Before being approved 34 for participation in the system, the governing body of a 35 municipality, metropolitan planning organization, or special 36 district that has a local retirement system must submit to the 37 administrator a certified financial statement showing the 38 condition of the local retirement system within 3 months before 39 the proposed effective date of membership in the Florida 40 Retirement System. The statement must be certified by a 41 recognized accounting firm that is independent of the local 42 retirement system.

All required documents necessary for 43 extending Florida Retirement System coverage must be received by 44 the department for consideration at least 15 days before the 45 proposed effective date of coverage. If the municipality, 46 metropolitan planning organization, or special district does not 47 comply with this requirement, the department may require that 48 the effective date of coverage be changed. 49 a.2.

A municipality, metropolitan planning organization, or 50 special district that has an existing retirement system covering 51 the employees in the units that are to be brought under the 52 Florida Retirement System may participate only after holding a 53 referendum in which all employees in the affected units have the 54 right to participate. Only those employees electing coverage 55 under the Florida Retirement System by affirmative vote in the 56 referendum are eligible for coverage under this chapter, and 57 those not participating or electing not to be covered by the 58

Florida Senate - 2021 SB 1870 3-01716A-21 20211870__ Page 3 of 12 CODING: Words stricken are deletions; words underlined are additions. Florida Retirement System shall remain in their present systems 59 and are not eligible for coverage under this chapter. After the 60 referendum is held, all future employees are compulsory members 61 of the Florida Retirement System. 62 b.3.

At the time of joining the Florida Retirement System, 63 the governing body of a municipality, metropolitan planning 64 organization, or special district complying with subparagraph 1. 65 may elect to provide, or not provide, benefits based on past 66 service of officers and employees as described in s. 121.081(1). 67 However, if such employer elects to provide past service 68 benefits, such benefits must be provided for all officers and 69 employees of its covered group. 70 c.4.

Once this election is made and approved it may not be 71 revoked, except under sub-subparagraphs d. and e. pursuant to 72 subparagraphs 5. and 6., and all present officers and employees 73 electing coverage and all future officers and employees are 74 compulsory members of the Florida Retirement System. 75 d.5. Subject to sub-subparagraph e. subparagraph 6., the 76 governing body of a hospital licensed under

chapter 395 which is 77 governed by the governing body of a special district as defined 78 in s. 189.012 or by the board of trustees of a public health 79 trust created under s. 154.07, hereinafter referred to as 80 “hospital district,” and which participates in the Florida 81 Retirement System, may elect to cease participation in the 82 system with regard to future employees in accordance with the 83 following: 84 (I)a. No more than 30 days and at least 7 days before 85 adopting a resolution to partially withdraw from the system and 86 establish an alternative retirement plan for future employees, a 87

Florida Senate - 2021 SB 1870 3-01716A-21 20211870__ Page 4 of 12 CODING: Words stricken are deletions; words underlined are additions. public hearing must be held on the proposed withdrawal and 88 proposed alternative plan. 89 (II)b. From 7 to 15 days before such hearing, notice of 90 intent to withdraw, specifying the time and place of the 91 hearing, must be provided in writing to employees of the 92 hospital district proposing partial withdrawal and must be 93 published in a newspaper of general circulation in the area 94 affected, as provided by ss. 50.011-50.031.

Proof of publication 95 must be submitted to the Department of Management Services. 96 (III)c. The governing body of a hospital district seeking 97 to partially withdraw from the system must, before such hearing, 98 have an actuarial report prepared and certified by an enrolled 99 actuary, as defined in s. 112.625, illustrating the cost to the 100 hospital district of providing, through the retirement plan that 101 the hospital district is to adopt, benefits for new employees 102 comparable to those provided under the system. 103 (IV)d.

Upon meeting all applicable requirements of this 104 sub-subparagraph subparagraph, and subject to sub-subparagraph 105 e. subparagraph 6., partial withdrawal from the system and 106 adoption of the alternative retirement plan may be accomplished 107 by resolution duly adopted by the hospital district board. The 108 hospital district board must provide written notice of such 109 withdrawal to the division by mailing a copy of the resolution 110 to the division, postmarked by December 15, 1995. The withdrawal 111 shall take effect January 1, 1996. 112 e.6.

Following the adoption of a resolution under sub-sub-113 subparagraph d.(IV) sub-subparagraph 5.d., all employees of the 114 withdrawing hospital district who were members of the system 115 before January 1, 1996, shall remain as members of the system 116

Florida Senate - 2021 SB 1870 3-01716A-21 20211870__ Page 5 of 12 CODING: Words stricken are deletions; words underlined are additions. for as long as they are employees of the hospital district, and 117 all rights, duties, and obligations between the hospital 118 district, the system, and the employees remain in full force and 119 effect. Any employee who is hired or appointed on or after 120 January 1, 1996, may not participate in the system, and the 121 withdrawing hospital district has no obligation to the system 122 with respect to such employees. 123 2.a.

On or after July 1, 2021, the governing body of any 124 newly created municipality, metropolitan planning organization, 125 or special district in the state must participate in the Florida 126 Retirement System. 127 b. At the time of joining the Florida Retirement System, 128 the governing body of a municipality, metropolitan planning 129 organization, or special district may elect to provide, or not 130 provide, benefits based on past service of officers and 131 employees as described in s. 121.081(1).

However, if such 132 employer elects to provide past service benefits, such benefits 133 must be provided for all officers and employees of its covered 134 group. 135

Section 2. Paragraph (

b) of subsection (7) of

section 136 121.091, Florida Statutes, is amended, and paragraph (

g) is 137 added to subsection (9) of that section, to read: 138 121.091 Benefits payable under the system.—Benefits may not 139 be paid under this

section unless the member has terminated 140 employment as provided in s. 121.021(39)(

a) or begun 141 participation in the Deferred Retirement Option Program as 142 provided in subsection (13), and a proper application has been 143 filed in the manner prescribed by the department. The department 144 may cancel an application for retirement benefits when the 145

Florida Senate - 2021 SB 1870 3-01716A-21 20211870__ Page 6 of 12 CODING: Words stricken are deletions; words underlined are additions. member or beneficiary fails to timely provide the information 146 and documents required by this

chapter and the department’s 147 rules. The department shall adopt rules establishing procedures 148 for application for retirement benefits and for the cancellation 149 of such application when the required information or documents 150 are not received. 151

(7) DEATH BENEFITS.— 152 (

b) If the employment of an active member who may or may 153 not have applied for retirement is terminated by reason of his 154 or her death subsequent to becoming vested and before prior to 155 his or her effective date of retirement, if established, it is 156 shall be assumed that the member retired as of the date of death 157 in accordance with subsection (1) if eligible for normal 158 retirement benefits, subsection (2) if eligible for benefits 159 payable for dual normal retirement, or subsection (3) if 160 eligible for early retirement benefits.

Benefits payable to the 161 designated beneficiary shall be as follows: 162 1. For a beneficiary who qualifies as a joint annuitant, 163 the optional form of payment provided in accordance with 164 subparagraph (6)(a)3. shall be paid for the joint annuitant’s 165 lifetime. 166 2.

For a beneficiary who does not qualify as a joint 167 annuitant, any benefits payable shall be paid as provided in the 168 option selected by the member; or if the member has not selected 169 an option, benefits shall be paid in the optional form of 170 payment provided in subparagraph (6)(a)1 no continuing monthly 171 benefit shall be paid and the beneficiary shall be entitled only 172 to the return of the member’s personal contributions. If there 173 is no monetary interest in the member’s retirement account for 174

Florida Senate - 2021 SB 1870 3-01716A-21 20211870__ Page 7 of 12 CODING: Words stricken are deletions; words underlined are additions. which such beneficiary is eligible, the beneficiary shall be the 175 next named beneficiary or, if no other beneficiary is named, the 176 beneficiary shall be the next eligible beneficiary according to 177 subsection (8). 178

(9) EMPLOYMENT AFTER RETIREMENT; LIMITATION.— 179 (

g) Any person whose retirement is effective on or after 180 July 1, 2021, or whose participation in the Deferred Retirement 181 Option Program terminates on or after July 1, 2021, who is 182 retired under this chapter, except under the disability 183 retirement provisions of subsection (4) or as provided in s. 184 121.053, may hold an elective public office that is covered by 185 the Florida Retirement System. Such person shall receive his or 186 her retirement benefits in addition to the compensation of the 187 elective office without regards to the time limitations 188 otherwise provided in this subsection. 189

