Cypen & Cypen
JULY 2, 2009
Stephen H. Cypen, Esq., Editor
SUMMARY OF LEGISLATION AFFECTING CHAPTER 175, FLORIDA STATUTES AND CHAPTER 185, FLORIDA STATUTES:
As we recently reported on June 2, 2009, Florida Governor Charlie Crist had signed into law CS SB 538, Chapter 2009-97, relating to Chapter 175, Florida Statutes (firefighters) and Chapter 185, Florida Statutes (police officers).
Patricia F. Shoemaker, Benefits Administrator, Municipal Police Officers’ & Firefighters’ Retirement Trust Funds, has issued a helpful summary of that law and another related new law. What follows is Trish’s summary:
These amendments affect both “Chapter” and “Local Law” plans. Some of the provisions are mandatory and some are optional. The Board should consult with its plan attorney and actuary to discuss any needed and/or optional amendments. The municipality/district should take the necessary action to amend the plan provisions accordingly.
“Local Law” plans: Pursuant to ss. 175.351(2) and 185.35(2), copies of the actuarial impact statement and proposed ordinance/resolution must be submitted to our office prior to final reading.
“Chapter” plans: Since the “Chapter” plans operate pursuant to the statutory provisions, no ordinance changes are needed, unless you wish to expand the terms of office of the board members. The contract actuary for the “Chapter” plans reviewed Chapter 2009-97 and determined that the changes will have no cost impact for any of the “Chapter” plans. If you wish to receive a copy of the letter of no actuarial impact, please contact our office.
Chapter 2009-97, Laws of Florida (SB 538)
Sections 1 & 2. Pertain to the Florida Retirement System and do not affect your plan.
Sections 3 and 9. Amend ss. 175.032(4)(c), and 185.02(5)(c), to expand the definition of “credited service” to allow, but not require, municipalities and districts the option to allow for the purchase of prior service for federal, other state, or county service, as long as the member can provide proof that it was equivalent service. Additionally, the term “firefighter” is amended to match language found in the definition of “police officer” indicating that supervisory and command personnel are to be included. Since all firefighters are currently included, including supervisory and command personnel is merely a clarification and not a change in the existing law.
Sections 4 and 10. Amend ss. 175.061(1)(a) and 185.05(1)(a), to allow, but not require, municipalities and districts the option of expanding the terms of office of the board of trustees from 2 to 4 years. If the plan sponsor chooses to make this change, the four year term must apply to all trustees. (As of this time, and subject to contrary authority, it is Trish’s position that the change in terms from 2 years to 4 years may be, but need not be, made applicable to existing trustees.)
Expands the board of trustees’ administrative option to withhold from the retirement payments those funds that are necessary to pay for premiums for accident, health, and long-term care insurance for the retiree and the retiree’s spouse and dependents. This amendment allows the retiree to take advantage of the tax savings offered by the passage of the Federal Pension Protection Act (PPA) allowing the payment of premiums for accident, health, and long-term care insurance for the retiree and/or his dependents.
Clarifies the language in the police statute pertaining to the replacement of the elected police officer members on the board of trustees to match the language found in the fire statute. This corrects a scrivener’s error made with the Chapter 99-1 amendments, as it was intended that the provisions be identical in the police and fire statutes.
Sections 5 and 11. Amend the general powers and duties of the board of trustees to include specific references in Chapters 175 and 185 to the fiduciary standards and code of ethics found in other statutory provisions. This is merely a clarification as these are general laws that the board of trustees must currently abide by in their operation and administration of the plans.
Expands the board of trustees’ ability to invest in foreign securities from 10 to 25 percent on a market value basis matching the foreign investment parameters found in s. 215.47(5), F. S. Prohibits any further revision, amendment, expansion, or repeal of the foreign investment restriction except by general law. Therefore, no plan may by local ordinance, resolution or legislative act of local application amend the foreign investment provision. If a plan provision contains the reference to the current 10 percent restriction it should be updated to 25 percent by the municipality or district.
