This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h0239.CRG
DATE: 3/7/2023
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 239 Special Risk Class Retirement Date
SPONSOR(S): Busatta Cabrera, Casello, and others
TIED BILLS: IDEN./SIM. BILLS: SB 224
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Constitutional Rights, Rule of Law &
Government Operations Subcommittee
Villa Miller
2) Appropriations Committee
3) State Affairs Committee
SUMMARY ANALYSIS
The Florida Retirement System (FRS) is a multi-employer, contributory plan that provides retirement income
benefits for employees of state and county government agencies, district school boards, state colleges, and
universities. It also serves as the retirement plan for participating employees of the cities and special districts
that have elected to join the system. Members of the FRS have two plan options available for participation: the
pension plan, which is a defined benefit plan, and the investment plan, which is a defined contribution plan.
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. For members initially enrolled on or after July 1, 2011,
the member vests in the pension plan after eight years of creditable service. A member vests immediately in all
employee contributions paid to the pension plan.
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. For members of
the pension plan in the Special Risk Class initially enrolled before July 1, 2011, normal retirement, which is
when a member is first eligible for unreduced benefits, occurs at the earliest of 25 years of service or age 55.
Special Risk Class members initially enrolled in the pension plan on or after July 1, 2011, must complete 30
years of service or attain age 60.
The Deferred Retirement Option Program (DROP) allows eligible members of the FRS to participate in the
program and defer receipt of retirement benefits while continuing employment with his or her FRS Employer.
Eligible members may elect to participate in DROP within 12 months of their normal retirement date.
The bill revises the FRS normal retirement date for Special Risk Class members initially enrolled on or after
July 1, 2011, to be consistent with the normal retirement date for Special Risk Class members initially enrolled
before July 1, 2011. Pursuant to the bill, normal retirement, which is when a member is first eligible for
unreduced benefits, for members of the Special Risk Class, will be the earliest of 25 years of creditable
service, instead of 30 years of creditable service, or age 55, instead of age 60, assuming the member has
vested. Accordingly, members of the Special Risk Class initially enrolled on or after July 1, 2011, will be eligible
to retire or enter DROP five years earlier.
The bill finds that the act fulfills an important state interest. It provides that a proper and legitimate state
purpose is served by the bill, which includes providing benefits that are managed, administered, and funded in
an actuarially sound manner.
The bill may have a significant fiscal impact on state and local governments. See Fiscal Comments. STORAGE NAME: h0239.CRG PAGE: 2
DATE: 3/7/2023
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Present Situation
Florida Retirement System
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 closed group. The FRS was amended in
1998 to add the Deferred Retirement Option Program (DROP) under the defined benefit plan and
amended in 2000 to provide a defined contribution plan alternative to the defined benefit plan for FRS
members effective July 1, 2002.
1
The FRS is a multi-employer, contributory plan
2
governed by the Florida Retirement System Act.
3
As of
June 30, 2022, the FRS had 629,073 active members,
4
448,846 retired members and beneficiaries,
and 28,827 members in DROP.
5
It is the primary retirement plan for employees of state and county
government agencies, district school boards, state colleges, and state universities. The FRS also
serves as the retirement plan for participating employees of the 180 municipalities, 153 special districts,
and two independent hospitals that have elected to join the system.
6
The membership of the FRS is divided into five membership classes:
The Regular Class
7
has 537,128 active members and 7,806 in renewed membership.
The Special Risk Class
8
has 72,925 active members and 1,100 in renewed membership.
The Special Risk Administrative Support Class
9
has 104 active members and one in renewed
membership.
The Elected Officers’ Class
10
has 2,075 active members and 109 in renewed membership.
The Senior Management Service Class
11
has 7,610 active members and 210 in renewed
membership.
12
Plan Choice
1
Florida Retirement System Pension Plan and Other State Administered Retirement Systems Comprehensive Annual Financial Report
Fiscal Year Ended June 30, 2022, at 35, available at: https://employer.frs.fl.gov/forms/2021-22_ACFR.pdf (last visited February 20,
2023).
