| Issue | Good – Current Law | Bad – SB 1130 | Ugly – House Bill 1405 |
| Defined Contribution Plan | FRS Investment Plan is a defined contribution plan, in which employer contributions are the same as employer contribution to FRS defined benefit plan. No employee contribution required. | Enrollment in the defined contribution plan is compulsory for eligible employees in the Elected Officers’ Class, Senior Management Service Class, or in a position for which the starting salary is greater than $75,000 who are employed on or after July 1, 2011, except those who are eligible to and elect to enroll in one of the three optional retirement programs. | Florida Retirement System Investment Plan
Employee contributions required |
| Defined Benefit Plan | FRS Pension Plan is a defined benefit plan, in which the employee is promised a benefit at retirement if he/she has met the 6-year vesting requirement and has reached age 62, or completed 30 years of service. The amount of the pension benefit is determined by a formula (multiplier), based on earnings, length of service, and membership class, and is adjusted by a 3% cost-of-living each July.
The retirement benefit is pre-funded by employer-paid contributions |
Florida Retirement System Pension Plan – enrollment available for employees earning less than $75,000
– Employee contributions required |
Florida Retirement System Pension Plan
– Employee contributions required |
| Employer Contributions | Employer pays 100% of FRS contribution to fund both the FRS Investment Plan and the FRS Pension Plan. | Effective July 1, 2011, each employer shall contribute on behalf of each program member an amount equal to the difference between 10.43% of the employee’s gross monthly compensation and the employee’s required contribution based on the employee’s gross monthly compensation.
Members of the Senior Management Service class who are participating in the Senior Management Service Class optional annuity program will begin paying contributions July 1, 2011.The member’s employer will pay the difference between 12.49 percent of the member’s gross monthly compensation and the amount of the member’s contribution. Effective July 1, 2011, members of the State University System Optional Retirement Program will begin paying contributions. The member’s employer will pay the difference between 10.43% of the member’s gross monthly compensation and the amount of the member’s contribution. |
Required employer retirement contribution rates for each membership class and subclass of the Florida Retirement System for both retirement plans are as follows:
Membership Class % of Gross Compensation Regular Class 6.16% Special Risk Class 16.95% Special Risk Administrative & Support Class 7.23% Elected Officers’ Class 10.76% Elected Officers-Judges 15.19% Senior Management Class 8.14% DROP 3.50% |
| Employee Contributions | ZERO — Employer pays 100% of FRS contribution to fund both the FRS Investment Plan and the FRS Pension Plan. | Each active employee of the FRS, the Senior Management Service Optional Annuity Plan, the State University System Optional Retirement Plan and the Community College Optional Retirement Plan will contribute a percentage of his/her gross salary on a pretax basis.
Employee Contributions – maximum limits Notwithstanding any other provision of law, the amount of employee retirement contributions for any member of the Regular Class or Special Risk Class may not exceed 2% of such member’s annual state compensation and the amount of employee retirement contributions for any member of the Senior Management Service Class or Elected Officers Class may not exceed 4% of such member’s annual state compensation. Employee Contribution – actuarial funding of plan Employee retirement contributions are not required if the Florida Retirement System reaches or exceeds 100% of actuarial funding. However, employee contributions shall be set for an entire fiscal year for each membership class and subclass of the FRS for both the pension and investment plans. Employee Contributions – FY 2011-12 Effective July 1, 2011, required employee retirement contribution rates for all members for fiscal year 2011-2012 shall be 0% for gross compensation up to and including $40,000, plus no more than 2% for gross compensation in excess of $40,000 and up to and including $75,000, plus no more than 4% for gross compensation that is greater than $75,000. |
Beginning 7/1/11, the employer shall deduct the contribution from the employee’s monthly salary, and the contribution shall be submitted to the Division of Retirement. The employee shall not have the option of choosing to receive the contributed amounts directly instead of having them paid by the employer to the plan. Such contributions are mandatory and each employee shall be considered to consent to payroll deductions.
Required employee retirement contribution rates for each membership class: % of Gross Compensation Regular Class 3% Special Risk Class 3% Special Risk Administrative & Support Class 3% Elected Officers’ Class 3% Senior Management Class 3% DROP 0% |
| TOTAL CONTRIBUTION | Determined annually by the FL Legislature | Effective 7/1/11 allocations from the Florida Retirement System Contributions Clearing Trust Fund to investment plan member accounts, which includes employee contributions as required in s. 121.71(3), shall be 11.25% of gross compensation for a member in the Special Risk Class and 9% of gross compensation for members in all other classes. | |
| Cost of Living Adjustment | 3% COLA (cost of living adjustment) each year | No change to current law | No change to current law |
| Accrual Value | 1.6% Regular Class; 2% SMS; 3% Elected Officers’ Class; 3.3% Judges | No change to current law | No change to current law |
| DROP | -Allows FRS employees to retire without terminating employment for up to 5 years (8 years for teachers under certain circumstances).
-Retirement benefits continue to accumulate and earn interest compounded monthly at an effective annual rate of 6.5%. -Eligible to participate in DROP when you are vested (6 years of service) and have either reached age 62 or completed 30 years of service (regardless of age). |
No change to current law | Effective 7/1/11, DROP is closed to new participants. Only members whose DROP effective date is prior to 7/1/11 may participate in DROP. |
| Retiree Health Insurance Subsidy | No change to current law. | No change to current law | No change to current law |
| Retirement Age/Years of Service | Age 62, 30 years of service | No change to current law | Increases the retirement age and years of service for members of the FRS who are initially enrolled on or after July 1, 2011:
Special Risk Class & Special Administrative Risk Class: increases the age from 55 to 60; increases years of service from 25 to 30 years of creditable service. All other classes: increases the age from 62 to 65; increases years of service from 30 to 33 years of creditable service. A member only needs to obtain one of the requirements, either the retirement age or the years of creditable service. These provisions do not apply to members who enrolled in the FRS prior to July 1, 2011. |
| Average Final Compensation | Average of highest 5 years | Amends the definition of “average final compensation” for purposes of the FRS defined benefit program to exclude accumulated annual leave payments and overtime payments paid from a salary fund in excess of 300 hours, for service earned on or after July 1, 2011. Service earned before that date will be subject to the current definitions. | |
| Vesting | 6 years | Effective July 1, 2011, an 8-year vesting requirement shall be implemented for the Florida Retirement System’s pension plan and investment plan. | No change to current law – 6 year vesting |
| Additional Benefit | Additional death benefit for members of the defined contribution plan who are killed in the line of duty; the surviving spouse of a participant killed in the line of duty may receive a monthly pension equal to one-half of the monthly salary being received by the participant at the time of death for the rest of the surviving spouse’s lifetime. If the surviving spouse of a participant killed in the line of duty dies, the monthly payments that would have been payable to the surviving spouse had such surviving spouse lived shall be paid for the use and benefit of such participant’s children under 18 years of age and unmarried until the 18th birthday of the participant’s youngest child. If a participant killed in the line of duty leaves no surviving spouse but is survived by children under 18 years of age, the benefits provided shall be paid for the use and benefit of the participant’s child or children under 18 years of age and unmarried until the 18th birthday of the participant’s youngest child. | ||
| No emergency /hardship benefits payable before retirement | Benefits are not payable under the investment plan before termination of employment for employee hardships, unforeseeable emergencies, loans, medical expenses, educational expenses, purchase of a residence, payments necessary to prevent eviction or foreclosure on an employee’s principal residence, or for any other reason. | Under the investment plan, Senior Management Service Optional Annuity Program, State University System Optional Retirement Program, or State Community College System Optional Retirement Program, the bill prohibits the payment of benefits before termination of employment in certain instances. Benefits may not be payable for employee hardships, unforeseeable emergencies, loans, medical expenses, educational expenses, purchase of a principal residence, payments necessary to prevent eviction or foreclosure on an employee’s principal residence, or any other reason prior to termination from all employment relationships with participating employers. | |
| Re-employment | A member who terminates covered employment in the FRS and takes a distribution of any contributions from his or her investment plan account is considered a retiree. Upon reemployment in a regularly established position with a covered employer, the retiree returns as a new hire and, if applicable, may participate in the FRS. | ||
| State University
Health Insurance |
1001.706(6)(b): Unless specifically authorized by law, neither the Board of Governors nor a state university may offer group insurance programs for employees as a substitute for or as an alternative to the health insurance programs offered pursuant to chapter 110. | Each state university may develop and implement cost-effective strategies to deliver health care benefits to its employees, including faculty and staff. Each university may develop health benefit programs, including, but not limited to, group or self-insurance plans, as well as the necessary administrative services required to implement and administer such programs if the annual costs in the year of the implementation do not exceed current state expenditures. | |
| Last Action | Now in Senate Budget Committee | Now in House Appropriations Committee |