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 Appropriations
BILL: CS/SB 7024
INTRODUCER: Appropriations Committee; and Governmental Oversight and Accountability Committee
SUBJECT: Retirement
DATE: March 30, 2023
ANALYST STAFF DIRECTOR REFERENCE ACTION
Harmsen McVaney GO Submitted as Comm. Bill/Fav
1. Shettle Sadberry AP Fav/CS
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/SB 7024 establishes the contribution rates paid by employers that participate in the Florida
Retirement System (FRS) beginning July 1, 2023. 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
$350.5 million more in revenue on an annual basis beginning July 1, 2023. 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 also increases the monthly Retiree Health Insurance Subsidy from $5 to $7.50 for each
year of service, effective July 1, 2023. The maximum benefit is adjusted from $150 to $225 per
month and the minimum benefit is adjusted from $30 to $45 per month. The employer-paid
contribution rate is increased to account for the increased benefit.
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, that employers participating in the
FRS must pay for retiree benefits. See Section V.
The bill takes effect July 1, 2023.
REVISED: BILL: CS/SB 7024 Page 2
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
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, 2022, the FRS had 629,073 active non-retired members, 448,846 annuitants,
14,858 disabled retirees, and 28,827 active participants of the Deferred Retirement Option
Program (DROP).
3
As of September 2022, the FRS consisted of 990 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 Class
5
consists of 537,128 active members and 7,806 in renewed membership;
The Special Risk Class
6
includes 72,925 active members and 1,100 in renewed membership;
The Special Risk Administrative Support Class
7
has 104 active members and one in renewed
membership;
The Elected Officers’ Class
8
has 2,075 active members and 109 in renewed membership; and
1
Florida Department of Management Services (DMS), Division of Retirement, Florida Retirement System Pension Plan and
Other State Administered Retirement Systems FY 2021-22 Annual Comprehensive Financial Report, 35, available at
https://employer.frs.fl.gov/forms/2020-21_ACFR.pdf. (last visited Mar. 7, 2023).
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 2021-22 Annual Comprehensive Financial Report, at 260, available at https://employer.frs.fl.gov/forms/2020-
21_ACFR.pdf. (last visited Mar. 7, 2023).
4
DMS, Division of Retirement, Participating Employers for Fiscal Year 2022-2023 (Sept. 2022), available at
https://employer.frs.fl.gov/forms/part-emp.pdf (last visited Mar. 7, 2023).
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. BILL: CS/SB 7024 Page 3
The Senior Management Service Class
9
has 7,610 active members and 210 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:
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
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.
13
A member vests immediately in all employee contributions paid to the investment plan.
14
With
respect to the employer contributions, a member vests after completing one work year of
employment with an FRS employer.
15
Vested benefits are payable upon termination or death as a
lump-sum distribution, direct rollover distribution, or periodic distribution.
16
The investment
plan also provides disability coverage for both in-line-of-duty and regular disability retirement
benefits.
17
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.
18
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 2021-
22 Annual Comprehensive Financial Report, at 263.
11
Florida State Board of Administration (SBA), Plan Comparison Chart (Jul. 2020), available at
https://www.myfrs.com/pdf/forms/plancomparison.pdf (last visited Mar. 7, 2023).
12
See, ch. 2000-169, Laws of Fla.
13
Section 121.4501(1), F.S.
14
Section 121.4501(6)(a), F.S.
15
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.
16
Section 121.591, F.S.
17
See s. 121.4501(16), F.S.
18
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 7024 Page 4
The State Board of Administration (SBA) is primarily responsible for administering the
investment plan.
19
The Board of Trustees of the SBA is comprised of the Governor as chair, the
Chief Financial Officer, and the Attorney General.
20
Pension Plan
The pension plan is administered by the Secretary 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 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.
26
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.
27
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.
28
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;
29
19
Section 121.4501(8), F.S.
20
FLA. CONST. art. IV, s. 4.
21
Section 121.025, F.S.
22
Florida SBA, Summary Overview of the State Board of Administration of Florida, 4, available at
https://www.sbafla.com/fsb/Portals/FSB/Content/Topics/SBAOverview_20211025.pdf?ver=2021-10-28-120954-217 (last
visited Mar. 7, 2023).
23
Section 121.021(45)(a), F.S.
24
Section 121.021(45)(b), F.S.
25
Section 121.091, F.S. See also, Florida Retirement System Pension Plan and Other State Administered Retirement Systems
FY 2021-22 Annual Comprehensive Financial Report, 35-37, supra at 1.
26
Section 121.021(29)(a)1., F.S.
27
Section 121.021(29)(b)1., F.S.
28
Sections 121.021(29)(a)2. and (b)2., F.S.
29
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 Mar. 7, 2023). BILL: CS/SB 7024 Page 5
Members in specified positions in the State University System may elect to enroll in the State
University System Optional Retirement Program;
30
and
Members in specified positions at a Florida College institution may elect to enroll in the State
Community College System Optional Retirement Program.
31
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,
which is the same percentage regardless of whether the member participates in the pension plan
or the investment plan.
32
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, 2022, plan
assets and liabilities, Milliman, Inc., the state actuary, determined the following key data relating
to the FRS pension plan:
33
Valuation Results (in $ billions)
July 1, 2019 July 1, 2020 July 1, 2021 July 1, 2022
Actuarial Liability $191.3 $200.3 $209.6 $217.4
Actuarial Value of Assets $161.0 $164.3 $174.9 $179.2
Unfunded Actuarial Liability $30.3 $36.0 $34.7 $38.3
Funded Percentage
(Actuarial Value of
Assets/Actuarial Liability)
84.2% 82.0% 83.4% 82.4%
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
(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
34
for each class and the
blended rates recommended by the state actuary beginning in July 2022:
35
30
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.
31
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.
32
Section 121.70(1), F.S.
33
Florida Retirement System Pension Plan and Other State Administered Retirement Systems FY 2021-22 Annual
Comprehensive Financial Report, 150 supra at 1.
34
Section 121.71(4) and (5), F.S.
35
Letter to Andrea Simpson, Florida DMS Division of Retirement Director, from Milliman Actuarial Services, entitled
“Blended Proposed Statutory Rates for the 2023-2024 Plan Year Reflecting a Uniform UAL Rate for All Membership Classes
and DROP: Table 1” Dec. 2, 2022 (on file with the Senate Committee on Governmental Oversight and Accountability). BILL: CS/SB 7024 Page 6
Membership Class
Current Rates
Effective July 1, 2022
Recommended Rates
to be effective
July 1, 2023
Normal
Cost
UAL
Rate
Normal
Cost
UAL
Rate
Regular Class 5.96% 4.23% 6.14% 4.72%
Special Risk Class 16.44% 9.67% 17.05% 10.83%
Special Risk Administrative Support
Class
10.77% 26.16% 10.75% 25.02%
Elected Officer’s Class
Legislators, Governor, Lt.
Governor, Cabinet Officers,
State Attorneys, Public
Defenders
Justices and Judges
County Officers
9.31%
14.41%
11.30%
56.76%
27.64%
43.98%
9.69%
14.64%
11.74%
49.85%
27.63%
44.04%
Senior Management Service Class 7.70% 22.15% 7.90% 23.61%
Deferred Retirement Option Program 7.79% 9.15% 8.18% 10.01%
For all membership classes, except the DROP and certain members with renewed membership,
employees contribute three percent of their compensation towards retirement.
36
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.
37
Retiree Health Insurance Subsidy
Section 112.363, F.S., provides for a retiree health insurance subsidy. This subsidy is paid from
the Retiree Health Insurance Subsidy Trust Fund to eligible retirees of the FRS. The amount of
the monthly subsidy is $5 for each year of service in the FRS, but not less than $30 nor more
than $150.
The subsidy is funded through a contribution by employers participating in the FRS. The current
contribution is 1.66 percent of the employer’s monthly payroll. The contribution is paid to the
DMS for deposit in the Retiree Health Insurance Subsidy Trust Fund. This program is funded on
a “pay-as-you-go” basis rather than on an actuarial basis. This means that the revenues and
expenditures of the trust fund are designed to match each other on an annual basis, with minimal
reserves accumulated.
Participants of the university, community college, and senior management service defined
contribution retirement programs receive contributions directly into their retirement accounts
during the years of employment; these participants will not receive the health insurance subsidy
36
Section 121.71(3), F.S.
37
See ss. 121.4503 and 121.72(1), F.S. BILL: CS/SB 7024 Page 7
during retirement. Participants of the FRS investment plan will not receive the health insurance
subsidy contributions directly, but will be eligible to receive the health insurance subsidy upon
retirement.
Sections 121.052, 121.055, and 121.071, F.S., also set forth the employer-paid contributions for
the retiree health insurance trust fund for the various FRS membership classes.
III. Effect of Proposed Changes:
Section 1 amends s. 112.363, F.S., to increase the monthly Retiree Health Insurance Subsidy
from $5 to $7.50 for each year of service. The maximum benefit is adjusted from $150 to $225
per month and the minimum benefit is adjusted from $30 to $45 per month. To account for the
increased benefit, the employer-paid contribution to the Retiree Health Insurance Trust Fund is
increased from 1.66 percent of gross compensation to 2.0 percent of gross compensation for each
member of the FRS.
Section 2 amends s. 121.052, F.S., to increase the employer-paid contribution to the Retiree
Health Insurance Trust Fund from 1.66 percent of gross compensation to 2.0 percent of gross
compensation for each member of the Elected Officers’ Class of the FRS.
Section 3 amends s. 121.055, F.S., to increase the employer-paid contribution to the Retiree
Health Insurance Trust Fund from 1.66 percent of gross compensation to 2.0 percent of gross
compensation for each member of the Senior Management Service Class of the FRS.
Section 4 amends s. 121.071, F.S., to increase the employer-paid contribution to the Retiree
Health Insurance Trust Fund from 1.66 percent of gross compensation to 2.0 percent of gross
compensation for each member of the Regular, Special Risk, and Special Risk Administrative
Support classes of the FRS.
Section 5 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 6 provides findings that the bill fulfills an important state interest.
Section 7 provides an effective date of July 1, 2023.
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….” BILL: CS/SB 7024 Page 8
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 FRS Trust Fund in
Fiscal Year 2023-2024 will increase by approximately $350.5 million when compared to
employer contributions paid in Fiscal Year 2022-2023.
38
The impacts by employer group
for Fiscal Year 2023-2024 are noted below.
39
38
Milliman Actuarial Services, Florida Retirement System Estimated 2023-2024 Employer Contribution Increases Due to
Input Rate Changes (on file with the Senate Committee on Governmental Oversight and Accountability).
39
Milliman Actuarial Services, Florida Retirement System Estimated 2023-2024 Employer Contribution Increases Due to
Rate Changes (on file with the Senate Committee on Governmental Oversight and Accountability). BILL: CS/SB 7024 Page 9
Employer Group Additional
Contributions
State Agencies $48.0 m
Universities $31.2 m
Colleges $9.1 m
School Boards $114.3 m
Counties $126.6 m
Other $21.4 m
Total $350.5 m
With the enactment of this legislation, the revenues deposited into the Retiree Health
Insurance Subsidy Trust Fund will be increased by approximately $139.3 million
annually. The estimated increase in contributions by employer group for Fiscal Year
2023-2024 are noted below.
Employer Group Additional
Contributions
State Agencies $16.6 m
Universities $18.7 m
Colleges $4.3 m
School Boards $54.3 m
Counties $37.3 m
Other $7.9 m
Total $139.3 m
VI. Technical Deficiencies:
None.
VII. Related Issues:
None.
VIII. Statutes Affected:
This bill substantially amends the following sections of Florida Statutes: 112.363, 121.052,
121.055, 121.071, and 121.71.
IX. Additional Information:
A. Committee Substitute – Statement of Substantial Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
CS by Appropriations on March 28, 2023:
The committee substitute amends s. 123.363, F.S., to provide for an increase to the
monthly Retiree Health Insurance Subsidy from $5 for each year of service to $7.50 for BILL: CS/SB 7024 Page 10
each year of service. The employer-paid contribution rate for each membership class is
also increased to account for the increased benefit.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.