Florida Special District Handbook Online:
Retirement Plans and Reporting Requirements
The Florida Protection of Public Employee Retirement Benefits Act (Chapter 112, Part VII, Florida Statutes - Actuarial Soundness of Retirement Systems) governs local government and alternative retirement plans supported in part or completely by public funds. When local governments, such as special districts, use public funds to pay for a public employee retirement plan, the plan administrator must manage the plan to ensure the following:
- Employees' retirement benefits are protected
- Costs are allocated equitably to current and future taxpayers
Retirement Plan Options for Special Districts
Independent Special Districts
Dependent Special Districts
- Must participate in the Florida Retirement System if its governing authority participates in the Florida Retirement System
- Subject to the directives of its local governing authority that does not participate in the Florida Retirement System:
- May participate in the same retirement plan of its governing authority
- May participate in another plan
- May establish its own plan
- May have no plan
Types of Retirement Plans
Locally Established Defined Benefit Retirement Plan
Locally established defined benefit retirement plans may be administered in-house, by an insurance company, or through other arrangements, such as a contract administrator, a money manager or a combination of administrators. The plan must be managed, administered, operated and funded in a way that maximizes the protection of the benefits. It is not permitted to use any procedure, methodology, or assumptions that would transfer to future taxpayers any portion of the costs that the current taxpayers should reasonably be expected to pay.
- Is not an individual account plan. Generally provides a monthly benefit for life.
- Uses a predefined formula to calculate the benefit amount
- The special district contributes an actuarially determined amount to support the promised benefits. Therefore, the special district bears the full investment risk. The contribution amount depends upon the plan's actuarial experience:
- If favorable, the special district can reduce its contributions;
- If unfavorable, the special district must increase its contributions.
- The employees are usually required to contribute
- The benefit amount is not affected by investment experience
- It guarantees predefined retirement benefits. Therefore, the individual can estimate at any given time their retirement benefit amount, which is generally specified as income for life. The retirement benefit amount is agreed upon in advance, or, determined by applying the plan's benefit formula to salient facts about the individual (e.g., years of service, average final salary, etc.).
Reporting Requirement - Actuarial Valuation Report
Defined benefit retirement plans must go through an actuarial valuation review at least once every three years by an enrolled actuary who collects and analyzes data about the plan's finances, statistics, and employee demographics. This review helps to ensure that the retirement plan can pay benefits to current and future retirees. The actuary prepares this report, revealing the results of the review. Within 60 days of completion and certification by the actuary, special districts must do the following:
- Make the results of the report available for public inspection upon request
- File the results with the special district's governing board or plan administrator
- File the results with the Department of Management Services
Failure to Comply with the Actuarial Valuation Report
The Florida Department of Management Services (DMS) will notify the special district and the plan's administrator and request adjustments to the report and/or the additional information if any of the following occurs:
Within a reasonable period of time after receiving this request, the special district must satisfy the requests and/or notify DMS of the progress of the request. DMS can provide technical assistance to help the special district comply with the statutory provisions.
If DMS determines that the special district has not or will not satisfy the requests, DMS will notify the special district and the plan's administrator of the consequences for failure to comply:
- DMS and the Florida Department of Revenue (DOR) will withhold from the special district any funds not pledged for satisfaction of bond debt service until the requests are satisfied.
Within 21 days of receipt of this notice, the special district may petition for an administrative hearing under:
If the hearing officer finds in favor of DMS, DMS will prepare an actuarial valuation and/or collect the requested information and charge the cost to the special district. If DMS does not receive payment of the costs within 60 days of invoice, DMS will certify to DOR and the Florida Department of Financial Services (DFS) the amount due and the DOR and DFS will pay DMS the amount due from any funds not pledged for satisfaction of bond debt service payable to the special district.
If the hearing officer finds in favor of the special district, DMS will decide whether to prepare an actuarial valuation report and/or collect the requested information, and pay the costs of doing so.
In addition, DMS will notify the Florida Department of Economic Opportunity, which must proceed pursuant to Section 189.067, Florida Statutes - Failure of district to disclose financial reports (see Noncompliance Status Reports: What will happen when special districts fail to comply with important accountability filings and reports for more information).