2
Prior to 1975, members of the FRS were required to make employee contributions of either four percent gross compensation for
Regular Class members or six percent for Special Risk Class members. Members were again required to contribute to the system after
June 30, 2011, at three percent.
3
Ch. 121, F.S.
4
As of June 30, 2022, the FRS Pension Plan had 444,150 members and the investment plan had 184,923 members. FRS
Comprehensive Annual Report, supra note 1 at 260.
5
FRS Comprehensive Annual Report, supra note 1 at 42.
6
Id. at 298.
7
The Regular Class is for all members who are not assigned to another class. S. 121.021(12), F.S.
8
The Special Risk Class is for members employed as law enforcement officers, firefighters, correctional officers, probation officers,
paramedics and emergency technicians, among others. S. 121.0515, F.S.
9
The Special Risk Administrative Support Class if 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 FRS. S. 121.0515(8), F.S.
10
The Elected Officers’ Class is for elected state and county officers, and for those elected municipal or special district officers whose
governing body has chosen Elected Officers’ Class participation for its elected officers. S. 121.052, F.S.
11
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. S. 121.055, F.S.
12
FRS Comprehensive Annual Report, supra note 1 at 263. STORAGE NAME: h0239.CRG PAGE: 3
DATE: 3/7/2023
Members of the FRS have two primary plan options available for participation:
The defined contribution plan, also known as the FRS Investment Plan; and
The defined benefit plan, also known as the FRS Pension Plan.
When an employee is initially hired in an FRS-covered position, the member has eight months after the
month of hire to choose to participate in either the pension plan or the investment plan. If the employee
does not choose within that period, a member in the Special Risk Class is deemed to have chosen to
participate in the pension plan and all other members are deemed to have chosen to participate in the
investment plan. After a member has made an active election to participate in a plan or the member’s
choice window has expired, the member has one additional opportunity to choose to switch between
plans; this is referred to as the second election.
13
Investment Plan
In 2000, the Legislature created the Public Employee Optional Retirement Program (investment plan),
a defined contribution plan offered to eligible employees as an alternative to the pension plan. The
earliest that any member could participate in the investment plan was July 1, 2002. The State Board of
Administration (SBA) is primarily responsible for administering the investment plan.
14
The SBA is
comprised of the Governor as chair, the Chief Financial Officer, and the Attorney General.
15
Benefits under the investment plan accrue in individual member accounts funded by both employee
and employer contributions and investment earnings. Benefits are provided through employee-directed
investments offered by approved investment providers. The amount of money contributed to each
member’s account varies by class as follows:
16
Membership Class Percentage of Gross
Compensation
1
Regular Class 9.30%
Special Risk Class 17.00%
Special Risk Administrative Support Class 10.95%
Elected Officers’ Class
Justices and Judges
County Elected Officers
Others
16.23%
14.34%
12.38%
Senior Management Service Class 10.67%
1
Includes the three percent employee contribution.
A member vests immediately in all employee contributions paid to the investment plan.
17
With respect
to the employer contributions, a member vests after completing one work year with an FRS employer.
18
Vested benefits are payable as a lump-sum distribution, direct rollover distribution, or periodic
distribution.
19
Benefit payments may not be made, however, until the member has been terminated for
at least three calendar months, except a distribution of up to 10 percent of the member’s account may
be authorized after one month if the member has reached his or her normal retirement date discussed
below under the pension plan.
20
Pension Plan
13
S. 121.4501(4)(b), F.S.
14
S. 121.4501(8), F.S.
15
Art. IV, s. 4(e), FLA. CONST.
16
S. 121.72(6), F.S.
17
S. 121.4501(6)(a), F.S.
18
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. S. 121.4501(6)(b) – (d), F.S.
19
S. 121.591, F.S.
20
S. 121.591(1)(a), F.S., and r. 19.11.003, F.A.C. STORAGE NAME: h0239.CRG PAGE: 4
DATE: 3/7/2023
The pension plan is a defined benefit plan administered by the secretary of the Department of
Management Services (DMS) through the Division of Retirement (division).
