Florida Senate - 2017                                     SB 632
       
       
        
       By Senator Brandes
       
       24-00445B-17                                           2017632__
    1                        A bill to be entitled                      
    2         An act relating to publicly funded defined benefit
    3         retirement plans; reordering and amending s. 112.625,
    4         F.S.; defining the term “long-range return rate”;
    5         amending s. 112.63, F.S.; revising requirements for
    6         actuarial reports submitted by a retirement plan or
    7         system subject to part VII of ch. 112, F.S., to
    8         conform; amending s. 112.64, F.S.; prohibiting the
    9         actuarial assumed rate of return of a plan or system
   10         from exceeding the long-range return rate, as of a
   11         specified date; specifying the length of time that a
   12         long-range return rate is in effect; specifying the
   13         method of reducing the actuarial assumed rate of
   14         return if certain conditions exist; prescribing
   15         reporting requirements for a plan or system with an
   16         actuarial assumed rate of return in excess of the
   17         long-range return rate; amending ss. 175.261 and
   18         185.221, F.S.; conforming cross-references; providing
   19         a declaration of important state interest; providing
   20         an effective date.
   21          
   22  Be It Enacted by the Legislature of the State of Florida:
   23  
   24         Section 1. Section 112.625, Florida Statutes, is reordered
   25  and amended to read:
   26         112.625 Definitions.—As used in this act:
   27         (9)(1) “Retirement system or plan” means any employee
   28  pension benefit plan supported in whole or in part by public
   29  funds, provided such plan is not:
   30         (a) An employee benefit plan described in s. 4(a) of the
   31  Employee Retirement Income Security Act of 1974, which is not
   32  exempt under s. 4(b)(1) of such act;
   33         (b) A plan which is unfunded and is maintained by an
   34  employer primarily for the purpose of providing deferred
   35  compensation for a select group of management or highly
   36  compensated employees;
   37         (c) A coverage agreement entered into pursuant to s. 218 of
   38  the Social Security Act;
   39         (d) An individual retirement account or an individual
   40  retirement annuity within the meaning of s. 408, or a retirement
   41  bond within the meaning of s. 409, of the Internal Revenue Code
   42  of 1954;
   43         (e) A plan described in s. 401(d) of the Internal Revenue
   44  Code of 1954; or
   45         (f) An individual account consisting of an annuity contract
   46  described in s. 403(b) of the Internal Revenue Code of 1954.
   47         (7)(2) “Plan administrator” means the person so designated
   48  by the terms of the instrument or instruments, ordinance, or
   49  statute under which the plan is operated. If no plan
   50  administrator has been designated, the plan sponsor shall be
   51  considered the plan administrator.
   52         (2)(3) “Enrolled actuary” means an actuary who is enrolled
   53  under Subtitle C of Title III of the Employee Retirement Income
   54  Security Act of 1974 and who is a member of the Society of
   55  Actuaries or the American Academy of Actuaries.
   56         (1)(4) “Benefit increase” means a change or amendment in
   57  the plan design or benefit structure which results in increased
   58  benefits for plan members or beneficiaries.
   59         (3)(5) “Governmental entity” means the state, for the
   60  Florida Retirement System, and the county, municipality, special
   61  district, or district school board which is the employer of the
   62  member of a local retirement system or plan.
   63         (6) “Pension or retirement benefit” means any benefit,
   64  including a disability benefit, paid to a member or beneficiary
   65  of a retirement system or plan as defined in subsection (9)(1).
   66         (10)(7) “Statement value” means the value of assets in
   67  accordance with s. 302(c)(2) of the Employee Retirement Income
   68  Security Act of 1974 and as permitted under regulations
   69  prescribed by the Secretary of the Treasury as amended by Pub.
   70  L. No. 100-203, as such sections are in effect on August 16,
   71  2006. Assets for which a fair market value is not provided shall
   72  be excluded from the assets used in the determination of annual
   73  funding cost.
   74         (5)(8) “Named fiduciary,” “board,” or “board of trustees”
   75  means the person or persons so designated by the terms of the
   76  instrument or instruments, ordinance, or statute under which the
   77  plan is operated.
   78         (8)(9) “Plan sponsor” means the local governmental entity
   79  that has established or that may establish a local retirement
   80  system or plan.
   81         (4) “Long-range return rate” means an actuarial assumed
   82  rate of return that is expected to be realized at least 50
   83  percent of the time over the next 30-year period.
   84         Section 2. Paragraph (c) of subsection (1) of section
   85  112.63, Florida Statutes, is amended, and paragraph (h) is added
   86  to that subsection, to read:
   87         112.63 Actuarial reports and statements of actuarial
   88  impact; review.—
   89         (1) Each retirement system or plan subject to the
   90  provisions of this act shall have regularly scheduled actuarial
   91  reports prepared and certified by an enrolled actuary. The
   92  actuarial report shall consist of, but is not limited to, the
   93  following:
   94         (c) A description and explanation of actuarial assumptions
   95  consistent with the requirements of s. 112.64.
   96         (h) A description of proposed adjustments to any actuarial
   97  assumptions, if required pursuant to s. 112.64.
   98  
   99  The actuarial cost methods utilized for establishing the amount
  100  of the annual actuarial normal cost to support the promised
  101  benefits shall only be those methods approved in the Employee
  102  Retirement Income Security Act of 1974 and as permitted under
  103  regulations prescribed by the Secretary of the Treasury.
  104         Section 3. Present subsection (7) of section 112.64,
  105  Florida Statutes, is renumbered as subsection (9) and a new
  106  subsection (7) and subsection (8) are added to that section, to
  107  read:
  108         112.64 Administration of funds; amortization of unfunded
  109  liability.—
  110         (7) Beginning January 1, 2021, the actuarial assumed rate
  111  of return for each plan year may not be greater than the long
  112  range return rate. Beginning with the 2021 plan year, the long
  113  range return rate is effective for each plan or system for a 5
  114  year period, and must be reevaluated and reestablished for each
  115  subsequent 5-year period thereafter and be consistent with the
  116  definition in s. 112.625(4). Each plan or system with an
  117  actuarial assumed rate of return greater than the long-range
  118  return rate on or after January 1, 2021, shall reduce the
  119  actuarial assumed rate of return for the next plan year by at
  120  least 25 basis points and shall continue to reduce the actuarial
  121  assumed rate by at least an additional 25 basis points for each
  122  subsequent plan year until the actuarial assumed rate of return
  123  is equal to or less than the long-range return rate.
  124         (8) Any plan or system that for any plan year has an
  125  actuarial assumed rate of return greater than the long-range
  126  return rate shall include at least the following information in
  127  any report required under s. 112.63:
  128         (a) The total necessary adjustment required to bring the
  129  actuarial assumed rate of return in compliance with the long
  130  range return rate currently in effect.
  131         (b) The number of plan years required to bring the
  132  actuarial assumed rate of return in compliance with the long
  133  range return rate currently in effect.
  134         (c) Any change to the plan investment strategy, including,
  135  but not limited to, changes to asset class allocations, and any
  136  change to actuarial methodology which results in a change to
  137  either the long-range return rate or the actuarial assumed rate
  138  of return of the plan.
  139         (d) The additional cost to the plan or system resulting
  140  from any changes required to be made to the actuarial assumed
  141  rate of return using the long-range return rate currently in
  142  effect.
  143         Section 4. Paragraph (b) of subsection (2) of section
  144  175.261, Florida Statutes, is amended to read:
  145         175.261 Annual report to Division of Retirement; actuarial
  146  valuations.—For any municipality, special fire control district,
  147  chapter plan, local law municipality, local law special fire
  148  control district, or local law plan under this chapter, the
  149  board of trustees for every chapter plan and local law plan
  150  shall submit the following reports to the division:
  151         (2) With respect to local law plans:
  152         (b) In addition to annual reports provided under paragraph
  153  (a), an actuarial valuation of the retirement plan must be made
  154  at least once every 3 years, as provided in s. 112.63,
  155  commencing 3 years from the last actuarial valuation of the plan
  156  or system for existing plans, or commencing 3 years from
  157  issuance of the initial actuarial impact statement submitted
  158  under s. 112.63 for newly created plans. Such valuation shall be
  159  prepared by an enrolled actuary, subject to the following
  160  conditions:
  161         1. The assets shall be valued as provided in s. 112.625(10)
  162  s. 112.625(7).
  163         2. The cost of the actuarial valuation must be paid by the
  164  individual firefighters’ retirement fund or by the sponsoring
  165  municipality or special fire control district.
  166         3. A report of the valuation, including actuarial
  167  assumptions and type and basis of funding, shall be made to the
  168  division within 3 months after the date of valuation. If any
  169  benefits are insured with a commercial insurance company, the
  170  report must include a statement of the relationship of the
  171  retirement plan benefits to the insured benefits, the name of
  172  the insurer, the basis of premium rates, and the mortality
  173  table, interest rate, and method used in valuing the retirement
  174  benefits.
  175         Section 5. Paragraph (b) of subsection (2) of section
  176  185.221, Florida Statutes, is amended to read:
  177         185.221 Annual report to Division of Retirement; actuarial
  178  valuations.—For any municipality, chapter plan, local law
  179  municipality, or local law plan under this chapter, the board of
  180  trustees for every chapter plan and local law plan shall submit
  181  the following reports to the division:
  182         (2) With respect to local law plans:
  183         (b) In addition to annual reports provided under paragraph
  184  (a), an actuarial valuation of the retirement plan must be made
  185  at least once every 3 years, as provided in s. 112.63,
  186  commencing 3 years from the last actuarial valuation of the plan
  187  or system for existing plans, or commencing 3 years from
  188  issuance of the initial actuarial impact statement submitted
  189  under s. 112.63 for newly created plans. Such valuation shall be
  190  prepared by an enrolled actuary, subject to the following
  191  conditions:
  192         1. The assets shall be valued as provided in s. 112.625(10)
  193  s. 112.625(7).
  194         2. The cost of the actuarial valuation must be paid by the
  195  individual police officer’s retirement trust fund or by the
  196  sponsoring municipality.
  197         3. A report of the valuation, including actuarial
  198  assumptions and type and basis of funding, shall be made to the
  199  division within 3 months after the date of the valuation. If any
  200  benefits are insured with a commercial insurance company, the
  201  report must include a statement of the relationship of the
  202  retirement plan benefits to the insured benefits, the name of
  203  the insurer, the basis of premium rates, and the mortality
  204  table, interest rate, and method used in valuing the retirement
  205  benefits.
  206         Section 6. The Legislature finds that a proper and
  207  legitimate state purpose is served when employees and retirees
  208  of the state and its political subdivisions, and the dependents,
  209  survivors, and beneficiaries of such employees and retirees, are
  210  extended the basic protections afforded by governmental
  211  retirement systems that provide fair and adequate benefits and
  212  that are managed, administered, and funded in an actuarially
  213  sound manner as required by s. 14, Article X of the State
  214  Constitution and part VII of chapter 112, Florida Statutes.
  215  Therefore, the Legislature determines and declares that this act
  216  fulfills an important state interest.
  217         Section 7. This act shall take effect July 1, 2017.