Actuarial Impact Statement for Proposed Plan Amendments
Each special district can propose benefit changes to its defined benefit retirement plan. For example, a special district may propose adding a new benefit, or increasing the benefit accrual rate (e.g., from 2% per year of service to 2.5%), or reducing the age/service eligibility requirement.
Before the benefit improvement can be adopted, the plan administrator or an enrolled actuary must analyze the effect the changes will have on the actuarial soundness of the plan. This includes the plan's ability to support the increased benefit cost in the short and long term. The result of this analysis is called an actuarial impact statement. The actuarial impact statement must meet the following requirements:
- It must be issued before the final public hearing about the proposed change.
- It must contain the following information:
- A description of the proposed amendment
- A statement that the actuary was provided with a copy of the proposed amendment and the information necessary to evaluate the proposed amendment
- A statement, signed by an enrolled actuary, of the estimated cost of implementing the amendment. It must include sufficient data about the amendment so that an actuary unfamiliar with the situation could accurately assess the statement's conclusion. It must be based on the actuarial valuation prepared within 12 months of the effective date of the proposed amendments.
- A statement saying that the proposed amendment complies with:
File the actuarial impact statement and the amendment with DMS, along with a written declaration that the prepared information reflects the estimated costs of the proposed amendment. The plan administrator must certify, sign, and date the statement.
Additional Actuarial Disclosures
Special districts that sponsor defined benefit pension plans for its employees are required to report additional actuarial disclosures within 60 days of receipt of their certified actuarial reports. These additional disclosures include financial statements that comply with Governmental Accounting Standards Board Statement 67 and Governmental Accounting Standards Board Statement 68 and use prescribed mortality tables and rate of return assumption adjustments, cash flow projections, and adjusted contribution requirements. This information must be submitted to the DMS electronically and placed on the district's website. In addition, certain other disclosures must also be placed on the district's website, including the plan's most recent financial statements and actuarial valuation, a five-year comparison of assumed and actual rates of return, and asset allocation percentages. For more information, see Section 112.664, Florida Statutes - Reporting standards for defined benefit retirement plans or systems and Develop and Maintain an Official Website.
Locally Established Defined Contribution Retirement Plans
In a defined contribution retirement plan, the contributions of the special district, and if applicable, the employee, are invested. The employee usually has some choice about how contributions are invested. When it is time to collect benefits, the employee receives the principal and the accumulated interest. The benefits due at retirement are dependent on the success of the plan investments. This plan may be administered in-house, by an insurance company, or through other arrangements, such as a contract administrator, money managers or a combination of administrators.
- Provides an individual account for each participant
- The amount of each participant's benefit is based solely upon the amount contributed to the participant's account, and any income, expenses, gains and losses and, if applicable, any forfeiture of accounts of other participants that may be allocated to their account
- The value of each account can be determined anytime. The plan defines the amount of the plan sponsor's annual contribution to each account
- The participant bears the full investment risk
Reporting Requirement - Defined Contribution Report
Special districts with defined contribution plans must annually provide DMS with information necessary to gather, catalog, and maintain a database of such plans.
Prepare this report according to either the plan's anniversary date or the special district's fiscal year. It must contain the following information:
- Plan description
- Contribution formula
- Vesting schedule
- Normal retirement date
- Member eligibility
- Anniversary date
- Plan sponsor
- Plan administrator
- Sources of funds
- Any changes and/or amendments to the plan since the last report
- A statement by the plan administrator's that verifies the completeness and accuracy of the report.