Section 3. Paragraph (

f) of subsection (4) of

section 190 121.4501, Florida Statutes, is amended to read: 191 121.4501 Florida Retirement System Investment Plan.— 192

(4) PARTICIPATION; ENROLLMENT.— 193 (

f) After the period during which an eligible employee had 194 the choice to elect the pension plan or the investment plan, or 195 the month following the receipt of the eligible employee’s plan 196 election, if sooner, the employee shall have one opportunity, at 197 the employee’s discretion, to choose to move from the pension 198 plan to the investment plan or from the investment plan to the 199 pension plan. Beginning July 1, 2021, a 90-day election period 200 shall be provided to permit each eligible employee who elected 201 between June 1, 2002, and June 30, 2011, to move from the 202 pension plan to the investment plan one opportunity to elect, at 203

Florida Senate - 2021 SB 1870 3-01716A-21 20211870__ Page 8 of 12 CODING: Words stricken are deletions; words underlined are additions. the employee’s discretion, to move from the investment plan back 204 to the pension plan.

Eligible employees may elect to move 205 between plans only if they are earning service credit in an 206 employer-employee relationship consistent with s. 207 121.021(17)(b), excluding leaves of absence without pay. 208 Effective July 1, 2005, such elections are effective on the 209 first day of the month following the receipt of the election by 210 the third-party administrator and are not subject to the 211 requirements regarding an employer-employee relationship or 212 receipt of contributions for the eligible employee in the 213 effective month, except when the election is received by the 214 third-party administrator.

This paragraph is contingent upon 215 approval by the Internal Revenue Service. 216 1. If the employee chooses to move to the investment plan, 217 the provisions of subsection (3) govern the transfer. 218 2.

If the employee chooses to move to the pension plan, the 219 employee must transfer from his or her investment plan account, 220 and from other employee moneys as necessary, a sum representing 221 the present value of that employee’s accumulated benefit 222 obligation immediately following the time of such movement, 223 determined assuming that attained service equals the sum of 224 service in the pension plan and service in the investment plan. 225 Benefit commencement occurs on the first date the employee is 226 eligible for unreduced benefits, using the discount rate and 227 other relevant actuarial assumptions that were used to value the 228 pension plan liabilities in the most recent actuarial valuation. 229 For any employee who, at the time of the second election, 230 already maintains an accrued benefit amount in the pension plan, 231 the then-present value of the accrued benefit is deemed part of 232

Florida Senate - 2021 SB 1870 3-01716A-21 20211870__ Page 9 of 12 CODING: Words stricken are deletions; words underlined are additions. the required transfer amount. The division must ensure that the 233 transfer sum is prepared using a formula and methodology 234 certified by an enrolled actuary. A refund of any employee 235 contributions or additional member payments made which exceed 236 the employee contributions that would have accrued had the 237 member remained in the pension plan and not transferred to the 238 investment plan is not permitted. 239 3.

Notwithstanding subparagraph 2., an employee who chooses 240 to move to the pension plan and who became eligible to 241 participate in the investment plan by reason of employment in a 242 regularly established position with a state employer after June 243 1, 2002; a district school board employer after September 1, 244 2002; or a local employer after December 1, 2002, must transfer 245 from his or her investment plan account, and from other employee 246 moneys as necessary, a sum representing the employee’s actuarial 247 accrued liability.

A refund of any employee contributions or 248 additional member payments made which exceed the employee 249 contributions that would have accrued had the member remained in 250 the pension plan and not transferred to the investment plan is 251 not permitted. 252 4. An employee’s ability to transfer from the pension plan 253 to the investment plan under pursuant to paragraphs (

a) and (b), 254 and the ability of a current employee to have an option to later 255 transfer back into the pension plan under subparagraph 2., is 256 considered shall be deemed a significant system amendment. Under 257 Pursuant to s. 121.031(4), any resulting unfunded liability 258 arising from actual original transfers from the pension plan to 259 the investment plan must be amortized within 30 plan years as a 260 separate unfunded actuarial base independent of the reserve 261

Florida Senate - 2021 SB 1870 3-01716A-21 20211870__ Page 10 of 12 CODING: Words stricken are deletions; words underlined are additions. stabilization mechanism defined in s. 121.031(3)(f). For the 262 first 25 years, a direct amortization payment may not be 263 calculated for this base.

During this 25-year period, the 264 separate base shall be used to offset the impact of employees 265 exercising their second program election under this paragraph. 266 The actuarial funded status of the pension plan will not be 267 affected by such second program elections in any significant 268 manner, after due recognition of the separate unfunded actuarial 269 base. Following the initial 25-year period, any remaining 270 balance of the original separate base shall be amortized over 271 the remaining 5 years of the required 30-year amortization 272 period. 273 5.

If the employee chooses to transfer from the investment 274 plan to the pension plan and retains an excess account balance 275 in the investment plan after satisfying the buy-in requirements 276 under this paragraph, the excess may not be distributed until 277 the member retires from the pension plan. The excess account 278 balance may be rolled over to the pension plan and used to 279 purchase service credit or upgrade creditable service in the 280 pension plan. 281

Section 4. Subsection (2) of

section 121.71, Florida 282 Statutes, is amended to read: 283 121.71 Uniform rates; process; calculations; levy.— 284 (2)(

a) Based on the uniform rates set forth in subsections 285 (3), (4), and (5), employees and employers shall make monthly 286 contributions to the Division of Retirement as required in s. 287 121.061(1), which shall initially deposit the funds into the 288 Florida Retirement System Contributions Clearing Trust Fund. A 289 change in a contribution rate is effective the first day of the 290

Florida Senate - 2021 SB 1870 3-01716A-21 20211870__ Page 11 of 12 CODING: Words stricken are deletions; words underlined are additions. month for which a full month’s employer and employee 291 contribution may be made on or after the beginning date of the 292 change. Beginning July 1, 2011, each employee shall contribute 293 the contributions required in subsection (3). The employer shall 294 deduct the contribution from the employee’s monthly salary, and 295 the contribution shall be submitted to the division.

These 296 contributions shall be reported as employer-paid employee 297 contributions, and credited to the account of the employee. The 298 contributions shall be deducted from the employee’s salary 299 before the computation of applicable federal taxes and treated 300 as employer contributions under 26 U.S.C. s. 414(h)(2). The 301 employer specifies that the contributions, although designated 302 as employee contributions, are being paid by the employer in 303 lieu of contributions by the employee.

The employee does not 304 have the option of choosing to receive the contributed amounts 305 directly instead of having them paid by the employer to the 306 plan. Such contributions are mandatory, and each employee is 307 considered to have consented to payroll deductions. Payment of 308 an employee’s salary or wages, less the contribution, is a full 309 and complete discharge and satisfaction of all claims and 310 demands for the service rendered by employees during the period 311 covered by the payment, except their claims to the benefits to 312 which they may be entitled under this chapter. 313 (

b) Effective July 1, 2021, employees in the pension plan 314 may contribute an amount in addition to the required retirement 315 contribution rate provided in subsection (3). Any amount 316 contributed in excess of the rate under subsection (3) must be 317 segregated from the employees’ required retirement contribution 318 and used to purchase additional retirement service credit in the 319

Florida Senate - 2021 SB 1870 3-01716A-21 20211870__ Page 12 of 12 CODING: Words stricken are deletions; words underlined are additions. membership class in which the member belongs. Additional service 320 purchased under this paragraph must be added to the credible 321 service of the member and used to vest for retirement 322 eligibility, and must be used in the calculation of benefits. 323

Section 5. The Legislature finds that a proper and 324 legitimate state purpose is served when employees and retirees 325 of the state and its political subdivisions, and the dependents, 326 survivors, and beneficiaries of such employees and retirees, are 327 extended the basic protections afforded by governmental 328 retirement systems. These persons must be provided benefits that 329 are fair and adequate and that are managed, administered, and 330 funded in an actuarially sound manner, as required by s. 14, 331

Article X of the State Constitution and

part VII of

chapter 112, 332 Florida Statutes. Therefore, the Legislature determines and 333 declares that this act fulfills an important state interest. 334

Section 6. This act shall take effect July 1, 2021. 335