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What a Ride!

What a Ride!. Legislative Changes to Governmental Pensions in Florida Bonni S. Jensen The Law Offices Of Perry & Jensen, LLC 400 Executive Center Drive, Suite 207 West Palm Beach, Florida 33401 561-686-6550/bsjensen@perryjensenlaw.com. Laws Affecting Pensions. HB 303 SB 1128 SB 1130

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What a Ride!

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  1. What a Ride! Legislative Changes to Governmental Pensions in Florida Bonni S. Jensen The Law Offices Of Perry & Jensen, LLC 400 Executive Center Drive, Suite 207 West Palm Beach, Florida 33401 561-686-6550/bsjensen@perryjensenlaw.com

  2. Laws Affecting Pensions • HB 303 • SB 1128 • SB 1130 • HB 1405 • SB 2100 • HB 7241

  3. And then there were 2 • SB 1128 – addresses municipal, police and firefighter pension plans • HB 2100 – addresses the Florida Retirement System (“FRS”)

  4. SB 1128 – Section 1 – 112.63 • Actuarial reports and statements of actuarial impact review. • Requires Plans to disclose the present value of the accrued benefits using the FRS rate of return. • Currently, the FRS rate is 7.75%. • Accrued benefits include vested and non-vested as well as the total benefits. • Designed to promote comparability of plans.

  5. IMPACT • Will require a new page to the actuarial impact statement. • State will provide the FRS rate of return on the state website. • Calculation is performed using FASB 35.

  6. SB 1128 – Section 2 – 112.66 • New subsection (11) which provides that: • For service earned after July 1, 2011 OR • Service earned under a collective bargaining agreement entered into on or after July 1, 2011 • Benefits may be calculated using • Up to 300 hours of overtime (as provided for by the CBA or the Plan) • But not payments for accrued unused sick or annual leave

  7. IMPACT • Applies only to defined benefit plans. • Does not apply to FRS. • Bargaining parties need to be advised that for the next collective bargaining agreement, exclusion of sick and vacation hours needs to be bargained. • Overtime over 300 hours may not be included • If more than 300 hours can be worked, then system to exclude those hours needs to be designed.

  8. SB 1128 – Section 2 – 112.66 • New subsection (12) which provides that: • Actuarial or cash surplus may not be used to pay expenses outside of the Plan.

  9. SB 1128 – Section 2 – 112.66 • New subsection (13) which provides that: • An employer must annually pay at least the normal cost. • Sections 175.091(1)(d) and 185.07(1)(d) requires the municipality to pay the normal cost and the amount required to fund any actuarial deficiency shown by an actuarial valuation. • This section does not apply to FRS.

  10. SB 1128 – Section 3 – 112.665 • Duties of Management Services • Management services will provide a fact sheet for each governmental defined benefit plan. • Fact sheet will summarize the plan’s actuarial status. • Fact sheet will be posted on the Management services website.

  11. SB 1128 – Secs. 4 & 8 – 175.032 & 185.02 Definition of Compensation • For service earned and collective bargaining agreements in place before July 1, 2011, definition of compensation remains the same as it was before July 1, 2011. • For service earned after July 1, 2011 OR Service earned under a collective bargaining agreement entered into on or after July 1, 2011 • Benefits may be calculated using • Up to 300 hours of overtime (as provided for by the CBA or the Plan) • But not payments for accrued unused sick or annual leave

  12. IMPACT • No change to minimums - Overtime is still a minimum for Police Officers but not for Firefighters. • If no union representation, law is effective July 1, 2011. • If there is a union contract and it addresses pensions, law takes effect when the new agreement is entered into. • There is still discussion about effective date if the contract does not expressly include pensions.

  13. SB 1128 – Secs. 5 & 9 – 175.061 and 185.05 Board of Trustees • Applies to Boards in place on June 30, 1986 that have higher employee percentage than 40%. • Allows only the municipal seat designations to be changed (For example replace the Mayor on the Board with another City representative). • Firefighter, Police Officer and municipal representation percentages cannot be changed. • Municipal representative must still be a resident.

  14. SB 1128 – Secs. 6 & 10 – 175.091 and 185.07 • Allows employee contributions to be increased without corresponding increase in benefits if: • The collective bargaining representative consents OR, if not represented by a Union • A majority of the members of the Fund approve.

  15. Financial Rating of Pensions • Department of Management Services is to create a plan to rate local government defined benefits pension plans. • Local Governmental Plans shall cooperate in providing necessary information. • Plan shall be submitted by January 1, 2012 to the Governor, the Speaker of the House and the President of the Senate.

  16. Financial Rating of Pensions • Considerations: • Current and future unfunded liabilities • Net asset value, managed returns and funded ratio • Metrics related to sustainability, including employer contributions percentage of payroll • Municipal Bond ratings • Whether there is a reduced contribution rate when the plan has an actuarial surplus • Whether the actuarial surplus is used for obligations outside of the pension plan

  17. Task Force on Public Employee Disability Presumptions • Task Force to look at the presumptions contained in Florida Statutes 112.18, 175.231, and 185.34. • Task force will be appointed on or before July 15, 2011 and will meet for the first time before August 15, 2011. • Department of Financial Services shall provide administrative support. • Report shall be submitted by January 2012.

  18. Task Force on Public Employee Disability Presumptions - Members • 3 appointed by the Senate President: • One Attorney who represents Plaintiffs • One representative of organized labor who is in a 175 plan • A representative from the Florida Association of Counties • 3 appointed by the Speaker of the House: • One Attorney who represents Defendants • One representative of organized labor who is in a 185 plan • A representative from the Florida League of Cities • A member employed by the Division of Retirement with experience in local government, appointed by the Governor • A member employed by Department of Financial Services with expertise in state risk management appointed by the Chief Financial Officer

  19. Task Force on Public Employee Disability Presumptions • Considerations: • Data related to operation of presumptions and fiscal impact to employers in pensions and workers compensation; • Presumptions in other states; • Proposals for change; and • Evidentiary standards and burden of proof including consideration of blood cholesterol level, body mass index, history of tobacco and alcohol use and other medical conditions.

  20. HB 2100 • 3% employee contribution, beginning July 1, 2011. DROP participants will not contribute because they are retired for benefit accrual purposes. • DROP interest rate is reduced to 1.3% (from 6.5%) for any member entering DROP on and after July 1, 2011. • Cost-of-Living increase for service earned on and after July 1, 2011 is eliminated. The COLA crediting will return effective July 1, 2016, if funding is provided.

  21. HB 2100 – New Hires after 7/1/11 • Vesting 8 years – increased from 6 years • Average Final Compensation period 8 years – increased from 5 years • Normal Retirement increased to: • Special Risk – Age 60 with 8 years of service or 30 years of service at any age • All Other Classes – Age 65 with 8 years of service or 33 years of service at any age

  22. 2011 FRS Contribution Rates - Employer • Regular Class 3.28% • Special Risk 10.21% • Special Risk Administrative 4.07% • Elected Officers – State 7.02% • Elected Officers – Judges 9.78% • Elected Officers – County 9.27% • Senior Mgt 4.81% • DROP 3.31%

  23. 2011 FRS Contribution Rates – Unfunded Actuarial Accrued Liability • Regular Class 0.49% • Special Risk 2.75% • Special Risk Administrative 0.83% • Elected Officers – State 0.88% • Elected Officers – Judges 0.77% • Elected Officers – County 0.73% • Senior Mgt 0.32% • DROP 0.00%

  24. 2012 FRS Contribution Rates - Employer • Regular Class 3.28% • Special Risk 10.21% • Special Risk Administrative 4.07% • Elected Officers – State 7.02% • Elected Officers – Judges 9.78% • Elected Officers – County 9.27% • Senior Mgt 4.81% • DROP 3.31%

  25. 2012 FRS Contribution Rates – Unfunded Actuarial Accrued Liability • Regular Class 2.16% • Special Risk 8.21% • Special Risk Administrative 21.40% • Elected Officers – State 21.76% • Elected Officers – Judges 12.86% • Elected Officers – County 22.05% • Senior Mgt 10.51% • DROP 6.36%

  26. Questions ?

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