Florida Senate - 2016                                    SB 7044
       By the Committee on Governmental Oversight and Accountability
       585-02039-16                                          20167044__
    1                        A bill to be entitled                      
    2         An act relating to retirement benefits for certain
    3         judges; amending s. 121.053, F.S.; authorizing certain
    4         retired members of the Florida Retirement System
    5         subsequently serving in a specified judicial office
    6         covered by the Elected Officers’ Class to transfer all
    7         or a portion of benefits and interest accrued during
    8         participation in the Deferred Retirement Option
    9         Program to the investment plan; prohibiting transfer
   10         of funds to the Florida Retirement System Trust Fund
   11         after the election is made; prohibiting distribution
   12         of transferred funds until the member ceases all
   13         employment relationships and completes certain
   14         requirements; defining the term “eligible officer”;
   15         amending ss. 121.091 and 121.4501, F.S.; conforming
   16         provisions to changes made by the act; requiring the
   17         State Board of Administration and the Department of
   18         Management Services to request a private letter ruling
   19         from the United States Internal Revenue Service;
   20         providing for applicability in the event of an
   21         unfavorable private letter ruling; providing an
   22         effective date.
   24  Be It Enacted by the Legislature of the State of Florida:
   26         Section 1. Paragraph (a) of subsection (7) of section
   27  121.053, Florida Statutes, is amended to read:
   28         121.053 Participation in the Elected Officers’ Class for
   29  retired members.—
   30         (7) A member who is elected or appointed to an elective
   31  office and who is participating in the Deferred Retirement
   32  Option Program is not subject to termination as defined in s.
   33  121.021, or reemployment limitations as provided in s.
   34  121.091(9), until the end of his or her current term of office
   35  or, if the officer is consecutively elected or reelected to an
   36  elective office eligible for coverage under the Florida
   37  Retirement System, until he or she no longer holds an elective
   38  office, as follows:
   39         (a) At the end of the 60-month DROP period:
   40         1. The officer’s DROP account may not accrue additional
   41  monthly benefits, but does continue to earn interest as provided
   42  in s. 121.091(13). However, an officer whose DROP participation
   43  begins on or after July 1, 2010, may not continue to earn such
   44  interest.
   45         2. Retirement contributions, except for unfunded actuarial
   46  liability and health insurance subsidy contributions required in
   47  ss. 121.71(5) and 121.76, are not required of the employer of
   48  the elected officer, and additional retirement credit may not be
   49  earned under the Florida Retirement System.
   50         3. Before termination, an eligible officer may elect to
   51  transfer all or a portion of the benefits and interest accrued
   52  during DROP participation to the investment plan pursuant to s.
   53  121.4501(21). Once the eligible officer transfers funds to the
   54  investment plan, the eligible officer may not elect to transfer
   55  funds back to the Florida Retirement System Trust Fund. A
   56  distribution of the funds transferred to the investment plan may
   57  not occur until the member has ceased all employment
   58  relationships as provided in s. 121.021(39) and completed all
   59  the requirements under s. 121.091(13) for a distribution under
   60  the program. For purposes of this subparagraph, the term
   61  “eligible officer” means a member of the pension plan
   62  participating in DROP who is serving as a county judge or
   63  circuit judge and has:
   64         a.Attained age 62, if initially enrolled in the pension
   65  plan before July 1, 2011; or
   66         b. Attained age 65, if initially enrolled in the pension
   67  plan on or after July 1, 2011.
   68         Section 2. Paragraph (c) of subsection (13) of section
   69  121.091, Florida Statutes, is amended to read:
   70         121.091 Benefits payable under the system.—Benefits may not
   71  be paid under this section unless the member has terminated
   72  employment as provided in s. 121.021(39)(a) or begun
   73  participation in the Deferred Retirement Option Program as
   74  provided in subsection (13), and a proper application has been
   75  filed in the manner prescribed by the department. The department
   76  may cancel an application for retirement benefits when the
   77  member or beneficiary fails to timely provide the information
   78  and documents required by this chapter and the department’s
   79  rules. The department shall adopt rules establishing procedures
   80  for application for retirement benefits and for the cancellation
   81  of such application when the required information or documents
   82  are not received.
   83         (13) DEFERRED RETIREMENT OPTION PROGRAM.—In general, and
   84  subject to this section, the Deferred Retirement Option Program,
   85  hereinafter referred to as DROP, is a program under which an
   86  eligible member of the Florida Retirement System may elect to
   87  participate, deferring receipt of retirement benefits while
   88  continuing employment with his or her Florida Retirement System
   89  employer. The deferred monthly benefits shall accrue in the
   90  Florida Retirement System on behalf of the member, plus interest
   91  compounded monthly, for the specified period of the DROP
   92  participation, as provided in paragraph (c). Upon termination of
   93  employment, the member shall receive the total DROP benefits and
   94  begin to receive the previously determined normal retirement
   95  benefits. Participation in the DROP does not guarantee
   96  employment for the specified period of DROP. Participation in
   97  DROP by an eligible member beyond the initial 60-month period as
   98  authorized in this subsection shall be on an annual contractual
   99  basis for all participants.
  100         (c) Benefits payable under DROP.—
  101         1. Effective on the date of DROP participation, the
  102  member’s initial normal monthly benefit, including creditable
  103  service, optional form of payment, and average final
  104  compensation, and the effective date of retirement are fixed.
  105  The beneficiary established under the Florida Retirement System
  106  is the beneficiary eligible to receive any DROP benefits payable
  107  if the DROP participant dies before completing the period of
  108  DROP participation. If a joint annuitant predeceases the member,
  109  the member may name a beneficiary to receive accumulated DROP
  110  benefits payable. The retirement benefit, the annual cost of
  111  living adjustments provided in s. 121.101, and interest accrue
  112  monthly in the Florida Retirement System Trust Fund. For members
  113  whose DROP participation begins:
  114         a. Before July 1, 2011, the interest accrues at an
  115  effective annual rate of 6.5 percent compounded monthly, on the
  116  prior month’s accumulated ending balance, up to the month of
  117  termination or death, except as provided in s. 121.053(7).
  118         b. On or after July 1, 2011, the interest accrues at an
  119  effective annual rate of 1.3 percent, compounded monthly, on the
  120  prior month’s accumulated ending balance, up to the month of
  121  termination or death, except as provided in s. 121.053(7).
  122         2. Each employee who elects to participate in DROP may
  123  elect to receive a lump-sum payment for accrued annual leave
  124  earned in accordance with agency policy upon beginning
  125  participation in DROP. The accumulated leave payment certified
  126  to the division upon commencement of DROP shall be included in
  127  the calculation of the member’s average final compensation. The
  128  employee electing the lump-sum payment is not eligible to
  129  receive a second lump-sum payment upon termination, except to
  130  the extent the employee has earned additional annual leave
  131  which, combined with the original payment, does not exceed the
  132  maximum lump-sum payment allowed by the employing agency’s
  133  policy or rules. An early lump-sum payment shall be based on the
  134  hourly wage of the employee at the time he or she begins
  135  participation in DROP. If the member elects to wait and receive
  136  a lump-sum payment upon termination of DROP and termination of
  137  employment with the employer, any accumulated leave payment made
  138  at that time may not be included in the member’s retirement
  139  benefit, which was determined and fixed by law when the employee
  140  elected to participate in DROP.
  141         3. The effective date of DROP participation and the
  142  effective date of retirement of a DROP participant shall be the
  143  first day of the month selected by the member to begin
  144  participation in DROP, provided such date is properly
  145  established, with the written confirmation of the employer, and
  146  the approval of the division, on forms required by the division.
  147         4. Normal retirement benefits and any interest continue to
  148  accrue in DROP until the established termination date of DROP or
  149  until the member terminates employment or dies before such date,
  150  except as provided in s. 121.053(7). Although individual DROP
  151  accounts may not be established, a separate accounting of each
  152  member’s accrued benefits under DROP shall be calculated and
  153  provided to the member.
  154         5. At the conclusion of the member’s participation in DROP,
  155  the division shall distribute the member’s total accumulated
  156  DROP benefits, subject to the following:
  157         a. The division shall receive verification by the member’s
  158  employer or employers that the member has terminated all
  159  employment relationships as provided in s. 121.021(39).
  160         b. The terminated DROP participant or, if deceased, the
  161  member’s named beneficiary, shall elect on forms provided by the
  162  division to receive payment of the DROP benefits in accordance
  163  with one of the options listed below. If a member or beneficiary
  164  fails to elect a method of payment within 60 days after
  165  termination of DROP, the division shall pay a lump sum as
  166  provided in sub-sub-subparagraph (I).
  167         (I) Lump sum.—All accrued DROP benefits, plus interest,
  168  less withholding taxes remitted to the Internal Revenue Service,
  169  shall be paid to the DROP participant or surviving beneficiary.
  170         (II) Direct rollover.—All accrued DROP benefits, plus
  171  interest, shall be paid from DROP directly to the custodian of
  172  an eligible retirement plan as defined in s. 402(c)(8)(B) of the
  173  Internal Revenue Code. However, in the case of an eligible
  174  rollover distribution to the surviving spouse of a deceased
  175  member, an eligible retirement plan is an individual retirement
  176  account or an individual retirement annuity as described in s.
  177  402(c)(9) of the Internal Revenue Code.
  178         (III) Partial lump sum.—A portion of the accrued DROP
  179  benefits shall be paid to DROP participant or surviving spouse,
  180  less withholding taxes remitted to the Internal Revenue Service,
  181  and the remaining DROP benefits must be transferred directly to
  182  the custodian of an eligible retirement plan as defined in s.
  183  402(c)(8)(B) of the Internal Revenue Code. However, in the case
  184  of an eligible rollover distribution to the surviving spouse of
  185  a deceased member, an eligible retirement plan is an individual
  186  retirement account or an individual retirement annuity as
  187  described in s. 402(c)(9) of the Internal Revenue Code. The
  188  proportions must be specified by the DROP participant or
  189  surviving beneficiary.
  191  An eligible officer, as defined in s. 121.053(7), who
  192  transferred accrued DROP benefits and interest to the investment
  193  plan must meet the requirements of s. 121.4501(21), which
  194  include the termination of all employment relationships as
  195  provided in s. 121.021(39), and complete the requirements of
  196  this sub-subparagraph to process the payment of any accrued DROP
  197  benefits and interest retained in the Florida Retirement System
  198  Trust Fund.
  199         c. The form of payment selected by the DROP participant or
  200  surviving beneficiary must comply with the minimum distribution
  201  requirements of the Internal Revenue Code.
  202         d. A DROP participant who fails to terminate all employment
  203  relationships as provided in s. 121.021(39) shall be deemed as
  204  not retired, and the DROP election is null and void. Florida
  205  Retirement System membership shall be reestablished
  206  retroactively to the date of the commencement of DROP, and each
  207  employer with whom the member continues employment must pay to
  208  the Florida Retirement System Trust Fund the difference between
  209  the DROP contributions paid in paragraph (i) and the
  210  contributions required for the applicable Florida Retirement
  211  System class of membership during the period the member
  212  participated in DROP, plus 6.5 percent interest compounded
  213  annually.
  214         6. The retirement benefits of any DROP participant who
  215  terminates all employment relationships as provided in s.
  216  121.021(39) but is reemployed in violation of the reemployment
  217  provisions of subsection (9) are suspended during those months
  218  in which the retiree is in violation. Any retiree in violation
  219  of this subparagraph and any employer that employs or appoints
  220  such person without notifying the division to suspend retirement
  221  benefits are jointly and severally liable for any benefits paid
  222  during the reemployment limitation period. The employer must
  223  have a written statement from the retiree that he or she is not
  224  retired from a state-administered retirement system. Any
  225  retirement benefits received by a retiree while employed in
  226  violation of the reemployment limitations must be repaid to the
  227  Florida Retirement System Trust Fund, and his or her retirement
  228  benefits shall remain suspended until payment is made. Benefits
  229  suspended beyond the end of the reemployment limitation period
  230  apply toward repayment of benefits received in violation of the
  231  reemployment limitation.
  232         7. The accrued benefits of any DROP participant, and any
  233  contributions accumulated under the program, are not subject to
  234  assignment, execution, attachment, or any legal process except
  235  for qualified domestic relations court orders, income deduction
  236  orders as provided in s. 61.1301, and federal income tax levies.
  237         8. DROP participants are not eligible for disability
  238  retirement benefits as provided in subsection (4).
  239         Section 3. Paragraphs (e) and (i) of subsection (2) and
  240  subsection (21) of section 121.4501, Florida Statutes, are
  241  amended to read:
  242         121.4501 Florida Retirement System Investment Plan.—
  243         (2) DEFINITIONS.—As used in this part, the term:
  244         (e) “Eligible employee” means an officer or employee, as
  245  defined in s. 121.021, who:
  246         1. Is a member of, or is eligible for membership in, the
  247  Florida Retirement System, including any renewed member of the
  248  Florida Retirement System initially enrolled before July 1,
  249  2010; or
  250         2. Participates in, or is eligible to participate in, the
  251  Senior Management Service Optional Annuity Program as
  252  established under s. 121.055(6), the State Community College
  253  System Optional Retirement Program as established under s.
  254  121.051(2)(c), or the State University System Optional
  255  Retirement Program established under s. 121.35.
  257  The term does not include any member participating in the
  258  Deferred Retirement Option Program established under s.
  259  121.091(13), except as provided in paragraph (21)(b), a retiree
  260  of a state-administered retirement system initially reemployed
  261  in a regularly established position on or after July 1, 2010, or
  262  a mandatory participant of the State University System Optional
  263  Retirement Program established under s. 121.35.
  264         (i) “Member” or “employee” means an eligible employee who
  265  enrolls in the investment plan as provided in subsection (4), a
  266  terminated Deferred Retirement Option Program member as
  267  described in paragraph (21)(a), an eligible elected officer as
  268  described in paragraph (21)(b) subsection (21), or a beneficiary
  269  or alternate payee of a member or employee.
  272         (a) Notwithstanding any other provision of law, members in
  273  the Deferred Retirement Option Program offered under part I may,
  274  after conclusion of their participation in the program and
  275  meeting the definition of termination in s. 121.021, elect to
  276  roll over or authorize a direct trustee-to-trustee transfer to
  277  an account under the investment plan of their Deferred
  278  Retirement Option Program proceeds distributed as provided under
  279  s. 121.091(13)(c)5. The transaction is considered must
  280  constitute an “eligible rollover distribution” within the
  281  meaning of s. 402(c)(4) of the Internal Revenue Code.
  282         (b)1. After his or her benefits cease to accrue in the
  283  Deferred Retirement Option Program and before meeting the
  284  definition of termination in s. 121.021, an eligible officer, as
  285  defined in s. 121.053(7)(a)3., may elect to transfer all or a
  286  portion of the total accumulated Deferred Retirement Option
  287  Program benefits plus interest to the investment plan subject to
  288  the terms of s. 121.053(7)(a)3. The transaction must constitute
  289  a “direct trustee-to-trustee transfer” under the Internal
  290  Revenue Code.
  291         2. After the eligible officer has ceased all employment
  292  relationships as provided in s. 121.021(39), the eligible
  293  officer may authorize a distribution of those proceeds as
  294  provided in s. 121.591.
  295         (c)(a) The investment plan may accept such amounts for
  296  deposit into member accounts as provided in paragraph (5)(e).
  297         (d)(b) The affected member shall direct the investment of
  298  his or her investment account; however, unless he or she becomes
  299  a renewed member of the Florida Retirement System under s.
  300  121.122 and elects to participate in the investment plan, no
  301  contributions may be made to the member’s account as provided
  302  under paragraph (5)(a).
  303         (e)(c) The state board or the department is not responsible
  304  for locating those persons who may be eligible to participate in
  305  the investment plan under this subsection.
  306         Section 4. (1) As soon as practicable after the effective
  307  date of this act, the State Board of Administration and the
  308  Department of Management Services shall request a private letter
  309  ruling from the United States Internal Revenue Service. If the
  310  United States Internal Revenue Service refuses to act upon the
  311  request for a private letter ruling, then a legal opinion from a
  312  qualified tax attorney or firm may be substituted for such
  313  private letter ruling.
  314         (2) If the state board or the department receives
  315  notification from the United States Internal Revenue Service
  316  that this act or any portion of this act will cause the Florida
  317  Retirement System, or a portion thereof, to be disqualified for
  318  tax purposes under the Internal Revenue Code, then the portion
  319  that will cause the disqualification does not apply. Upon
  320  receipt of such notice, the state board and the department shall
  321  notify the presiding officers of the Legislature.
  322         Section 5. This act shall take effect upon becoming a law.