This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h0151b.APC
DATE: 1/31/2024
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/HB 151 Florida Retirement System
SPONSOR(S): Appropriations Committee, Busatta Cabrera and others
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 27 Y, 0 N, As CS Helpling Pridgeon
3) State Affairs Committee
SUMMARY ANALYSIS
The bill conforms law to the House proposed 2024-2025 General Appropriations Act (GAA) as retirement
contributions are included in the GAA.
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
state 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.
The Department of Management Services (DMS) must compile an annual actuarial valuation of the FRS and
report the results to the Legislature by December 31 of each year. Thereafter, the Legislature uses the results
of the actuarial valuation to establish uniform employer contribution rates during the next legislative session to
ensure the FRS is funded in a sound actuarial manner.
The bill:
Restores a 3 percent cost-of-living adjustment (COLA) for eligible FRS pension plan members initially
enrolled in the FRS before July 1, 2011. The bill limits the 3 percent COLA to the first $150,000 of
annual benefit. For any benefit above $150,000, the COLA adjustment is limited to service credit
earned for service prior to July 1, 2011.
Increases member contribution rates to better align with the benefits earned by each employee class.
Increases the allocations to the investment plan accounts for each membership class.
Closes the FRS Preservation of Benefits Plan to new members effective July 1, 2026.
Allows FRS retirees to receive both compensation from an employer that participates in the FRS and
retirement benefits, provided the retiree is not reemployed within the 6 months following the date of
retirement.
Authorizes certain elected officers that have completed a DROP participation period as of June 30,
2023, to remain in elective office and receive his or her accumulated DROP proceeds.
Adjusts the employer contribution rates for the FRS based on the annual actuarial valuation and
additional actuarial studies.
Declares that the act fulfills an important state interest.
Application of the rates will have a significant fiscal impact on the amount of funds appropriated by the
Legislature associated with employee salaries and benefits. Provisions of the bill relating to employer
retirement contribution rates will increase the amounts that FRS Employers will pay for employee retirement
benefits. See Fiscal Comments.
STORAGE NAME: h0151b.APC PAGE: 2
DATE: 1/31/2024
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
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 again 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 multiple-employer, contributory plan
2
governed by the Florida Retirement System Act.
3
As
of June 30, 2023, the FRS provides retirement income benefits to 646,277 active members,
4
448,846
retired members and beneficiaries, and 27,767 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 the employees of the 181 cities, 153
special districts, and two independent hospitals that have elected to join the system.
6
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.
7
Membership of the FRS is divided into the following membership classes:
8
Regular Class
9
consists of 550,931 members (85.2 percent of the total 2023 FRS membership).
This class is for all members who are not assigned to another class.
Special Risk Class
10
includes 75,495 members (11.7 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
11
has 104 members (0.016 percent). This class is for
former Special Risk Class members who provide administrative support within an FRS special
1
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.
http://www.dms.myflorida.com/workforce_operations/retirement/publications/annual_reports [hereinafter Annual Report]
(Last visited Jan. 24, 2024).
2
Prior to 1975, members of the FRS were required to make employee contributions of either 4 percent 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.
3
Ch. 121, F.S.
4
As of June 30, 2023, 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 1, at p. 188.
5
Id.
6
Id., at 226.
7
Email from Jeff Ivey, Deputy Chief of Staff, Department of Management Services, RE: 2022 CEM Slides (Mar. 13, 2023).
8
Annual Report, supra note 1, at 191.
9
S. 121.021(12), F.S.
10
S. 121.0515, F.S.
11
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. Section 121.0515(8), F.S. STORAGE NAME: h0151b.APC PAGE: 3
DATE: 1/31/2024
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
12
has 2,105 members (0.33 percent). This 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.
Senior Management Service Class
13
has 7,875 members (1.2 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 State Board of
Administration (SBA) is primarily responsible for administering the investment plan.
16
The SBA is
comprised of the Governor as chair, the Chief Financial Officer, and the Attorney General.
17
A member
vests immediately in all employee contributions paid to the investment plan.
18
With respect to the
employer contributions, a member vests after completing one work year with an FRS employer.
19
12
S. 121.052, F.S.
13
S. 121.055, F.S.
14
Annual Report, supra note 1, at 188.
15
Annual Report, supra note 1, at 189.
16
S. 121.4501(8), F.S.
17
Art. IV, s. 4(e), Fla. Const.
18
S. 121.4501(6)(a), F.S.
19
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.
Total FRS Membership by Plan
14
2022 2023 Percent Change
Investment Plan 184,923 204,461 10.57%
Pension Plan 444,150 441,816 -0.53%
Total Membership 629,073 646,277 2.73%
Total FRS Membership by Source
15
2023
Percentage of
Members
School Districts 308,076 47.7%
Counties 154,648 23.9%
State Agencies 94,449 14.6%
State Universities 30,549 4.7%
Others 38,195 5.9%
State Colleges 20,360 3.2% STORAGE NAME: h0151b.APC PAGE: 4
DATE: 1/31/2024
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.
20
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:
21
Membership Class Percentage of Gross
Compensation
Regular Class 11.30%
Special Risk Class 19.00%
Special Risk Administrative Support Class 12.95%
Elected Officers’ Class
Justices and Judges
County Elected Officers
Others
18.23%
16.34%
14.38%
Senior Management Service Class 12.67%
The above table reflects the rates in effect since July 1, 2023. Between July 1, 2022, through June 30,
2023, the Percentage of Gross Compensation was 2 percent less for each class.
22
The additional 2
percent for each class was provided in the 2023 Legislative Session.
23
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 (division).
24
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.
25
For members initially enrolled on or after July
1, 2011, the member vests in the pension plan after eight years of creditable service.
26
A member vests
immediately in all employee contributions paid to the pension plan.
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.
27
Non-special risk members initially enrolled in
the pension plan on or after July 1, 2011, must complete 33 years of service or attain age 65. For
members in the Special Risk and Special Risk Administrative Support Classes, normal retirement is the
earlier of 25 years of service or age 55.
28
20
S. 121.591, F.S.
21
S. 121.72(7), F.S.
22
S. 121.72(6), F.S.
23
Ch. 2023-193, Laws of Fla.
24
S. 121.025, F.S.
25
S. 121.021(45)(a), F.S.
26
S. 121.021(45)(b), F.S.
27
S. 121.021(29)(a)1., F.S.
28
S. 121.021(29)(b), F.S. STORAGE NAME: h0151b.APC PAGE: 5
DATE: 1/31/2024
Employee Contribution Rates
From 1975 to July 1, 2011, employees were not required to contribute to the FRS. Beginning July, 1,
2011, employees of both retirement plans were required to begin contributions to the FRS.
29
Each
member class of the FRS is required to pay 3 percent
30
which is deducted by the employer from the
employee’s monthly salary and submitted to the Division of Retirement.
31
The contribution rates have
not been modified since they were initially required in 2011.
In response to the 2008-2009 market decline, public pension plans increased employee contributions.
Nearly all employees of state and local government share in the cost of their retirement benefits.
Employee rates vary by state and may be dependent on the type of employee, hire date, and income.
Some states include rates in excess of 9 percent. In 2023, the national average across all pension
plans for non-public safety employee contributions was 6.3 percent.
32
Normal Retirement Pension Benefit
Statute sets the calculation used to determine a member’s benefit. A member earns a set percentage
for years of service, depending on class.
33
Pension plan benefits are calculated as a product of a
statutorily set percent and creditable years of service. The product of the percent and creditable years
of service is applied to the member’s average compensation.
34
Below are the statutorily set
percentages
35
and the calculations based on credible years of service.
Class
Percent per
Year
Percent
Earned after
25 Years
Percent
Earned after
30 Years
Regular 1.6% 40.0% 48.0%
Senior Management 2.0% 50.0% 60.0%
Special Risk 3.0% 75.0% 90.0%
Elected Class - Others 3.0% 75.0% 90.0%
Elected Class - Judges 3.3% 83.3% 99.9%
Cost-of-Living Adjustment
For a member whose effective retirement date is before July 1, 2011, the member receives a 3 percent
cost-of-living adjustment (COLA).
36
In the 2011 Legislative Session, the COLA adjustment was
reduced for future retirees.
37
For members enrolled on or after July 1, 2011, the COLA is zero. For
retirees with years of service prior to 2011, the COLA amount is prorated.
38
Below are examples of potential COLAs, dependent on the years of service before and after July 1,
2011.
29
Ch. 2011-68, Laws of Fla.
30
S. 121.71(3), F.S.
31
S. 121.71(2), F.S.
32
National Association of State Retirement Administrators, NASRA Issue Brief: Employee Contributions to Public Pension
Plans, https://www.nasra.org/files/Issue%20Briefs/NASRAContribBrief.pdf (last visited Jan. 25, 2024).
33
S. 121.091(1), F.S.
34
S. 121.091(1)(a), F.S.
35
Id.
36
S. 121.101(3)(b), F.S.
37
Ch. 2011-68, Laws of Fla.
38
Section 121.101(4)(c), F.S., provides 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: h0151b.APC PAGE: 6
DATE: 1/31/2024
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%
The charts below provide the number of retirees receiving a full COLA and a reduced
COLA.
39
As more members of the FRS Pension Plan retire post July 1, 2011, members with
a 3 percent COLA will continue to decrease and members with a partial COLA will continue
to increase.
Section 121.101(5), F.S., provides for the restoration of the COLA:
Subject to the availability of funding and the Legislature enacting sufficient employer
contributions specifically for the purpose of funding the expiration of the cost-of-living
adjustment specified in subsection (4), in accordance with s. 14, Art. X of the State
Constitution, the cost-of-living adjustment formula provided for in subsection (4) shall
expire effective June 30, 2016, and the benefit of each retiree and annuitant shall be
adjusted on each July 1 thereafter, as provided in subsection (3).
To date, the Legislature has not provided funding to restore the COLA to current or future retirees.
Deferred Retirement Option Program
DROP
40
allows eligible members
41
of the FRS Pension Plan to participate in the program and defer
receipt of retirement benefits while continuing employment with his or her FRS employer. The deferred
monthly benefits accrue, plus interest, on behalf of the employee, 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 amounts.
42
For retirements
after July 1, 2010, for termination of employment to occur, an employee cannot be employed for six
calendar months.
43
Elected officers participating in DROP are also subject to the same termination
requirements to access their accrued drop benefit.
44
39
Data as of March 3, 2023, provided by the Department of Management Services, Division of Retirement.
40
S. 121.091(13), F.S.
41
S. 121.091(13)(a), F.S.
42
Id.
43
S. 121.021(39)(a)2., F.S.
44
S. 121.053(3)(b), F.S.
Number of Retirees Receiving 0.00% to 2.99% COLA
1. State 25,570
2. State Universities 6,236
3. Counties 37,009
4. School Boards 72,628
5. State Colleges 4,972
6. Others 6,723
TOTAL 151,913
Number of Retirees Receiving a 3% COLA
1. State 61,167
2. State Universities 14,430
3. Counties 64,904
4. School Boards 135,984
5. State Colleges 9,402
6. Others 8,868
TOTAL 294,755 STORAGE NAME: h0151b.APC PAGE: 7
DATE: 1/31/2024
Employment After Retirement
The FRS is a 401(a) qualified plan under the Internal Revenue Code (IRC). Accordingly, FRS
contributions qualify for tax deductions and investment earnings are tax deferred until distributed to
retirees. Federal regulations require 401(a) qualified plans to be established by an employer primarily to
provide regular and clearly defined benefits to its employees over an extended period, typically for life,
following retirement or upon reaching the normal retirement age.
