Pension Reform 2011 James W. Linn. 2011 Legislation. SB 2100 – Florida Retirement System SB 1128 – Local Government Retirement Plans. SB 2100 -- Florida Retirement System Changes . 3% employee contribution eff. 7/1/11 (was zero) No COLA for service after 7/1/11 (was 3%)
*changes apply to members who first join FRS on or after 7/1/11
Above rates include the additional 1.14% health insurance subsidy contribution and administrative/education fee
For service on and after 7/1/11 -- prohibits inclusion of overtime in excess of 300 hours per year and payments for unused sick or annual leave in compensation for pension purposes. OT up to 300 hrs/yr subject to collective bargaining.
For plans that are subject to collective bargaining, changes are effective for the first agreement negotiated after 7/1/11.
Applies to all local government pension plans, including police and firefighter plans under Chapters 175 and 185.
Prohibits the use of an actuarial or cash surplus in a government pension plan for any expenses outside the plan.
Prohibits the reduction of plan sponsor contributions to a local government pension plan below the normal cost.
Eliminates the requirement in Chapters 175 and 185 that pension benefits be increased whenever member contributions are increased.
Requires that all actuarial reports disclose the present value of the plan’s accrued vested, nonvested and total benefits, as adopted by the Financial Accounting Standards Board, using the Florida Retirement System’s assumed rate of return (currently 7.75%), “to promote the comparability of actuarial data between local plans.”
Department of Management Services to provide a fact sheet on each participating local government defined benefit pension plan summarizing the plan’s actuarial status.
Fact sheet to contain a summary of the plan’s most recent actuarial data, minimum funding requirements as a percentage of pay, and a 5 year history of funded ratios.
Fact sheets to be posted on the Department’s website.
All premium taxes in excess of the “frozen” amount must be placed in the “excess state monies reserve” and used only for “extra benefits”
“Frozen amount” = premium taxes received in 1998 plus premium taxes used for benefit improvements since 1999 (aka “adjusted base amount”)
If excess premium taxes are used to provide formula benefits, the cost of the benefit shifts to the local government over time.
“Stop & Restart” – increase frozen amount of premium tax revenue that can be used to reduce government contribution.
“Share Plan” use excess premium tax revenues for defined contribution accounts instead of formula benefits.
“Hybrid DB/Share Plan” – reduce benefits in DB plan to 1999 level. All excess premium tax revenues go to DC “share plan.”
Opt out of Ch. 175/185 -- Local governments can stop participating in Ch. 175/185 and stop receiving premium tax revenues. But local taxpayers would still pay the tax.
Stuart (2007)- All Employees
Ft. Lauderdale (2007) - General
Coral Gables (2009) - Police
Naples (2009) - Fire
$1. 67 million per year
Hollywood (2009) - Fire
Port Orange (2010) – Fire[Not Yet Implemented]*
* litigation pending
Miami Beach (2010) – All Employees*
* litigation pending – police/fire
Delray Beach (2010) – General Employees
Miami (2010) – Pension Changes (All Employees)*
[Financial urgency declared – City Commission adopted wage and benefit reductions 8/31/10]:
* litigation pending
Town of Palm Beach (2011) – Fire [Town Council imposed wage and benefit reductions 4/21/11]:
Palm Bay (2011) – Fire[Settlement Approved 5/19/11]
Coral Gables (2011) – General[Settlement approved by union members and City Commission in July 2011]
Sarasota (2011) – Police[City proposal at impasse; Special Magistrate hearing held in June 2011]
Hollywood (2011) – All Employees[City declared financial urgency; pension changes to be submitted to referendum if agreement with unions not reached by September 1]
Recent FRS changes provide a clue to the future of DB plans: