Retirement and Pensions (Updated 4/23/13)

Pension costs have become a challenging issue across the nation. Municipalities and state governments are struggling with ways to adequately fund pension costs. Florida is no different. Over the next session, the legislature is expected to address issues with the Florida Retirement System.

The Florida Retirement System (FRS) is a multi-employer, contributory plan that provides retirement income benefits to 623,011 active members, 334,682 retired members and beneficiaries, and 40,556 members of the Deferred Retirement Option Program. It is the primary retirement plan for employees of the state and county government agencies, district school boards, community colleges, and universities. The FRS also serves as the retirement plan for participating employees of the 185 cities and 257 independent hospitals and special districts that have elected to join the system.

Members of the FRS have two plan options available for participation: the defined benefit plan, also known as the pension plan, and the defined contribution plan, also known as the investment plan. In addition to the two primary plans, some eligible members have the choice of participating in optional retirement plans, which include the Senior Management Service Optional Annuity Program, State Community College System Optional Retirement Program, and the State University System Optional Retirement Program.

There will be several reports and pieces of legislation to share.

Legislation

House Bill 7011

House Bill 7011 started as a committee bill produced by the House Government Relations Subcommittee. It amends chapter 121, Florida Statutes, relating to the Florida Retirement System Act. Key provisions of the bill are listed below.

Bill Summary


• Closes the pension plan (defined benefit) to members initially enrolled in the Florida Retirement System on or after January 1, 2014, and requires those members to participate in the investment plan (defined contribution).
• Provides an additional death benefit to members of the Special Risk Class initially enrolled in the FRS on or after January 1, 2014.
• Closes the Senior Management Service Optional Annuity Program to new participants effective January 1, 2014.
• Prohibits an elected official who is eligible for membership in the Elected Officers' Class from joining the Senior Management Service Class on or after January 1, 2014.
• Expands the investment options available to investment plan participants
• Maintains curren disability benefit for members initially enrolled on or after January 1, 2014.
• Prohibits members participating in the State Community College System Optional Retirement Program from transferring to the FRS after December 31, 2013;
• Adjusts the employer contribution rates for certain retirement classes as necessitated by the changes to the plan. The adjustments are nominal and should result in an insignificant fiscal impact.

The bill does not impact the ability of any current FRS enrollee to select participation in the pension plan or the investment plan. Changes included in the bill only pertain to new enrollees initially enrolled in the system on or after January 1, 2014.

Projected Fiscal Impact: has a projected negative fiscal impact in fiscal year 2014-15 (negative $400,000 in General Revenue and negative $2.4 million for all participating entities). In fiscal year 2016-17, the bill has a positive fiscal impact ($27 million in General Revenue and $39.3 million for all participating entities). The savings continue to increase each year over the period covered by the study.

Last Action: (4/3/13) Passed House of Representatives 74-42 vote. Sent to the Senate and referred to committees on Governmental Oversight and Accountability, Community Affairs and Appropriations.

Senate Bill 1392

Senate Bill 1392 makes several changes to the Florida Retirement System. It affects those who enroll on or after January 1, 2014. Key components include:

• Changes the vesting period in the pension plan from 8 to 10 years.
• Mandates that Elected Officer's Class and Senior Management Service Class members may only join the investment plan.
• Changes the default for members who do not affirmatively choose a plan from the pension plan to the investment plan.
• Closes the Senior Management Service Optional Annuit Program to new members.
• Changes the out of service disability retirement vesting period from 8 to 10 years.
• Lowers employee's contribution rate from 3% to 2% for all members of the investment plan. This will require higher employer contributions.

Projected Fiscal Impact: Unknown at this time.

Last Action: (4/18/13) Placed on Special Order Calendar for 4/24/13.

Reports

Florida Retirement System (PDF format, 3.4 MB)
This presentation provides a great overview of the Florida Retirement System including benefits, type of plans, members, funding and historical data on the program.

Florida Retirement System Investment Plan(PDF format, 3.1 MB)
This presentation provides a great overview of the Florida Retirement System Investment Plan including the enrollment process, first and second elections, vesting requirements, contributions and disability beneifts.

Local Government Pension Plans(PDF format, 1.7 MB)
This presentation provides a historical look at local government pension plans including funding levels, membership and percentage of funded balance.

The State of State Pension Plans: A Deep Dive into Shortfalls and Surpluses (PDF format, 361 KB)
In November of 2012, Morningstar completed a study entitled "The State of State Pension Plans: A Deep Dive into Shortfalls and Surpluses." The study provides comparison tables of all 50 states. Data shows that Florida is not alone in pension challenges. Interestingly, Florida is one of very few states that has only one state pension program. Some states have more than 10. The study shows that Florida's program is currently 86.9% funded, down from a high of 105.6% in 2007. While Florida does not have the highest funded ratio, we are doing much better than many of our neighbors. Alabama's funded ratio is only 66.9%.

Health Insurance (Updated 1/17/13)

Health insurance costs continue to be an area for concern for individuals, businesses and government agencies. The Affordable Care Act will impact health costs and benefits in the coming years. We will provide information on reports made available to the legislature as well as bills affecting health insurance.

Reports

Program Overview and Impacts of PPACA (PDF format, 521KB)
This report was prepared by the Director of the House Select Committee on PPACA and presented on January 16, 2013. The report covers the impacts of the Affordable Care Act on the state health insurance program.

Health Care Reform: General Employer Considerations (PDF format, 143KB)
This report was prepared by Stuart D. Rachlin, F.S.A., M.A.A.A, a Principal and Consulting Actuary from Milliman, Inc. and presented on January 16, 2013. This report focuses on overall impacts of Health Care Reform and the Affordable Care Act on the nation as a whole.