21
Investment management
is handled by the SBA.
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.
22
For members initially enrolled on or after July
1, 2011, the member vests in the pension plan after eight years of creditable service.
23
A member vests
immediately in all employee contributions paid to the pension plan.
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.
24
For members of the pension plan initially enrolled before July 1, 2011, normal retirement, which is when
a member is first eligible for unreduced benefits, occurs at the earliest attainment of 30 years of service
or age 62.
25
For members in the Special Risk and Special Risk Administrative Support Classes
26
enrolled before July 1, 2011, normal retirement is the earliest of 25 years of service or age 55.
27
Members initially enrolled in the pension plan on or after July 1, 2011, must complete 33 years of
service or attain age 65, and members in the Special Risk and Special Risk Administrative Support
Classes must complete 30 years of service or attain age 60.
28
Deferred Retirement Option Program
All membership classes in the FRS Pension Plan may participate in DROP.
29
The program allows an
eligible member
30
of the FRS to defer receipt of retirement benefits while continuing employment with
the FRS employer. The deferred monthly benefits accrue, plus interest, in the FRS on behalf of the
member for the period of time the member participates in DROP. Upon termination of the employment,
the member receives the total DROP benefits and begins to receive the previously determined normal
retirement benefits.
31
In order to participate in DROP, a member must elect to do so within 12 months of reaching his or her
normal retirement date discussed above.
32
However, for members initially enrolled in the FRS before
July 1, 2011, and who reach normal retirement date based on service before he or she reaches age 62,
or age 55 for Special Risk Class members, election to participate may be deferred to the 12 months
immediately following the date the member attains age 57, or age 52 for Special Risk Class members.
Members initially enrolled on or after July 1, 2011, and who reach normal retirement date based on
service before he or she reaches age 65, or 60 for Special Risk Class members, election to participate
may be deferred to the 12 months immediately following the date the member attains age 60, or 55 for
Special Risk Class members.
33
Effect of the Bill
21
S. 121.025, F.S.
22
S. 121.021(45)(a), F.S.
23
S. 121.021(45)(b), F.S.
24
S. 121.091(1), F.S.
25
S. 121.021(29)(a)1., F.S.
26
Service in the administrative support position applies towards satisfaction of the special risk normal retirement date if, while in such
position, the member remains certified as a law enforcement officer, firefighter, correctional officer, emergency medical technician, or
paramedic; remains subject to reassignment at any time to a position qualifying for special risk membership; and completes an
aggregate of the years of service as a designated special risk member before retirement which is equal to or greater than the years of
service required to be vested. S. 121.0515(8)(a), F.S.
27
S. 121.021(29)(b)1., F.S.
28
S. 121.021(29)(a)2. and (b)2., F.S.
29
A member in the FRS Investment Plan may not participate in DROP. Investment Plan members are considered retired from the FRS
when the member takes a distribution from his or her account.
30
See s. 121.091(13)(a), F.S.
31
S. 121.091(13), F.S.
32
Effective July 1, 2001, K-12 instructional personnel may elect to participate in DROP any time after reaching normal retirement date.
S. 121.091(13)(a)6., F.S.
33
S. 121.091(13)(a)2., F.S. STORAGE NAME: h0239.CRG PAGE: 5
DATE: 3/7/2023
The bill revises the FRS normal retirement date for Special Risk Class members initially enrolled on or
after July 1, 2011, to be consistent with the normal retirement date for Special Risk Class members
initially enrolled before July 1, 2011. Pursuant to the bill, normal retirement, which is when a member is
first eligible for unreduced benefits, for members of the Special Risk Class, will be the earliest of 25
years of creditable service, instead of 30 years of creditable service, or age 55, instead of age 60
assuming vesting requirements have been met. Accordingly, members of the Special Risk Class
initially enrolled on or after July 1, 2011, will be eligible to retire or enter DROP five years earlier.
The bill amends other provisions of the FRS to conform to changes made by the act.
Finally, the bill finds that the act fulfills an important state interest. It provides that a proper and
legitimate state purpose is served by the bill, which includes providing benefits that are managed,
administered, and funded in an actuarially sound manner.
B. SECTION DIRECTORY:
Section 1 amends s. 121.021, F.S., relating to definitions.
Section 2 amends s. 121.091, F.S., relating to benefits payable under the system.
Section 3 amends s. 121.4501, F.S., relating to the Florida Retirement System Investment Plan.
Section 4 creates an unnumbered section of law providing that the Legislature finds that the act fulfills
an important state interest.
Section 5 provides an effective date of July 1, 2023.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
See Fiscal Comments.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
See Fiscal Comments.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
None.
D. FISCAL COMMENTS:
The bill revises the FRS normal retirement date for Special Risk Class members initially enrolled on or
after July 1, 2011, to be consistent with the normal retirement date for Special Risk Class members
initially enrolled before July 1, 2011. Accordingly, Special Risk Class members initially enrolled on or
after July 1, 2011, will be eligible to retire or enter DROP five years earlier.
STORAGE NAME: h0239.CRG PAGE: 6
DATE: 3/7/2023
To fund the changes to the FRS made by the bill, according to an actuarial study,
34
the total combined
employer contributions estimated to be paid into the FRS Trust Fund in Fiscal Year 2023-2024 will
need to increase by approximately $77.5 million above contributions paid in Fiscal Year 2022-2023.
The estimated increase in contributions by employer contribution group for Fiscal Year 2023-2024 are
as follows:
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
The county/municipality mandates provision of Art. VII, section 18, of the Florida Constitution may
apply because this bill will require increased pension contributions from county and municipal
participants in the FRS. However, an exception may apply because the bill finds that the act fulfills
an important state interest and all similarly situated entities are required to comply with the act.
2. Other:
Actuarial requirements: Article X, s. 14 of the State Constitution requires that benefit improvements
under public pension plans in the State of Florida be concurrently funded on a sound actuarial basis,
as set forth below:
SECTION 14. State retirement systems benefit changes.--A governmental unit responsible for
any retirement or pension system supported in whole or in part by public funds shall not after
January 1, 1977, provide any increase in the benefits to the members or beneficiaries of such
system unless such unit has made or concurrently makes provision for the funding of the
increase in benefits on a sound actuarial basis.
Article X, s. 14 of the State Constitution is implemented by statute under part VII of ch. 112, F.S.,
the “Florida Protection of Public Employee Retirement Benefits Act” (Act). The Act establishes
minimum standards for the operation and funding of public employee retirement systems and plans
in the State of Florida. It prohibits the use of any procedure, methodology, or assumptions the effect
of which is to transfer to future taxpayers any portion of the costs which may reasonably have been
expected to be paid by the current taxpayers.
B. RULE-MAKING AUTHORITY:
The bill neither provides authority for nor requires rulemaking by executive branch agencies.
C. DRAFTING ISSUES OR OTHER COMMENTS:
As currently drafted, the bill may make some Special Risk Class members ineligible to apply for DROP.
For example, under current law, a member who is age 58 with 15 years of service is not yet eligible for
unreduced benefits, and as such the DROP eligibility window has not yet started. However, under the
34
An actuarial study was performed by the Milliman actuarial and consulting firm through the DMS. Restore Normal Retirement and
DROP Entry Eligibility Criteria to Pre-2011 Requirements for Tier II Special Risk Class members, requested by the Speaker of the
House of Representatives.
Employer Contribution Group Estimated Increase In Contributions
State Agencies $13.8 million
School Boards $2.9 million
State Universities $583,000
Colleges $162,000
Counties $55.1 million
Other $4.8 million
Total: $77.5 million STORAGE NAME: h0239.CRG PAGE: 7
DATE: 3/7/2023
bill, the member’s DROP eligibility window would be 12 months after the member reaches age 55 with
eight years of service, and as such, may have already closed.
Technical comment: At line 169 of the bill, there is an extra comma before the period.
IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES