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 Governmental Oversight and Accountability
BILL: SPB 7046
INTRODUCER: For consideration by the Governmental Oversight and Accountability Committee
SUBJECT: Public Employment
DATE: February 9, 2022
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. McVaney McVaney Pre-meeting
I. Summary:
SPB 7046 establishes the contribution rates paid by employers participating in the Florida
Retirement System (FRS) beginning July 1, 2022. These rates are intended to fund the full
normal cost and the amortization of the unfunded actuarial liability of the FRS. With these
modifications to employer contribution rates, the FRS Trust Fund will receive roughly $438
million more in revenue on an annual basis beginning July 1, 2022. The public employers that
will incur these additional costs are state agencies, state universities and colleges, school
districts, counties, municipalities, and other governmental entities that participate in the FRS.
The bill increases the amount of employer-paid contributions allocated to each active member’s
investment plan account by three percent of the member’s compensation. The bill also extends
the period that law enforcement officers may participate in the Deferred Option Retirement
Program from 60 months to 96 months. To be eligible for this extended participation period, the
law enforcement officer must be participating in DROP before July 1, 2028.
The bill will have a fiscal impact on state funds appropriated by the Legislature for employee
benefits. The bill will increase the amounts, in the aggregate, employers participating in the FRS
and the retiree health insurance subsidy program must pay for retiree benefits. See Section V.
The bill takes effect July 1, 2022.
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
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
REVISED: BILL: SPB 7046 Page 2
closed group.
1
The FRS is a contributory system, with active members contributing three percent
of their salaries.
2
The FRS is a multi-employer, contributory plan, governed by the Florida Retirement System Act
in ch. 121, F.S. As of June 30, 2021, the FRS had 635,266 active members, 440,307 annuitants,
15,138 disabled retirees, and 31,655 active participants of the Deferred Retirement Option
Program (DROP).
3
As of June 30, 2021, the FRS consisted of 985 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 179 cities and 151
special districts that have elected to join the system.
4
The membership of the FRS is divided into five membership classes:
The Regular Class
5
consists of 541,698 active members and 7,645 in renewed membership;
The Special Risk Class
6
includes 74,355 active members and 1,163 in renewed membership;
The Special Risk Administrative Support Class
7
has 98 active members and 1 in renewed
membership;
The Elected Officers’ Class
8
has 2,095 active members and 110 in renewed membership; and
The Senior Management Service Class
9
has 7,875 active members and 220 in renewed
membership.
10
Each class is funded separately based upon the costs attributable to the members of that class.
Members of the FRS have two primary plan options available for participation:
The defined contribution plan, also known as the Investment Plan; and
The defined benefit plan, also known as the Pension Plan.
1
Florida Retirement System Pension Plan and Other State Administered Retirement Systems FY 2020-21 Annual
Comprehensive Financial Report, at p. 35. Available online at: https://employer.frs.fl.gov/forms/2020-21_ACFR.pdf. (last
visited February 8, 2022).
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. Members in the Deferred Retirement Option Program do not contribute to the system.
3
Florida Retirement System Pension Plan and Other State Administered Retirement Systems FY 2020-21 Annual
Comprehensive Financial Report, at p. 164.
4
Id. at p. 200.
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.
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 2020-
21 Annual Comprehensive Financial Report, at p. 167. BILL: SPB 7046 Page 3
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. The State Board of Administration (SBA) is responsible for administering the investment
plan.
11
The Board of Trustees of the SBA is comprised of the Governor as chair, the Chief
Financial Officer, and the Attorney General.
12
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.
A member vests immediately in all employee contributions paid to the investment plan.
13
With
respect to the employer contributions, a member vests after completing one work year of
employment with an FRS employer.
14
Vested benefits are payable upon termination or death as a
lump-sum distribution, direct rollover distribution, or periodic distribution.
15
The investment
plan also provides disability coverage for both in-line-of-duty and regular disability retirement
benefits.
16
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.
17
The table below shows the percentage of compensation deposited into individual investment
accounts by membership class for members in the investment plan.
18
Membership Class Percentage of
Compensation*
Regular Class 6.3%
Special Risk Class 14.0%
Special Risk Admin. Support Class 7.95%
Elected Officers’ Class
State
Justice and Judges
Local
9.38%
13.23%
11.34%
Senior Management Service Class 7.67%
*Includes the three percent employee contribution
11
Section 121.4501(8), F.S.
12
FLA CONST. art. IV, s. 4.
13
Section 121.4501(6)(a), F.S.
14
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.
15
Section 121.591, F.S.
16
See s. 121.4501(16), F.S.
17
Pension plan disability retirement benefits, which apply for investment plan members who qualify for disability,
compensate an in-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.
18
Section 121.72(5), F.S. BILL: SPB 7046 Page 4
Pension Plan
The pension plan is administered by the Secretary of Management Services (DMS) through the
Division of Retirement.
