Bill Summary – FastDemocracy

The Florida Senate
                  BILL ANALYSIS AND FISCAL IMPACT STATEMENT
              (This document is based on the provisions contained in the legislation as of the latest date listed below.)
                     Prepared By: The Professional Staff of the Committee on Community Affairs
BILL:           CS/SB 400
INTRODUCER:     Governmental Oversight and Accountability Committee and Senators Burgess and
                Hooper
SUBJECT:        Reemployment of Retired Law Enforcement Officers
DATE:           February 5, 2024                REVISED:
           ANALYST                    STAFF DIRECTOR                 REFERENCE                                 ACTION
1. McVaney                          McVaney                               GO              Fav/CS
2. Hackett                          Ryon                                  CA              Favorable
3.                                                                        AP
                     Please see Section IX. for Additional Information:
                                   COMMITTEE SUBSTITUTE - Substantial Changes
 I.     Summary:
        CS/SB 400 authorizes, effective July 1, 2024, an FRS retiree, regardless of membership class, to
        be reemployed with an employer participating in the Florida Retirement System (FRS) after
        meeting the definition of termination and receive both compensation from the employer and an
        FRS retirement benefit. This effectively eliminates the “suspension of benefits” period typically
        applied during months 7 through 12 after the date of termination. The retiree must still achieve a
        bona fide termination of service with all FRS-participating employers.
        The bill is expected to increase actuarial liabilities of the Florida Retirement System by
        $23.8 million annually system-wide which will be funded by increases in the annual employer-
        paid contributions to the FRS Trust Fund.
        The bill takes effect July 1, 2024.
 II.    Present Situation:
        The Florida Retirement System (FRS)
        The Florida Retirement System (FRS) was established in 1970 when the Legislature consolidated
        the Teachers’ Retirement System, the State and County Officers and Employees’ Retirement
        System, and the Highway Patrol Pension Fund. In 1972, the Judicial Retirement System was
BILL:   CS/SB 400                                                                                                      Page 2
         consolidated into the FRS, and in 2007, the Institute of Food and Agricultural Sciences
         Supplemental Retirement Program was consolidated under the Regular Class of the FRS as a
         closed group.1 The FRS is a contributory system, with active members contributing 3 percent of
         their salaries.2
         The FRS is a multi-employer plan, governed by ch. 121, F.S., the “Florida Retirement System
         Act.” As of June 30, 2023, the FRS had 646,277 active non-retired members, 455,601 annuitants,
         14,499 disabled retirees, and 27,767 active participants of the Deferred Retirement Option
         Program (DROP).3 As of June 30, 2023, the FRS consisted of 991 total employers; it is the
         primary retirement plan for employees of state and county government agencies, district school
         boards, Florida College institutions, and state universities, and includes the 180 cities and 153
         special districts that have elected to join the system.4
         The membership of the FRS is divided into five membership classes:
          The Regular Class5 consists of 550,931 active members and 8,433 in renewed membership;
          The Special Risk Class6 includes 75,495 active members and 1,168 in renewed membership;
          The Special Risk Administrative Support Class7 has 93 active members and one in renewed
            membership;
          The Elected Officers’ Class8 has 2,105 active members and 106 in renewed membership; and
          The Senior Management Service Class9 has 7,714 active members and 227 in renewed
            membership.10
         Each class is funded separately based upon the costs attributable to the members of that class.
1
  Florida Department of Management Services (DMS), Division of Retirement, Florida Retirement System Summary Plan
Description, 1 (July 1, 2023), https://frs.fl.gov/forms/spd-pp.pdf (last visited Jan. 5, 2024).
2
  Prior to 1975, members of the FRS were required to make employee contributions of either 4 percent for Regular Class
employees or 6 percent for Special Risk Class members. Employees were again required to contribute to the system after
July 1, 2011. See, ch. 2011-68, s. 33, Laws of Fla. Members in the Deferred Retirement Option Program do not contribute to
the system.
3
  DMS, Division of Retirement, Florida Retirement System Pension Plan and Other State Administered Retirement Systems
FY 2022-223 Annual Comprehensive Financial Report, at 188, available at https://employer.frs.fl.gov/forms/2022-
23_ACFR.pdf. (last visited Jan. 5, 2024).
4
  DMS, Division of Retirement, Participating Employers for Fiscal Year 2023-2024 (Oct. 2023), available at
https://employer.frs.fl.gov/forms/part-emp.pdf (last visited Jan. 5, 2024).
5
  The Regular Class is for all members who are not assigned to another class. Section 121.021(12), F.S.
6
  The Special Risk Class is for members employed as law enforcement officers, firefighters, correctional officers, probation
officers, paramedics and emergency technicians, among others. Section 121.0515, F.S. See also, DMS, FRS Pension Plan
Member Handbook, 9-14 (2023), available at https://frs.fl.gov/forms/member_handbook.pdf (last visited Jan. 5, 2024).
7
  The Special Risk Administrative Support Class is for a special risk member who moved or was reassigned to a nonspecial
risk law enforcement, firefighting, correctional, or emergency medical care administrative support position with the same
agency, or who is subsequently employed in such a position under the Florida Retirement System. Section 121.0515(8), F.S.
8
  The Elected Officers’ Class includes elected state and county officers, and those elected municipal or special district
officers whose governing body has chosen Elected Officers’ Class participation for its elected officers. Section 121.052, F.S.
9
  The Senior Management Service Class is for members who fill senior management level positions assigned by law to the
Senior Management Service Class or authorized by law as eligible for Senior Management Service designation. Section
121.055, F.S.
10
   All figures are from Florida Retirement System Pension Plan and Other State Administered Retirement Systems FY 2022-
23 Annual Comprehensive Financial Report, at 191.
BILL:   CS/SB 400                                                                                                       Page 3
         Members of the FRS have two primary plan options available for participation:11
          The defined contribution plan, also known as the Investment Plan; and
          The defined benefit plan, also known as the Pension Plan.
         Investment Plan
         In 2000, the Public Employee Optional Retirement Program (investment plan) was created as a
         defined contribution plan offered to eligible employees as an alternative to the FRS Pension
         Plan.12 The State Board of Administration (SBA) is primarily responsible for administering the
         investment plan.13 The Board of Trustees of the SBA is comprised of the Governor as chair, the
         Chief Financial Officer, and the Attorney General.14
         Benefits under the investment plan accrue in individual member accounts funded by both
         employee and employer contributions and earnings. Benefits are provided through employee-
         directed investments offered by approved investment providers.15
         A member vests immediately in all employee contributions paid to the investment plan.16 With
         respect to the employer contributions, a member vests after completing one work year of
         employment with an FRS employer.17 Vested benefits are payable upon termination or death as a
         lump-sum distribution, direct rollover distribution, or periodic distribution.18 The investment
         plan also provides disability coverage for both in-line-of-duty and regular disability retirement
         benefits.19 An FRS member who qualifies for disability while enrolled in the investment plan
         may apply for benefits as if the employee were a member of the pension plan. If approved for
         retirement disability benefits, the member is transferred to the pension plan.20
11
   Florida State Board of Administration (SBA), Plan Comparison Chart (Jul. 2020), available at
https://www.myfrs.com/pdf/forms/plancomparison.pdf (last visited Jan. 5, 2024).
12
   See, ch. 2000-169, Laws of Fla.
13
   Section 121.4501(8), F.S.
14
   FLA. CONST. art. IV, s. 4.
15
   Section 121.4501(1), F.S.
16
   Section 121.4501(6)(a), F.S.
17
   If a member terminates employment before vesting in the investment plan, the nonvested money is transferred from the
member’s account to the SBA for deposit and investment by the SBA in its suspense account for up to five years. If the
member is not reemployed as an eligible employee within five years, any nonvested accumulations transferred from a
member’s account to the SBA’s suspense account are forfeited. Section 121.4501(6)(b)-(d), F.S.
18
   Section 121.591, F.S.
19
   See s. 121.4501(16), F.S.
20
   Pension plan disability retirement benefits, which apply for investment plan members who qualify for disability,
compensate a line-of-duty disabled member up to 65 percent of the average monthly compensation as of the disability
retirement date for special risk class members. Other members may receive up to 42 percent of the member’s average
monthly compensation for disability retirement benefits. If the disability occurs other than in the line-of-duty, the monthly
benefit may not be less than 25 percent of the average monthly compensation as of the disability retirement date.
Section 121.091(4)(f), F.S.
BILL:   CS/SB 400                                                                                                       Page 4
         Pension Plan
         The pension plan is a defined benefit plan administered by the Department of Management
         Services (DMS) through the Division of Retirement.21 The State Board of Administration
         manages the pension fund’s assets.22
         Any member initially enrolled in the pension plan before July 1, 2011, vests in the pension plan
         after completing six years of service with an FRS employer.23 For members initially enrolled on
         or after July 1, 2011, the member vests in the pension plan after eight years of creditable
         service.24 Benefits payable under the pension plan are calculated based on the member’s years of
         creditable service multiplied by the service accrual rate multiplied by the member’s average final
         compensation.25
         For non-special risk members of the pension plan initially enrolled before July 1, 2011, normal
         retirement (when first eligible for unreduced benefits) occurs at the earlier of 30 years of service
         or age 62.26 Those non-special risk members initially enrolled in the pension plan on or after
         July 1, 2011, must complete 33 years of credible service or attain age 65.27 For members in the
         Special Risk and Special Risk Administrative Support Classes, normal retirement is the earlier of
         25 years of credible service or age 55.28
         Deferred Retirement Option Program
         The Deferred Retirement Option Program (DROP) allows eligible members of the FRS Pension
         Plan to participate in the program and defer receipt of retirement benefits while continuing
         employment with an FRS employer. The deferred monthly benefits accrue, plus interest,29 in the
         FRS on behalf of the employee for the period of time the member participates in DROP. Upon
         termination of employment, the member receives the total DROP benefits and begins to receive
         the previously determined normal retirement benefits.30
         A member may elect to participate in DROP any time after reaching the normal retirement
         date.31 Generally, an eligible member is authorized to participate in DROP for 8 years. However,
         certain instructional personnel may participate in DROP for 10 years until June 30, 2029.32
21
   Section 121.025, F.S.