Allows the board of trustees to designate two individuals, other than the Chairman and Secretary, to sign the drafts issued upon the trust funds, but requires them to be subject to the same fiduciary standards as required for the board of trustees.
Adds a provision in ss. 175.071(8) and 185.06(7), requiring the board of trustees to identify and report any holdings it may have in any scrutinized company, and to sell, redeem, divest, or withdraw all publicly traded securities it may have in that company beginning January 1, 2010. Such divestiture must be completed by September 30, 2010 for Chapter 175 plans and September 10, 2010 for Chapter 185 plans.
To fulfill the requirement that the board of trustees identify any such holdings, the board may use the list of “scrutinized” companies developed by the State Board of Administration (SBA). This list is updated and posted quarterly on the SBA’s Web site at: www.s bafla.com/fsb/. Click on the icon: “Protecting Florida’s Investments Act (Iran/Sudan Divestment)” to open a page showing the latest quarterly list of scrutinized companies.
IMPORTANT: The board of trustees must publicly report any holdings it may have in any “scrutinized” company and complete the process of divestiture by September 2010. Since this is a statutory requirement, state premium tax moneys will be withheld if the board of trustees fails to comply. The 2010 Annual Report, which is due on February 1, 2011 (for Chapter plans) and March 15, 2011 (for Local Law plans), will request verification that the board of trustees has complied with this requirement. If not, state premium tax moneys will be withheld until the board of trustees has completed its divestiture.
Section 6. Amends s. 175.101(1), to provide clarification in Chapter 175 to allow a special fire control district to continue to receive the benefit of the state premium tax revenues once a portion of the district has been annexed until the completion of the 4-year period provided for in s. 171.093(4), or other agreed upon extension, or the termination of an interlocal agreement executed pursuant to s. 171.093(3).
Sections 7 and 12. Clarify the application of two different sections relating to the ability of a member to change his designation of joint annuitant or beneficiary. Sections 175.071(1)(c) and 185.161(1)(b) appear to require the approval of the board of trustees and proof of the good health of the existing joint annuitant or beneficiary before any changes can be made by the retiree. Sections 175.333 and 185.341 allow the member to change his joint annuitant or beneficiary up to two times without any qualifications. Upon receipt of a completed change of joint annuitant form or such other notice, the board of trustees shall adjust the member’s monthly benefit by the application of actuarial tables and calculations developed to ensure that the benefit paid is the actuarial equivalent of the present value of the member’s current benefit. The amendment clarifies that the first two changes are at the discretion of the retiree; any additional changes must be approved by the board. All local ordinances and resolutions should be amended accordingly.
Sections 8 and 13. Respond to recent litigation over what appeared to be conflicting provisions in the termination provisions. Prior to this revision, the law provided that the rights of all employees to benefits accrued to the date of termination of the plan and the amounts credited to the employees’ accounts are nonforfeitable; however, it also alluded to the apportionment of the remaining assets. Chapter 2009-97 eliminated the apportionment provisions and requires the board of trustees to determine the date of the distribution and the asset value required to fund all the nonforfeitable benefits, after taking into account the expenses of the distribution. It further requires the board of trustees to inform the municipality or district if additional assets are required, in which event the employer shall continue to financially support the plan until all nonforfeitable benefits have been funded. All local ordinances and resolutions should be amended accordingly.
Section 14 – Provides that this act shall take effect on July 1, 2009.
Chapter 2009-78, Laws of Florida (SB 1806)
This law amends s. 215.20, Florida Statutes, relating to the service charge on trust funds. Previously the Police and Firefighters’ Premium Tax Trust Fund was subject to a 7.3 percent cost of government service charge. The legislation increases the service charge to 8 percent, with certain exceptions, effective July 1, 2009.
The Division has already transferred the service charges applicable to this year’s premium tax distribution, so that there will be no change in the 7.3 percent service charge on this year’s distribution of the 2008 premium tax moneys.
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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.