45
Retirement involves more than just a
decrease in the hours worked by an employee. Therefore, retirement benefits cannot be distributed
solely because an employee’s hours have been reduced before reaching normal retirement age.
46
Florida law prohibits a pension benefit from being made prior to participation in DROP or termination of
employment.
47
The law applies the same definition of termination of employment for retirements
occurring either before and after normal retirement age. Thus, determining whether a bona fide
termination of employment has occurred is crucial for both the tax-exempt qualification of the FRS and
state statutory compliance purposes.
48
The Internal Revenue Service (IRS), the federal agency responsible for administering the IRC, has not
provided an objective test for determining whether a bona fide termination of employment has occurred.
Instead the IRS has applied Treasury Regulation 1.409A-1(h)(l)(ii), which states whether a termination
of employment has occurred is determined based on whether the facts and circumstances indicate that
the employer and employee reasonably anticipated that no further services would be performed after a
certain date
49
or that the level of bona fide services the employee would perform after such date would
permanently decrease to no more than 20 percent of the average level of bona fide services performed
over the immediately preceding 36-month period.
50
However, when applying the regulation in the
context of a 401(a) plan, the IRS has opined that “if both the employer and employee know at the time
of ‘retirement’ that the employee will, with reasonably [sic] certainty, continue to perform services for the
employer, a termination of employment has not occurred upon ‘retirement’ and the employee has not
legitimately retired.”
51
In order to apply the requirement of a bona fide termination, Florida law has incorporated the federal
regulation and further has implemented a reemployment limitation period in which an FRS retiree may
not be reemployed
52
by an FRS employer within 6 months of termination.
53
In addition, if the retiree is
reemployed by an FRS employer during months 7 through 12, the retiree’s retirement benefit for those
months is suspended and forfeited.
54
After the 12-month reemployment limitation period, there are no
restrictions on receiving both a salary and retirement benefits when reemployed by an FRS employer.
55
45
26 CFR § 1.401(a)-1(b)(1)(i).
46
26 CFR § 1.401(a)-1(b)(3).
47
S. 121.091, F.S.
48
Memorandum to David DiSalvo, Director, Division of Retirement, Re: Bona Fide Terminations from Employment and
Bona Vide Volunteer Services (dated January 8, 2021) on file with the Constitutional Rights, Rule of Law & Government
Operations Subcommittee.
49
The regulation provides that the employment relationship is treated as continuing intact while the individual is on a bona
fide leave of absence if the leave does not exceed 6 months, or if longer, as long as the individual retains a right to
reemployment pursuant to statute or contract. The IRS explains in the preamble to the regulation that “a bona fide leave of
absence refers to a leave of absence where there is a reasonable expectation the service provider will return to service
with the service recipient.” Department of the Treasury, Internal Revenue Service, Application of Section 409A to
Nonqualified Deferred Compensation Plans, 26 CFR Part I [TD 9321], RIN 1545-BE79 (Dated April 17, 2007).
50
See IRS PLR 201147038; see also Memorandum to David DiSalvo, Director, Division of Retirement, Re: Bona Fide
Terminations from Employment and Bona Vide Volunteer Services (dated January 8, 2021) on file with the Constitutional
Rights, Rule of Law & Government Operations Subcommittee.
51
IRS PLR 201147038.
52
For purposes of the reemployment limitation period, the term “employment” includes the provision of services. S.
121.021(39), F.S.
53
S. 121.021(39), F.S.
54
S. 121.021(9)(c), F.S.
55
However, for reemployed members, the FRS employer must pay retirement contributions in an amount equal to the
unfunded actuarial liability portion of the employer contribution that would be required for active members of the FRS in
addition to the contributions for social security and for the retiree health insurance subsidy. S. 121.091(9)(c)2., F.S. STORAGE NAME: h0151b.APC PAGE: 8
DATE: 1/31/2024
A retiree employed in violation of the reemployment limitation period and the FRS employer employing
such retiree are jointly and severally liable for reimbursement to the retirement trust fund from which the
benefits were paid. Pension benefits remain suspended until repayment has been made. Benefits
suspended beyond the reemployment limitation period are applied towards repaying the benefits
received in violation of the reemployment limitation period.
56
Florida law currently provides two exceptions to the reemployment limitation period. The first authorizes
retirees to provide civic, charitable, and humanitarian services to an FRS employer during the first 12
months following retirement provided the following criteria are met:
Before the date of retirement, there is no agreement or understanding between the employer
and the retiree that the retiree will return to provide services for the employer;
The employer or a third party does not provide any form of compensation, including any cash
equivalents, to the volunteer for the volunteer service;
Except as otherwise provided in law, a volunteer cannot be provided any employee benefits,
including health or life insurance benefits. However, a volunteer may be provided certain
perquisites necessary for, and for the limited purpose of, completing tasks associated with the
volunteer program, such as an assigned uniform or the provision of equipment;
The number of volunteer hours per week, including training hours, that the volunteer provides is
no more than 20 percent of the number of hours that the volunteer was expected to work per
week before the date of retirement;
There is a clear distinction between the duties of a volunteer and the duties of an employee;
The schedule of a volunteer, including the number of hours volunteered and the number and
type of assignments for which he or she agrees to volunteer, is controlled by the volunteer; and
The employer and retiree maintain adequate records to document adherence to the above
criteria, which must be made available to DMS or the SBA upon request.
57
The second exception to the reemployment limitation period applies to law enforcement officers that are
reemployed as school resource officers and authorizes such retirees to be reemployed during months 7
through 12 after retirement and receive both a salary and retirement benefits. The reemployed retired
law enforcement officer may not renew membership in the FRS except as provided in law.
58
Preservation of Benefits
Internal Revenue Code 415(b) is a federal provision that limits the benefit amount that a retired
employee may receive from a defined benefit plan. The limit is adjusted by the IRS each year. Effective
July 1, 2024, the limitation on the annual benefit under a defined benefit plan is $275,000. Statute
establishes the Florida Retirement System Preservation of Benefits Plan as a qualified governmental
excess benefit arrangement pursuant to s. 415(m) of the Internal Revenue Code
59
to allow qualifying
FRS members to receive a benefit that is in excess of the adjusted yearly limit.
Actuarial Study - Contribution Rates
Section 121.031, F.S., requires DMS to compile an annual actuarial study of the FRS, the results of
which must be reported to the Legislature by December 31 of each year.
60
Thereafter, the Legislature
uses the report to establish the uniform contribution rates in law during the next regular legislative
session. The employer contribution rate is the same percentage regardless of whether the member
participates in the pension plan or the investment plan.
61
The rate is determined annually based on the
actuarial study by DMS that calculates the necessary level of funding to support all of the benefit
obligations under the plan. FRS employers are responsible for contributing a set percentage of the
member’s monthly compensation to the division to be distributed into the FRS Contributions Clearing
Trust Fund.
56
S. 121.091(9)(b)1. and (9)(c)3., F.S.
57
S. 121.091(15), F.S.
58
S. 121.091(9)(f), F.S.
59
S. 121.1001, F.S.
60
S. 121.031(3), F.S.
61
S. 121.70(1), F.S. STORAGE NAME: h0151b.APC PAGE: 9
DATE: 1/31/2024
Effects of Proposed Changes
Investment Plan
The bill increases the allocations to the investment plan accounts for each membership class in the
investment plan. The revised contribution percentages, by class, are as follows:
Membership Class Percentage of Gross
Compensation
Regular Class 13.30%
Special Risk Class 22.00%
Special Risk Administrative Support Class 14.95%
Elected Officers Class
Justices and Judges
County Elected Officers
Others
22.23%
20.34%
18.38%
Senior Management Service Class 14.67%
The increase is equivalent to the additional member contribution rates required in the bill and an
additional 1 percent employer contribution.
