Federal Legislation
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State Legislation
FPPTA Legislative Report
State of Florida by FPPTA State Legislative Consultant, Randy Touchton
February 1, 2010
Defined Benefit vs. Defined Contribution Pension Plans
The difference this session versus the past two is that Senator Mike Fasano now
has a House Companion to his legislation Senate Bill 660. Representative John Wood
has filed House Bill 413, and although the bills are not identical, with minor modifications
that could be accomplished. The bottom line, however, is that the intent of both
bills are to move toward a defined contribution plan that are the same.
Florida Retirement System
This is the first year, in the past 12, that the FRS has an unfunded liability.
This is a result of below market investment returns by the State Board of Administration.
The current economic downturn, coupled with the budget shortfalls on both the state
and local levels, are being use as reasons to drastically consider changes to the
FRS. Interestingly, most if not all, are on the backs of employees.
At the last senate Governmental Accountability and Oversight Committee, there was
significant discussion of reinstituting and FRS employee retirement contribution,
which would be used to offset the need to raiser employer contributions. The FRS
has been a non-employee contributory system since 1975. Interestingly, during the
past 12 good years when the FRS has enjoyed a surplus, all of those surplus dollars
have gone toward lowering the FRS employer contributions. As an example, in 2002,
$1,061,700,000 was used for that specific purpose.
The Office of Program Policy Analysis and Government Oversight, an analytical arm
of the Legislature, has currently been directed to complete a study on the Florida
Retirement System with primary focus on the current condition of the FRS, an examination
of the current class structure, the DROP program, and Defined Contribution versus
a Defined Benefit Plan. The study is slated to be completed by the end of January
and be ready for public consumption on the first part of February.
I have spoken to a number of individuals which have been involved with the study,
and have been told that we will not be pleased with the recommendations contained
therein.
175/185 Local Pension Plans
Although the Florida League of Cities had originally planned on filing a comprehensive
piece of legislation relating to the Local Pension Plans, they were unsuccessful
in finding a sponsor for their bill. My understanding is that their legislation
would have changed the method by which the premium tax revenues are dispersed and
increase the revenue to the local governments to further offset their costs. In
addition, they are still unsettled with our success in codifying the 4th District
Court of Appeals decision relating to terminated pension plans (SB 538) and were
going to make a run at repealing or significantly amending that section to their
liking.
We need to keep a close eye on the House Appropriation Committee, since their staff
has been inquiring as to how much premium tax revenue is being generated, and for
what purpose it is being used. In this day and age, and with the continued budget
shortfalls, nothing is sacred.
Administrative Rules 60t
There has not been much activity on the Division of Retirement draft rules relating
to the Chapter 175 and 185 Local Pension Plans since the public hearings, which
occurred in Tallahassee and Orlando. I believe, however, that is about to change.
The next step in the rule making process would be to take the testimony and suggested
changes raised at the above public hearings and incorporate them into a proposed
rule. The proposed rule would be noticed in the Administrative Weekly, and subsequently,
a public hearing would be scheduled.
February Committee Meetings
The legislative is practically in full gear now. Committee Meetings will be held
the 1st week of February, the week of February 8th is specifically set aside for
Appropriation Committee Meetings, and the week of February 15th, all committees
will be back on track to meet. Although up until now there have been very few bills
considered in committee, that is about to change
I will be attending the Senate Community Affairs, the Senate Government Oversight
and Accountability Committee, the House Governmental Affairs Committee, and the
respective Appropriation Committees in both the House and the Senate, which deal
with our areas of interest.
In addition, I will be meeting with as many of the members that serve on the above
committees as I can to educate them on issues of importance to us.
Session Dates
March 2nd Regular Session convenes
April 30th last day of the Regular Session
2010 Issue Brief: Municipal Pension Plans
The Florida League of Cities will support legislation that provides comprehensive
municipal firefighter and police officer pension reform. Any comprehensive pension
reform package should address the issue of statutory presumptions and maximum benefits
should be based on actual base salary. Alternatives to defined benefit programs
should be incentivized and cities that join the Florida Retirement System for firefighters
or police officers should be allowed to purchase past service credit at the 3% rate,
rather than the current law 2% rate. Pension boards should not consist of a majority
of plan members and all plans and plan expenses should receive third party independent
review. Lastly, if a firefighter or police officer pension plan does not accept
insurance premium tax revenues, then the insurance premium tax should not be changed
in that jurisdiction.
Background:
The Senate Oversight Committee on Government Operations in 2008 and 2007 performed
an interim project on local government defined benefit pension plans (not including
the Florida Retirement System). Several hundred local governments in Florida, primarily
cities and, to a lesser extent, special districts, sponsor more than 500 separate
single purpose or multi-purpose pension plans for their officers and employees.
The state Division of Retirement produces an Annual Report on local government retirement
systems. The Annual Reports for the past several years identified various issues
of concern with local government retirement systems, including: auditing of pension
plans; limiting certain required contributions; clarifying existing statutory provisions;
retaining contribution stability; determining the “reasonableness” of certain assumptions;
and non-forfeitable benefits. The Division’s issues of concern and recommendations
could have a significant impact on the operation of various local government defined
benefit pension plans.
In 1999, the Legislature amended chapters 175 and 185, Florida Statutes, relating
to firefighter and police officer pensions to state that additional premium tax
revenues over a base amount must be used to provide “extra benefits” in firefighter
and police officer pension plans. The Legislature further amended the law to state
that the term “extra benefits” means benefits in addition to those in existence
in the plan on March 12, 1999. What this means is if a municipality could not use
additional premium tax revenues to pay for the benefit; however, if the municipality
had provided the exact same benefit on or after March 13, 1999, it could have used
additional premium tax revenues to pay for the benefit. This arbitrary date, selected
by the Legislature for determining when a pension benefit should be considered to
be an “extra benefit,” essentially punishes municipalities that offered heightened
pension benefits to their firefighters and police officers prior to March 12, 1999.
In aggregate numbers, it is estimated that municipalities have had to provide over
$250 million in "extra pension benefits" to firefighters and police officers since
March 12, 1999.
J. Stephen Palmquist, ASA, MAAA, FCA, EA
Gabriel, Roeder, Smith & Company
One East Broward Blvd., Suite 505
Fort Lauderdale, FL 33301
SB1710 would prevent local governments from paying any of the post retirement medical
premiums and would eliminate the statutory provision that requires premiums for
retirees to be determined as a blend of active and retiree experience. Retirees
would see a huge increase in their expenses if this bill passes.