22
   SBA Florida, Florida Retirement System Pension Plan,
https://www.sbafla.com/fsb/FundsWeManage/FRSPensionPlan.aspx (last visited Jan. 5, 2024).
23
   Section 121.021(45)(a), F.S.
24
   Section 121.021(45)(b), F.S.
25
   Section 121.091, F.S. See also, DMS, FRS Pension Plan Member Handbook, 28 (2023),
https://frs.fl.gov/forms/member_handbook.pdf (last visited Jan. 5, 2024).
26
   Section 121.021(29)(a)1., F.S.
27
   Section 121.021(29)(a)2., F.S.
28
   Section 121.021(29)(b), F.S.
29
   Currently, the interest that is applied accrues at an effective annual rate of 4 percent compounded monthly. Before July 1,
2011, the rate was 6.5 percent, and between July 1, 2011, through June 30, 2023, the rate was 1.3 percent.
S. 121.091(13)(c)1., F.S.
30
   Section 121.091(13), F.S.
31
   Section 121.091(13)(a)2., F.S.
32
   Section 121.091(13)(b), F.S.
BILL:   CS/SB 400                                                                                                   Page 5
         Renewed Membership
         Effective July 1, 2017,33 retirees of the investment plan, Senior Management Service Optional
         Annuity Program (SMSOAP), State University System Optional Retirement Program
         (SUSORP), or State University System Optional Retirement Program (SCCORP) may renew
         membership in the FRS.34 Such renewed member will participate in the appropriate membership
         class in the investment plan, unless employed in a position eligible for participation in the
         SUSORP or the SCCSORP, in which case the retiree will become a renewed member of the
         SUSORP or the SCCSORP, as applicable. A renewed member may not qualify for disability
         retirement benefits and must satisfy the vesting requirements of the specific plan. A renewed
         member in the FRS Investment Plan who is not receiving the maximum health insurance subsidy
         is entitled to earn additional credit towards the subsidy.35 Retired FRS Pension Plan members are
         not eligible for renewed membership in the FRS.36
         Optional Retirement Programs
         Eligible employees may choose to participate in one of three retirement programs instead of
         participating in the FRS:
          Members of the Senior Management Service Class may elect to enroll in the Senior
             Management Service Optional Annuity Program;37
          Members in specified positions in the State University System may elect to enroll in the
             (SUSORP);38 and
          Members in specified positions at a Florida College institution may elect to enroll in the
             SCCORP.39
33
   Different renewed membership provisions apply to FRS members who retired and were reemployed prior to July 1, 2010.
Prior to July 1, 2010, retirees of the pension plan or investment plan could renew membership in either plan or in another
state administered retirement system similar to newly hired members and earn service credit towards a subsequent retirement
benefit. From July 1, 2010, to July 1, 2017, FRS retirees were ineligible to be enrolled as a renewed member. S. 121.122(1)
and (2), F.S.
34
   Section 121.122(3), (4), and (5), F.S. Upon renewed membership, the employer and the renewed member are required to
pay applicable contributions.
35
   Id.
36
   Section 121.122(2), F.S.
37
   The Senior Management Service Optional Annuity Program (SMSOAP) was established in 1986 for members of the
Senior Management Service Class. Employees in eligible positions may irrevocably elect to participate in the SMSOAP
rather than the FRS. Effective July 1, 2017, the SMSOAP is closed to new members. Section 121.055(6), F.S. See also,
Florida DMS, Senior Management Service Optional Annuity Program,
https://www.dms.myflorida.com/workforce_operations/retirement/optional_retirement_programs/senior_management_servic
e_optional_annuity_program (last visited Jan. 5, 2024).
38
   Eligible participants of the State University System Optional Retirement Program (SUSORP) are automatically enrolled in
the SUSORP. However, the member must execute a contract with a SUSORP provider within the first 90 days of
employment or the employee will default into the pension plan. If the employee decides to remain in the SUSORP, the
decision is irrevocable and the member must remain in the SUSORP as long as the member remains in a SUSORP-eligible
position. Section 121.35(3)(c), F.S.
39
   If the member is eligible for participation in a State Community College System Optional Retirement Program, the member
must elect to participate in the program within 90 days of employment. Unlike the other optional programs, an employee who
elects to participate in this optional retirement program has one opportunity to transfer to the FRS. Section 1012.875, F.S.
BILL:   CS/SB 400                                                                                                 Page 6
         The SUSORP requires each employee to contribute 3 percent40 of his or her gross compensation
         to the plan, and the employer must contribute the difference between the current employee
         contribution (3 percent) and 8.15 percent of the employee’s gross monthly compensation
         (currently, the employer contribution is 5.15%).41 The state university employer is also required
         to contribute an amount equal to the UAL contribution to the FRS Trust Fund.42
         Contribution Rates
         Employers that participate in the FRS must contribute a specific percentage of the member’s
         monthly compensation to the Division of Retirement to be distributed into the FRS Contributions
         Clearing Trust Fund. The employer contribution rate is a blended contribution rate set by statute,