19
The SBA is responsible for the management of the pension fund assets.
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.
20
For members initially enrolled on
or after July 1, 2011, the member vests in the pension plan after eight years of creditable
service.
21
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.
22
For most current members of the pension plan, normal retirement (when first
eligible for unreduced benefits) occurs at the earliest attainment of 30 years of service or age
62.
23
For public safety employees in the Special Risk and Special Risk Administrative Support
Classes, normal retirement is the earliest of 25 years of service or age 55.
24
Members initially
enrolled in the pension plan on or after July 1, 2011, have longer service requirements. For
members initially enrolled after that date, the member must complete 33 years of service or attain
age 65, and members in the Special Risk classes must complete 30 years of service or attain age
60.
25
Deferred Retirement Option Program
The Deferred Retirement Option Program (DROP)
26
allows an eligible member of the FRS
pension plan to continue employment with an FRS-participating employer and defer receipt of
retirement benefits. The deferred monthly benefits accrue, plus 1.3% annual interest, in the FRS
on behalf of the member while the member participates in the DROP. Upon termination of
employment, the member receives the accumulated DROP benefits and begins to receive the
previously determined normal retirement benefit amounts.
27
Eligible members may elect to participate in DROP for a period not to exceed a maximum of 60
consecutive calendar months.
28
However, instructional personnel employed by the Florida
School for the Deaf and the Blind, instructional personnel in grades K-12, and personnel
employed by a developmental research school may participate in DROP for up to 36 calendar
months beyond the 60-month period.
29
19
Section 121.025, F.S.
20
Section 121.021(45)(a), F.S.
21
Section 121.021(45)(b), F.S.
22
Section 121.091, F.S.
23
Section 121.021(29)(a)1., F.S.
24
Section 121.021(29)(b)1., F.S.
25
Sections 121.021(29)(a)2. and (b)2., F.S.
26
Section 121.091(13), F.S.
27
Section 121.091(13)(a), F.S.
28
Section 121.091(13)(b), F.S.
29
Section 121.091(13)(b)1.a., F.S. BILL: SPB 7046 Page 5
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;
30
Members in specified positions in the State University System may elect to enroll in the State
University System Optional Retirement Program;
31
and
Members in specified positions at a Florida College institution may elect to enroll in the State
Community College System Optional Retirement Program.
32
Contribution Rates
Employers participating in the FRS are required to contribute a specified 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, which is the same percentage regardless of whether the member participates in the
pension plan or the investment plan.
33
The rate is determined annually based on an actuarial
study by the DMS that calculates the necessary level of funding to support all of the benefit
obligations under both FRS retirement plans.
In the annual actuarial valuation of the Florida Retirement System based on July 1, 2021, plan
assets and liabilities, Milliman, Inc., the state actuary, determined the following key data relating
to the FRS pension plan:
34
Valuation Results (in $ billions)
July 1, 2018 July 1, 2019 July 1, 2020 July 1, 2021
Actuarial Liability $186.0 $191.3 $200.3 $209.6
Actuarial Value of Assets $156.1 $161.0 $164.3 $174.9
Unfunded Actuarial Liability $29.9 $30.3 $36.0 $34.7
Funded Percentage
(Actuarial Value of
Assets/Actuarial Liability)
83.9% 84.2% 82.0% 83.4%
The state actuary determines a rate associated with the normal cost of the pension plan (funding
the prospective benefits) and a rate necessary to amortize prior unfunded actuarial liabilities
30
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.
31
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, F.S.
32
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.
33
Section 121.70(1), F.S.
34
Florida Retirement System Pension Plan Actuarial Valuation as of July 1, 2021, at p. 3. BILL: SPB 7046 Page 6
(UAL) over a thirty-year period and new tranches of unfunded actuarial liabilities over a twenty-
year period. The following are the current employer contribution rates
35
for each class and the
blended rates recommended by the state actuary beginning in July 2022:
36
Membership Class
Current Rates
Effective July 1, 2021
Recommended Rates
to be effective
July 1, 2022
Normal
Cost
UAL
Rate
Normal
Cost
UAL
Rate
Regular Class 4.91% 4.19% 5.16% 4.23%
Special Risk Class 15.27% 8.90% 15.91% 9.53%
Special Risk Administrative Support
Class
9.73% 26.31% 9.91% 26.16%
Elected Officer’s Class
Legislators, Governor, Lt.
Governor, Cabinet Officers,
State Attorneys, Public
Defenders
Justices and Judges
County Officers
8.49%
13.38%
10.28%
53.52%
25.81%
39.42%
8.34%
13.90%
10.31%
56.76%
27.64%
43.98%
Senior Management Service Class 6.49% 20.80% 6.83% 22.15%
Deferred Retirement Option Program 7.23% 9.45% 7.77% 9.15%
For all membership classes, except the DROP and certain members with renewed membership,
employees contribute three percent of their compensation towards retirement.
37
After employer and employee contributions are placed into the FRS Contributions Clearing Trust
Fund, the allocations under the investment plan are transferred to third-party administrators to be
placed in the employee’s individual investment accounts, whereas contributions under the
pension plan are transferred into the FRS Trust Fund.
38
Actuarial Special Studies
The state actuary has completed an actuarial study to determine the uniform blended employer
rates for each membership class and subclass of the FRS necessary to fund the current normal
cost and the amortization of the unfunded actuarial liabilities of the FRS and reflecting an
increase of investment plan benefits by three percent of payroll. The table below shows the
incremental increases by membership class and subclass associated with the investment plan
35
Section 121.71(4) and (5), F.S.
36
Letter to Ms. Andrea Simpson, Re: Blended Proposed Statutory Rates for the 2022-2023 Plan Year Reflecting a Uniform
UAL Rate for All Membership Classes and DROP, dated December 1, 2021 (on file with the Senate Committee on
Governmental Oversight and Accountability).
37
Section 121.71(3), F.S.
38
See ss. 121.4503 and 121.72(1), F.S. BILL: SPB 7046 Page 7
benefit increases over the blended rates recommended by the state actuary based on the 2021
Actuarial Valuation.
39
Membership Class Increase in Blended Normal
Cost Contribution Rate
Regular Class 0.80 %
Special Risk Class 0.44%
Special Risk Admin.
Support Class
0.86%
Elected Officers’ Class
State
Justice and Judges
Local
0.97%
0.51%
0.99%
Senior Management Service
Class
0.87%
The state actuary also has completed a special actuarial study on the recommended blended
statutory rates for 2022-2023 reflecting the extension of the maximum length of DROP
participation for law enforcement members by up to 36 months.
40
The study shows increases for
the Special Risk Class by 0.09 percentage points in the normal cost contribution rate and 0.14
percentage points for the UAL contribution rate. An increase of 0.02 percentage points in the
DROP rate is also necessary.
III. Effect of Proposed Changes:
Section 1 amends s. 121.091, F.S., to extend the maximum period of DROP participation for law
enforcement members by 36 months. To be eligible for the extended period, the member must
enter DROP by June 30, 2028.
Section 2 amends s. 121.71, F.S., to set the employer-paid contribution rates to the Florida
Retirement System Trust Fund for each membership class and subclass of the FRS. The bill also
updates the employer-paid contribution rates for each membership class to address the unfunded
actuarial liabilities of the FRS.
Section 3 amends s. 121.72, F.S., to increase the amounts allocated to individual investment
accounts by three percent of the member’s compensation.
Section 4 provides findings that the bill fulfills an important state interest.
Section 5 provides an effective date of July 1, 2022
39
Letter to Ms. Andrea Simpson, Re: Projected Blended 2022-2023 Statutory Rates Reflecting 3.00% of Pay Increase in FRS
Investment Plan Employer Contribution Rate, dated December 5, 2021 (on file with the Senate Committee on Governmental
Oversight and Accountability).
40
Letter to Ms. Andrea Simpson, Re: Extend Maximum DROP Participation by 36 Months for Law Enforcement Officer
Members, dated January 26, 2022 (on file with the Senate Committee on Governmental Oversight and Accountability). BILL: SPB 7046 Page 8
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
Article VII, s. 18(a) of the State Constitution provides that: “No county or municipality
shall be bound by any general law requiring such county or municipality to spend
funds...unless the legislature has determined that such law fulfills an important state
interest and unless: ...the expenditure is required to comply with a law that applies to all
persons similarly situated….”
This bill includes legislative findings that the bill fulfills important state interests, and the
bill applies to all persons similarly situated (those employers participating in the Florida
Retirement System), including state agencies, school boards, state universities,
community colleges, counties, municipalities, and special districts.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
This bill does not impose, authorize to impose, or raise a state tax or fee. Thus, the
requirements of Art. III, s. 19 of the State Constitution are not applicable.
E. Other Constitutional Issues:
None identified.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
None.
B. Private Sector Impact:
None.
C. Government Sector Impact:
The aggregate employer contributions anticipated to be paid into the Florida Retirement
System Trust Fund in Fiscal Year 2022-2023 will increase by approximately $438
million when compared to the employer contributions paid in Fiscal Year 2021-2022.
The impacts by employer group for Fiscal Year 2022-2023 are noted below.
BILL: SPB 7046 Page 9
Employer Group Additional
Contributions
State Agencies $65.9 m
Universities $31.3 m
Colleges $12.6 m
School Boards $156.3 m
Counties $145.0 m
Other $26.6 m
Total $437.6 m
VI. Technical Deficiencies:
None.
VII. Related Issues:
None.
VIII. Statutes Affected:
This bill substantially amends sections 121.091, 121.071, and 121.072 of the Florida Statutes.
IX. Additional Information:
A. Committee Substitute – Statement of Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
None.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.