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: SB 7024
INTRODUCER: Governmental Oversight and Accountability Committee
SUBJECT: Employer Contributions to Fund Retiree Benefits
DATE: January 30, 2024
ANALYST STAFF DIRECTOR REFERENCE ACTION
Harmsen McVaney GO Submitted as Committee Bill
1. Davis Sadberry AP Pre-meeting
I. Summary:
SB 7024 establishes the contribution rates paid by employers that participate in the Florida
Retirement System (FRS) beginning July 1, 2024. These rates are intended to fund the full
normal cost and the amortization of the unfunded actuarial liability (UAL) of the FRS. With
these modifications to employer contribution rates, the FRS Trust Fund will receive roughly
$30 million less in revenue on an annual basis beginning July 1, 2024, when compared to the
employer contributions generated based on the current statutory contribution rates. Public
employers, such as state agencies, colleges, school districts, counties, municipalities, and other
governmental entities that participate in the FRS, will see a decrease in these retirement
contributions. State universities, however, are expected to see an increase of roughly $750,000
annually in their retirement contributions.
The bill will have a fiscal impact on state funds appropriated by the Legislature for employee
benefits. The bill will decrease the amounts, in the aggregate, that employers participating in the
FRS must contribute for retirement benefits. See Section V.
The bill takes effect July 1, 2024.
II. Present Situation:
The Florida Retirement System (FRS)
The Florida Retirement System (FRS) was established in 1970 when the Legislature consolidated
the Teachers’ Retirement System, the State and County Officers and Employees’ Retirement
System, and the Highway Patrol Pension Fund. In 1972, the Judicial Retirement System was
consolidated into the FRS, and in 2007, the Institute of Food and Agricultural Sciences
Supplemental Retirement Program was consolidated under the Regular Class of the FRS as a
REVISED: BILL: SB 7024 Page 2
closed group.
1
The FRS is a contributory system, with active members contributing three percent
of their salaries.
2
The FRS is a multi-employer plan, governed by ch. 121, F.S., the “Florida Retirement System
Act.” As of June 30, 2023, the FRS had 646,277 active non-retired members, 455,601 annuitants,
14,499 disabled retirees, and 27,767 active participants of the Deferred Retirement Option
Program (DROP).
3
As of June 30, 2023, the FRS consisted of 991 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 550,931 active members and 8,433 in renewed membership;
The Special Risk Class
6
includes 75,495 active members and 1,168 in renewed membership;
The Special Risk Administrative Support Class
7
has 93 active members and one in renewed
membership;
The Elected Officers’ Class
8
has 2,105 active members and 106 in renewed membership; and
The Senior Management Service Class
9
has 7,714 active members and 227 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
1
Florida Department of Management Services (DMS), Division of Retirement, Florida Retirement System Summary Plan
Description, 1 (July 1, 2023), https://frs.fl.gov/forms/spd-pp.pdf (last visited Jan. 5, 2024).
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 2022-223 Annual Comprehensive Financial Report, at 188, available at https://employer.frs.fl.gov/forms/2022-
23_ACFR.pdf. (last visited Jan. 5, 2024).
4
DMS, Division of Retirement, Participating Employers for Fiscal Year 2023-2024 (Oct. 2023), available at
https://employer.frs.fl.gov/forms/part-emp.pdf (last visited Jan. 5, 2024).
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. See also, DMS, FRS Pension Plan
Member Handbook, 9-14 (2023), available at https://frs.fl.gov/forms/member_handbook.pdf (last visited Jan. 5, 2024).
7
The Special Risk Administrative Support Class is for a special risk member who moved or was reassigned to a nonspecial
risk law enforcement, firefighting, correctional, or emergency medical care administrative support position with the same
agency, or who is subsequently employed in such a position under the Florida Retirement System. Section 121.0515(8), F.S.
8
The Elected Officers’ Class includes elected state and county officers, and those elected municipal or special district
officers whose governing body has chosen Elected Officers’ Class participation for its elected officers. Section 121.052, F.S.
9
The Senior Management Service Class is for members who fill senior management level positions assigned by law to the
Senior Management Service Class or authorized by law as eligible for Senior Management Service designation. Section
121.055, F.S.
10
All figures are from Florida Retirement System Pension Plan and Other State Administered Retirement Systems FY 2022-
23 Annual Comprehensive Financial Report, at 191.
11
Florida State Board of Administration (SBA), Plan Comparison Chart (Jul. 2020), available at
https://www.myfrs.com/pdf/forms/plancomparison.pdf (last visited Jan. 5, 2024). BILL: SB 7024 Page 3
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
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
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.
19
Section 121.4501(8), F.S.
20
FLA. CONST. art. IV, s. 4. BILL: SB 7024 Page 4
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
Members in specified positions in the State University System may elect to enroll in the State
University System Optional Retirement Program (SUSORP);
30
and
21
Section 121.025, F.S.
22
SBA Florida, Florida Retirement System Pension Plan,
https://www.sbafla.com/fsb/FundsWeManage/FRSPensionPlan.aspx (last visited Jan. 5, 2024).
23
Section 121.021(45)(a), F.S.
24
Section 121.021(45)(b), F.S.
25
Section 121.091, F.S. See also, DMS, FRS Pension Plan Member Handbook, 28 (2023),
https://frs.fl.gov/forms/member_handbook.pdf (last visited Jan. 5, 2024).
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 Jan. 5, 2024).
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(3)(c), F.S. BILL: SB 7024 Page 5
Members in specified positions at a Florida College institution may elect to enroll in the State
Community College System Optional Retirement Program.
31
The SUSORP requires each employee to contribute three percent
32
of his or her gross
compensation to the plan, and the employer must contribute the difference between the current
employee contribution (3 percent) and 8.15 percent of the employee’s gross monthly
compensation (currently, the employer contribution is 5.15%).
33
The state university employer is
also required to contribute an amount equal to the UAL contribution to the FRS Trust Fund.
34
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.
35
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, 2023, plan
assets and liabilities, Milliman, Inc., the state actuary, determined the following key data relating
to the FRS pension plan:
36
Valuation Results (in $ billions)
July 1, 2020 July 1, 2021 July 1, 2022 July 1, 2023
Actuarial Liability $200.3 $209.6 $217.4 $226.2
Actuarial Value of Assets $164.3 $174.9 $179.2 $184.2
Unfunded Actuarial Liability $36.0 $34.7 $38.3 $42.0
Funded Percentage
(Actuarial Value of
Assets/Actuarial Liability)
82.0% 83.4% 82.4% 81.4%
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-
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
This contribution is tied to the FRS employee contribution required by s. 121.71(3), F.S., which is three percent as of July
1, 2011.
33
Section 121.35(4)(a)4., F.S.
34
Section 121.35(4)(b), F.S.
35
Section 121.70(1), F.S.
36
Matt Larrabee, Milliman Actuarial Valuation, Florida Retirement System Pension Plan Actuarial Valuation as of July 1,
2023, 3 (Dec. 1, 2023) (on file with the Senate Committee on Governmental Oversight and Accountability). BILL: SB 7024 Page 6
year period. The following are the current employer contribution rates
37
for each class and the
blended rates recommended by the state actuary beginning in July 2024:
38
Membership Class
Current Statutory
Rates
Effective July 1, 2023
Recommended Rates
to be effective
July 1, 2024
Normal
Cost
UAL
Rate
Normal
Cost
UAL
Rate
Regular Class 6.73% 4.78% 6.70% 4.81%
Special Risk Class 18.66% 11.95% 18.39% 12.00%
Special Risk Administrative Support
Class
11.54% 26.22% 10.92% 25.90%
Elected Officer’s Class
Legislators, Governor, Lt.
Governor, Cabinet Officers,
State Attorneys, Public
Defenders
Justices and Judges
County Officers
10.45%
14.90%
12.39%
50.21 %
27.93%
44.23%
10.68%
14.50%
12.22%
49.81%
28.39%
43.44%
Senior Management Service Class 8.56% 23.90% 8.44% 22.72%
Deferred Retirement Option Program 8.49% 10.64% 8.46% 10.51%
For all membership classes, except the DROP and certain members with renewed membership,
employees contribute three percent of their compensation towards retirement.
39
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.
40
III. Effect of Proposed Changes:
Section 1 amends s. 121.71, F.S. to set the employer-paid normal cost 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 2 provides a legislative finding that the bill fulfills an important state interest.
Section 3 provides that the bill takes effect July 1, 2024.
37
Section 121.71(4) and (5), F.S.
38
Letter to Kathy Gould, Florida DMS Division of Retirement Director, from Milliman Actuarial Services, entitled “Blended
Proposed Statutory Rates for the 2024-2025 Plan Year Reflecting a Uniform UAL Rate for All Membership Classes and
DROP: Table 1” Dec. 1, 2023 (on file with the Senate Committee on Governmental Oversight and Accountability).
39
Section 121.71(3), F.S.
40
See ss. 121.4503 and 121.72(1), F.S. BILL: SB 7024 Page 7
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
Article VII, s. 18(a) of the State Constitution provides that: “No county or municipality
shall be bound by any general law requiring such county or municipality to spend
funds...unless the legislature has determined that such law fulfills an important state
interest and unless: ...the expenditure is required to comply with a law that applies to all
persons similarly situated….”
This bill includes legislative findings that the bill fulfills important state interests, and the
bill applies to all persons similarly situated (those employers participating in the Florida
Retirement System), including state agencies, school boards, state universities,
community colleges, counties, municipalities, and special districts.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
This bill does not impose, authorize to impose, or raise a state tax or fee. Thus, the
requirements of Art. III, s. 19 of the State Constitution are not applicable.
E. Other Constitutional Issues:
None identified.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
None.
B. Private Sector Impact:
None.
C. Government Sector Impact:
The aggregate employer contributions anticipated to be paid into the FRS Trust Fund in
Fiscal Year 2024-2025 will decrease by approximately $30 million when compared to
employer contributions that would be due based on the current statutory contribution BILL: SB 7024 Page 8
rates.
41
The impacts of this bill by employer group for Fiscal Year 2024-2025 are noted
below.
42
Employer Group Change in
Contributions
State Agencies ($8.7 m)
Universities $751,000
Colleges ($555,000)
School Boards ($3.2 m)
Counties ($15.6 m)
Other ($2.8 m)
Total ($30.0 m)
.
VI. Technical Deficiencies:
None.
VII. Related Issues:
None.
VIII. Statutes Affected:
This bill substantially amends section 121.71 of the Florida Statutes.
IX. Additional Information:
A. Committee Substitute – Statement of Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
None.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.
41
Milliman Actuarial Services, Florida Retirement System Estimated 2024-2025 Employer Contribution
Increases/(Decreases) Due to Rate Changes (on file with the Senate Committee on Governmental Oversight and
Accountability).
42
Id.