Filing Requirement When Initially Implementing a Defined Contribution Plan
Send the following documents to DMS:
- Plan documents
- Enactment or other statement on funding and administration
- A copy of the Internal Revenue Service Plan qualification letter, approving the plan as tax qualified, if applicable
- Internal Revenue Code section under which the plan operates
Local Government Retirement Plan Requirements
Special districts with a local government retirement plan must maintain accurate and accessible records of the following:
- For All Active or Inactive Members:
- ID number
- Birth date
- Employment dates
- Occupational classification
- Period of credited service (divided between prior and current service)
- For All Active Members:
- Current pay rate
- Current rate of contributions
- Cumulative contributions (with accumulated interest)
- For All Inactive Members:
- Age when deferred benefit begins
- Average final compensation or equivalent
- For All Retired Members and Other Beneficiaries:
- ID number
- Birth date
- Date benefit begins
- Retirement type
- Amount of monthly benefit
- Type of survivor benefit
Independent special fire control districts that elect to participate under the provisions of Chapter 175, Florida Statutes, are entitled to the benefits available under a uniform retirement system for firefighters. For more information on eligibility and benefits, see Chapter 175, Florida Statutes - Firefighter Pensions, or contact DMS, Division of Retirement (see next section).
Additional reporting requirements are applicable. By February 1 each year, independent special fire control districts participating as a chapter plan, and by March 15 each year, independent special fire control districts participating as a local law plan must file an annual report with the Division of Retirement regarding actuarial valuations and plan activity. For specific information on the reporting requirements, see section 175.261, Florida Statutes, Annual Report to Division of Retirement; Actuarial Valuations.
Contact Someone Who Can Answer Questions About Local Government Retirement Plans
Florida Retirement System
The Florida Retirement System (FRS) provides retirement, disability or death benefits to retirees or their designated beneficiaries, and offers a wide range of informational services to its members.
Special districts participating must make monthly contributions, as a percentage of salary paid, to the FRS based on the membership class of each employee. The Legislature establishes employer contribution rates annually.
The State Board of Administration has a governing board consisting of the Governor, the Attorney General, and the Chief Financial Officer. The board is responsible for investing the assets of the FRS Trust Fund for the defined benefit plan. The State Board of Administration is also responsible for the administration of the defined contribution plan (subcontracted to Aon Hewitt) and the financial education program for all members (subcontracted to Ernst & Young and Financial Engines).
The FRS is carefully monitored as follows:
- Annually, the Division of Retirement presents a comprehensive written report to the Florida Legislature concerning the FRS.
- Annually, the Division of Retirement has an independent actuary study the FRS to determine its fiscal soundness and to recommend employer contributions to the Legislature that are sufficient to meet the actuarially sound funding requirements to pay current and future benefits.
- Ongoing, the Office of Program Policy Analysis and Government Accountability (OPPAGA) contracts with an independent consulting actuary to review the valuation for reasonableness. This helps OPPAGA determine if the FRS is complying with the Florida Protection of Public Employee Retirement Benefits Act. OPPAGA works with the Auditor General that audits the State Board of Administration.
Two Choices of Plans
- A defined benefit plan
- A defined contribution plan
Florida Retirement System Eligibility
Compulsory (For Regularly Established Positions)
- State Employees
- County Employees
- District School Board Employees
- Community College Employees
- University Employees
- Dependent Special Districts if its governing authority participates
- Independent Special Districts
- Public Charter Schools
- Metropolitan Planning Organizations
After a city, special district, charter school, or metropolitan planning organization joins, all current and future regular employees filling regularly established positions become compulsory members.
If the independent or dependent status of the special district changes, the special district must contact the Division of Retirement to confirm its continued eligibility.
Special District Responsibilities
Ensure that contributions are received by the Division of Retirement by the fifth working day of the month following the month in which the salary was paid.
If a special district is delinquent in making its payment, the Division of Retirement may assess a fee of one-percent of the contributions due.
If the contributions are delinquent after 120 days, the state may withhold the amount owed from any state funds allocated to the special district and/or have the local tax collector collect the funds. In addition, the employer of delinquent contributions for a defined contribution plan member will also be liable to reimburse the member's individual account for market losses resulting from the late contributions, plus the cost of the third-party administrator for determining the loss.
Failure to Meet A Pension Obligation
A special district financial emergency exists if the special district fails to transfer its own contributions or employee contributions for any pension, retirement, or benefit plan of an employee, or fails to pay retirement benefits owed to former employees. Therefore, the Department of Management Services must notify the Governor (see Financial Emergencies for more information).
Contact Someone Who Can Answer Questions About the Florida Retirement System