FRS Pension Plan – Cost-of-Living Adjustment
Beginning July 1, 2024, the bill restores a 3 percent COLA for eligible FRS pension plan members
initially enrolled in the FRS before July 1, 2011. The bill limits the 3 percent COLA to the first $150,000
of annual benefit. Any benefit above $150,000, the COLA adjustment is limited to service credit earned
for service prior to July 1, 2011. The bill states that the $150,000 limit shall be adjusted annually to
reflect changes in the Consumer Price Index compiled by the United States Department of Labor.
Additionally, the bill states that any benefit made in accordance with this portion shall only be made
prospectively.
The bill eliminates the current COLA restoration language in statute and provides that beginning July 1,
2033, and annually thereafter, DMS must submit an actuarial analysis to the Legislature on the
feasibility and cost of providing a COLA for employees that initially enrolled in the FRS after July 1,
2011.
STORAGE NAME: h0151b.APC PAGE: 10
DATE: 1/31/2024
Contribution Rates
The bill increases member contribution rates to better align with the benefits earned by each employee
class to FRS as follows:
Membership Class Percentage of Gross
Compensation
Regular Class 4.00%
Special Risk Class 5.00%
Special Risk Administrative Support Class 4.00%
Elected Officers Class
Justices and Judges
County Elected Officers
Others
6.00%
6.00%
6.00%
Senior Management Service Class 4.00%
Deferred Retirement Option Program
The bill authorizes specified elected officers that have completed DROP participation period as of June
30, 2023, to remain in elective office and receive his or her accumulated DROP proceeds, subject to
any minimum age requirements specified in 26 U.S.C. s. 401(a)(36), including interest.
62
Employment After Retirement
The bill provides that any person whose retirement is effective on or after July 1, 2024, or whose
participation in DROP terminates on or after July 1, 2024, may be reemployed by an employer that
participates in a state-administered retirement system and receive retirement benefits and
compensation from that employer.
63
The person may not be reemployed by an employer participating in
the Florida Retirement System before meeting the termination definition in s. 121.021, F.S.
Effectively the bill allows FRS specified retirees to receive both compensation from an employer that
participates in the FRS and retirement benefits, provided the retiree is not reemployed within 6 months,
instead of 12 months, following the date of retirement.
The bill states that the reemployed retiree may not renew membership in the FRS unless as provided in
s. 121.122, F.S., and that the employer shall pay retirement contribution in an amount equal to the
unfunded actuarial liability portion of the employer contribution that would be required for active
members of the FRS in addition to the contributions required by s. 121.76, F.S.
Additionally, the bill states that a retiree initially reemployed in violation of the above requirements and
an employer that employs or appoints such a person are jointly and severally liable for reimbursement
of any retirement benefits paid to the retirement trust fund from which the benefits were paid, including
the Florida Retirement System Trust Fund and the Florida Retirement System Investment Plan Trust
Fund, as appropriate. The bill specifies that the employer must have a written statement from the
employee that he or she is not retired from a state-administered retirement system. Further the bill
specifies that benefits shall remain suspended until repayment is made. Benefits that are suspended
beyond the end of the retiree's 6-month reemployment limitation period shall apply toward the
repayment of benefits specified in the bill.
Preservation of Benefits
The bill closes the Florida Retirement System Preservation of Benefits Plan to new members effective
July 1, 2026.
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United States Code section 401(a)(36), was amended by Section 104 of the Bipartisan American Miners Act of 2019, to
reduce the permissible age for in-service distributions from 62 to 59-1/2, effective after December 31, 2019.
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The bill excludes retirees under the disability provisions of subsection (4) of the amended statue or in s. 121.053, F.S. STORAGE NAME: h0151b.APC PAGE: 11
DATE: 1/31/2024
Actuarial Study - Contribution Rates
The bill revises the employer contribution rates for the normal costs and the unfunded actuarial liability
(UAL) of the FRS based on the annual actuarial study and the actuarial studies relating to the
modifications to the FRS included in the bill.
The bill declares that it 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. 121.053, F.S., revising collection of DROP proceeds for specified elected
officers.
Section 2: Amends s. 121.091, F.S., revising requirements for reemployment.
Section 3: Amends s. 121.1001, F.S., closing the Florida Retirement System Preservation of
Benefits Plan to new members by a specified date.
Section 4: Amends s. 121.101, F.S., revising provisions for the COLA for certain retirees.
Section 5: Amends s. 121.71, F.S., revising required employee and employer retirement
contribution rates.
Section 6: Amends s. 121.72, F.S., revising specified allocations to the investment plan.
Section 7: Amends s. 121.591, F.S., conforming provisions to changes made by the act.
Section 8: Provides a declaration of important state interest.
Section 9: Provides an effective date of July 1, 2024.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
See Fiscal Comments.
2. Expenditures:
See Fiscal Comments.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
See Fiscal Comments.
2. Expenditures:
See Fiscal Comments.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR: STORAGE NAME: h0151b.APC PAGE: 12
DATE: 1/31/2024
None.
D. FISCAL COMMENTS:
The bill revises the employer contribution rates as determined by the July 1, 2023, Annual Valuation.
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Further, the bill includes the rates necessary to fund the program for each modification to the FRS
included in the bill.
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The proposed employer contributions for Fiscal Year 2024-2025 compared to the
rates currently in effect are contained in the table below.
7/1/20237/1/20247/1/20237/1/20247/1/20237/1/2024
Regular Class 6.73% 7.91% 4.78% 7.55% 11.51% 15.46%
Special Risk Class 18.66% 21.02% 11.95% 17.76% 30.61% 38.78%
Special Risk
Administrative Class
11.54% 13.37% 26.22% 32.39% 37.76% 45.76%
Elected Officer Class
Leg/Gov/SAs/PDs 10.45% 12.28% 50.21% 53.84% 60.66% 66.12%
Judges 14.90% 17.06% 27.93% 33.74% 42.83% 50.80%
County Officers 12.39% 13.89% 44.23% 48.84% 56.62% 62.73%
Senior Management 8.56% 9.88% 23.90% 26.96% 32.46% 36.84%
DROP 8.49% 10.12% 10.64% 16.57% 19.13% 26.69%
Membership Class
"Blended"
Normal Costs
Unfunded Actuarial
Liability
Combined
Contribution Rates
The revised employer contribution rates based on the 2023 Actuarial Valuation and other actuarial
studies will have a significant fiscal impact on funds paid into the Florida Retirement System Trust
Fund.
The total combined employer contributions estimated to be paid into the Florida Retirement System
Trust Fund in Fiscal Year 2024-2025 will increase by approximately $2.1 billion above the contributions
paid in Fiscal Year 2023-2024. The estimated increase in contributions by employer contribution group
for Fiscal Year 2024-2025 are provided on the following series of tables:
2023 Actuarial Valuation for Normal Cost and Unfunded Liability for Fiscal Year 2023-2024
Employer Contribution Group Estimated Increase/(Decrease) in
Contributions
State Agencies ($8.7) Million
School Boards ($3.2) Million
State Universities $0.8 Million
Colleges ($0.6) Million
Counties ($15.6) Million
Other ($2.8) Million
Total: ($30.0) Million
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The July 1, 2023, Annual Valuation resulted in a reduction in rates and a corresponding savings for employer
contributions. The reduced rates offset the increased contributions required by the additional modifications included in the
bill.
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Actuarial studies were requested to be performed by the Milliman actuarial and consulting firm through DMS for
modifications to FRS included in the bill. The studies for COLA modifications are included in this analysis. However, at the
time of this analysis, studies for Reemployment and increases to the investment plan have not been received. For those
modifications, studies received in Fiscal Year 2023-24 were used to determine those impacts. STORAGE NAME: h0151b.APC PAGE: 13
DATE: 1/31/2024
Cost Reflecting 1.00% Employer Increase for the FRS Investment Plan
Employer Contribution Group Estimated Increase in Contributions
State Agencies $11.7 Million
School Boards $38.5 Million
State Universities $4.4 Million
Colleges $2.9 Million
Counties $26.5 Million
Other $5.6 Million
Total: $89.6 Million
Reemployment Modification
Employer Contribution Group Estimated Increase in Contributions
State Agencies $4.6 Million
School Boards $9.4 Million
State Universities $2.5 Million
Colleges $0.7 Million
Counties $11.6 Million
Other $1.9 Million
Total: $30.6 Million
COLA Modifications
Employer Contribution Group Estimated Increase in Contributions
State Agencies $290.6 Million
School Boards $656.8 Million
State Universities $183.6 Million
Colleges $50.7 Million
Counties $690.7 Million
Other $118.9 Million
Total: $1,991.4 Million
The total combined employer contributions estimated to be paid into the Florida Retirement System
Trust Fund in Fiscal Year 2024-2025:
Employer Contribution Group Estimated Increase In Contributions
State Agencies $298.2 Million
School Boards $701.5 Million
State Universities $191.3 Million
Colleges $53.7 Million
Counties $713.2 Million
Other $123.6 Million
Total: $2,081.6 Million
Member Contribution Increase
Based on the results of the 2024-2025 blended rate study, the projected increase in Fiscal Year 2024-
2025 for the increased member contributions to the FRS Pension Plan would be $334 million.
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That
amount consists of $211 million in additional Regular Class contributions, $111 million in additional
Special Risk Class contributions and $12 million in additional contributions in all other membership
classes. For a point for comparison, combined employer plus member contributions to the FRS Pension
Plan for the most recently completed plan year (2022-2023) were $5,595 million. This amount does not
modify the estimated employer contributions outlined above for the impacts included in the bill.
However, in future rate analyses, this additional employee contribution may decrease the required
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The state actuary, Milliman, determined that calculating the increase in member contributions did not need a study.
However, an estimated total amount to be contributed to the Pension Plan, by class, was provided. STORAGE NAME: h0151b.APC PAGE: 14
DATE: 1/31/2024
employer contribution. Additionally, the increased level of overall contributions in subsequent years may
accelerate the projected date at which the current Unfunded Actuarial Liability (UAL) would be fully
amortized.
Closure of the Preservation of Benefits to Future Retirees
Single-year Preservation of Benefits payments for 2023 were made to 75 retirees and the cumulative
single-year payments were approximately $2.2 million.
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Closing the plan would result in a small
savings to the overall FRS in the near future. However, as of June 2023, there are 835 members whose
salaries exceed the $275,000 IRS limitation.
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This increases the potential pool of recipients of the plan
by a factor over ten. If each employee earned a benefit in excess of the limit, the potential cost
avoidance would be $25.5 million. As public employee salaries continue to rise, more employees may
qualify for payment under the plan. Closing the plan may have a significant savings to the FRS in future
years.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
The mandates provision of art. VII, section 18 of the State Constitution may apply because this bill
requires cities and counties to spend money or take an action that requires the expenditure of
money; however, an exception may apply as the Legislature has determined that this bill satisfies an
important state interest and similarly situated persons are all required to comply.
2. Other:
The actuarial requirements provision of art. X, section 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, section 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.
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The state actuary, Milliman, determined that closing the Preservation of Benefits Plan did not require a full study to
determine the overall impacts to the retirement system. However, Milliman provided an analysis of the financial impact of
closing the plan.
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Email from Jake Holmgreen, Deputy Legislative Affairs Director, Department of Management Services, RE: Section
121.30, F.S. (Nov. 3, 2023). STORAGE NAME: h0151b.APC PAGE: 15
DATE: 1/31/2024
B. RULE-MAKING AUTHORITY:
None.
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES