This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h0151a.CRG
DATE: 1/11/2024
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 151 Cost-of-living Adjustment of Retirement Benefits
SPONSOR(S): Busatta Cabrera
TIED BILLS: IDEN./SIM. BILLS: SB 242
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Constitutional Rights, Rule of Law &
Government Operations Subcommittee
15 Y, 0 N Villa Miller
2) Appropriations Committee
3) State Affairs Committee
SUMMARY ANALYSIS
The Florida Retirement System (FRS) is a multiple-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 employees of the cities, special districts, and independent
hospitals 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.
Current law provides an FRS Pension Plan member whose effective retirement date was before July 1, 2011,
with a 3 percent annual cost-of-living adjustment (COLA). However, in 2011, the COLA was eliminated for
service earned on or after July 1, 2011. Accordingly, members initially enrolled in the FRS on or after July 1,
2011, do not receive a COLA when they retire. For retirees with years of service prior to 2011, the COLA
amount is prorated.
The bill restores the annual COLA to 3 percent for all retired FRS Pension Plan members beginning July 1,
2024. It removes the COLA conditional restoration language in current law.
The bill will have a significant fiscal impact on state and local governments. See Fiscal Comments. STORAGE NAME: h0151a.CRG PAGE: 2
DATE: 1/11/2024
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
State Board of Administration
The State Board of Administration (SBA) is established by Art. IV, s. 4(e) of the Florida Constitution,
and is composed of the Governor as Chair, the Chief Financial Officer, and the Attorney General,
commonly referred to as the “Board of Trustees.”
1
The SBA has responsibility for investing the assets
of the Florida Retirement System (FRS) Pension Plan
2
and administering the FRS Investment Plan,
3
which combined represent approximately $190.8 billion, or approximately 84.4 percent of the $225.4
billion in assets managed by the SBA, as of October 31, 2023.
4
The SBA also manages over 25 other
investment portfolios, with combined assets of approximately $34.6 billion, including the Florida
Hurricane Catastrophe Fund, the Florida Lottery Fund, the Florida Prepaid College Plan, and various
debt-service accounts for state bond issues.
Florida Retirement System
The 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 include the
Deferred Retirement Option Program (DROP) under the defined benefit plan and in 2000 was amended
to provide a defined contribution plan alternative to the defined benefit plan for FRS members effective
July 1, 2002.
5
The FRS is a multiple-employer, contributory plan
6
governed by the Florida Retirement System Act.
7
As
of June 30, 2023, the FRS has 646,277 active members,
8
455,601 retired members and beneficiaries,
and 27,767 members in DROP.
9
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 the employees of the 181 cities, 153 special districts, and two
independent hospitals that have elected to join the system.
10
The FRS is a low-cost system compared to other retirement systems. The cost to administer the FRS in
2022 was $19 per active member and annuitant compared to the peer average of $115 for other similar
pension systems. Further, the number of staff to administer the FRS is 1.3 positions per 10,000
members versus an average of 3.4 per 10,000 members of other similar retirement systems.
11
1
See also art. XII, s. 9, FLA. CONST.
2
S. 121.151, F.S.
3
S. 121.4501(8), F.S. See also, rule 19-13.001, F.A.C.
4
State Board of Administration, Performance Report Month Ending: October 31, 2023,
https://www.sbafla.com/fsb/Portals/FSB/Content/Performance/Trustees/2023/October%202023%20Monthly%20Trustee%20Report.pdf
?ver=2023-12-22-140235-787, (last visited January 5, 2024).
5
DMS, Florida Retirement System Pension Plan and Other State Administered Systems Comprehensive Annual Comprehensive
Financial Report Fiscal Year Ended June 30, 2023, at p. 33. A copy of the report can be found online at:
http://www.dms.myflorida.com/workforce_operations/retirement/publications/annual_reports [hereinafter Annual Report] (last visited
January 4, 2024).
6
Prior to 1975, members of the FRS were required to make employee contributions of either 4 percent of their salaries for Regular
Class members or 6 percent for Special Risk Class members. Members were again required to contribute to the system after June 30,
2011, at 3 percent of salary regardless of membership class.
7
Ch. 121, F.S.
8
As of June 30, 2022, the FRS Pension Plan, which is a defined benefit plan, had 441,816 members, and the investment plan, which is
a defined contribution plan, had 204,461 members. Annual Report, supra note 5, at p. 188.
9
Id.
10
Id., at 226.
11
Email from Jeff Ivey, Deputy Chief of Staff, Department of Management Services, RE: 2022 CEM Slides (Mar. 13, 2023) on file with
the Constitutional Rights, Rule of Law & Government Operations Subcommittee. STORAGE NAME: h0151a.CRG PAGE: 3
DATE: 1/11/2024
Membership of the FRS is divided into the following membership classes:
12
Regular Class
13
consists of 550,931 members (85.27 percent of the total 2023 FRS
membership). This class is for all members who are not assigned to another class.
Special Risk Class
14
includes 75,495 members (11.68 percent). This class is for members
employed as law enforcement officers, firefighters, correctional officers, probation officers,
paramedics, and emergency medical technicians, among others.
Special Risk Administrative Support Class
15
has 93 members (0.014 percent). This class is for
former Special Risk Class members who provide administrative support within an FRS special
risk employing agency. Members of this class must maintain the certification required for their
former Special Risk Class position and be subject to recall into those positions if needed.
Elected Officers’ Class
16
has 2,105 members (0.33 percent). This class is for 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.
Senior Management Service Class
17
has 7,714 members (1.19 percent). This 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
Class designation.
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 investment plan, which is a defined contribution plan; and
The pension plan, which is a defined benefit plan.
FRS 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 SBA is
primarily responsible for administering the investment plan.
18
A member vests immediately in all employee contributions paid to the investment plan.
19
With respect
to the employer contributions, a member vests after completing one work year with an FRS employer.
20
Vested benefits are payable upon termination of employment with the FRS employer or death, as a
lump-sum distribution, direct rollover distribution, or periodic distribution.
21
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.
12
Annual Report, supra note 5, at 191.
13
S. 121.021(12), F.S.
14
S. 121.0515, F.S.
15
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 FRS. S. 121.0515(8), F.S.
16
S. 121.052, F.S.
17
S. 121.055, F.S.
18
S. 121.4501(8), F.S.
19
S. 121.4501(6)(a), F.S.
20
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.
21
S. 121.591, F.S. STORAGE NAME: h0151a.CRG PAGE: 4
DATE: 1/11/2024
FRS Pension Plan
The pension plan is a defined benefit plan that is administered by the secretary of the Department of
Management Services (DMS) through the Division of Retirement.
22
Investment management is
provided 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.
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
A member vests
immediately in all employee contributions paid to the pension plan.
25
For non-special risk members of the pension plan initially enrolled before July 1, 2011, normal
retirement is the earlier of 30 years of service or age 62.
26
Those 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
Cost-of-living Adjustment
For an FRS Pension Plan member whose effective retirement date was before July 1, 2011, the
member receives a 3 percent annual cost-of-living adjustment (COLA).
29
In 2011, the COLA was
eliminated for service earned on or after July 1, 2011.
30
Accordingly, for members initially enrolled in the
FRS on or after July 1, 2011, the COLA is zero. For retirees with years of service prior to 2011, the
COLA amount is prorated.
31
Below are examples of potential COLAs, dependent on the years of service before July 1, 2011.
Total Years
of Service
Years of Service
before July 1, 2011
COLA
30 30 3.00%
30 25 2.50%
30 20 2.00%
30 15 1.50%
30 10 1.00%
30 5 0.50%
30 0 0.00%
22
See s. 121.025, F.S.
23
S. 121.021(45)(a), F.S.
24
S. 121.021(45)(b), F.S.
25
S. 121.091(5)(a), F.S.
26
S. 121.021(29)(a)1., F.S.
27
S. 121.021(29)(a)2., F.S.
28
S. 121.021(29)(b), F.S.
29
S. 121.101(3), F.S.
30
Ch. 2011-68, s. 17, Laws of Fla.
31
Section 121.101(4)(c), F.S., explains that the COLA is prorated by taking the product of 3 percent multiplied by the quotient of the
sum of the member’s service credit earned for service before July 1, 2011, divided by the sum of the member’s total service credit
earned. Example: A member with 10 years of service prior to July 1, 2011 retires after 30 years of service. Divide 10 by 30 and multiply
by 3 percent. In this example, the member’s COLA would be 1.0%. STORAGE NAME: h0151a.CRG PAGE: 5
DATE: 1/11/2024
The chart below shows the number of retirees receiving a full COLA (Tier I) and a reduced
COLA (Tier II) as of March 21, 2023.
32
FRS Employer
Tier I
Retirees Receiving a 3% COLA
Tier II
Retirees Receiving a 0.00% to 2.99% COLA
State 61,167 25,570
State Universities 14,430 6,236
Counties 64,904 37,009
State Boards 135,984 72,628
State Colleges 9,402 4,972
Others 8,868 6,723
Total 294,755 151,913
Current law provides for the restoration of the COLA effective June 30, 2016, subject to the availability
of funding and the Legislature enacting sufficient employer contributions specifically for such purpose.
33
To date, the Legislature has not provided funding to restore the COLA to current or future retirees.
Effect of the Bill
The bill restores the annual COLA to 3 percent for all retired FRS Pension Plan members beginning
July 1, 2024. It removes the conditional COLA restoration language in current law.
B. SECTION DIRECTORY:
Section 1 amends s. 121.101, F.S., relating to cost-of-living adjustment benefits.
Section 2 provides a declaration of important state interest.
Section 3 provides an effective date of July 1, 2024.
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.
32
Fla. H.R. Appropriations Committee Staff Analysis for CS/CS/HB 239 (2023) at p. 5, available at:
https://myfloridahouse.gov/Sections/Documents/loaddoc.aspx?FileName=h0239c.APC.DOCX&DocumentType=Analysis&BillNumber=0
239&Session=2023 (dated March 30, 2023).
33
S. 121.101(5), F.S. STORAGE NAME: h0151a.CRG PAGE: 6
DATE: 1/11/2024
D. FISCAL COMMENTS:
Revising employer contribution rates for the restoration of the COLA will have a significant fiscal impact
on funds paid into the FRS Trust Fund. An actuarial study for the restoration of COLA has not been
completed for Fiscal Year 2024-25. However, an actuarial study was completed for Fiscal Year 2023-
24. The actuarial study for Fiscal Year 2023-24 provides that the estimated amount to restore the
COLA for the 2023-24 fiscal year was as follows:
34
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
The county/municipality mandates provision of Art. VII, s. 18 of the Florida Constitution may apply
because this bill will result in increased employer contribution rates from county and municipal
participants in the FRS; however, an exception may apply as the Legislature has determined that this
bill satisfies an important state interest and all similarly situated persons 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:
34
Memorandum to Ms. Andrea Simpson, State Retirement Director, Florida Department of Management Services, Division of
Retirement, Re: Special Actuarial Study of Prospective Minimum COLA Rate for Tier I and Tier II Members and Beneficiaries, (dated
February 14, 2023) on file with the Constitutional Rights, Rule of Law & Government Operations Subcommittee.
Employer Contribution Group Estimated Increase in Contributions
State Agencies $331.8 Million
School Boards $796.7 Million
State Universities $204.2 Million
Colleges $61.7 Million
Counties $863.3 Million
Other $143.1 Million
Total: $2,400.8 Million STORAGE NAME: h0151a.CRG PAGE: 7
DATE: 1/11/2024
The bill neither provides additional rulemaking authority nor appears to require executive branch
rulemaking.
C. DRAFTING ISSUES OR OTHER COMMENTS:
On line 32, the bill references the cost-of-living benefit instead of the cost-of-living adjustment.
IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES
None.