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410 municipalities (cities, towns, villages)
No requirement to provide a pension or
retirement program for employees
Most do provide either voluntarily or through
collective bargaining
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Municipal employees have the right to
collectively bargain for retirement benefits
(Florida Supreme Court case, City of
Tallahassee v. Public Employees Relations
Commission, 410 S2d 487 (Fla. 1982))
Pensions and pension benefit increases must
be funded on a sound actuarial basis (Article
X, Section 14, Florida Constitution, and Part
VII, Chapter 112, Florida Statutes)
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Options for Municipal Pension or Retirement
Programs
Defined Benefit Plan
Defined Contribution Plan
Chapter 175 (Firefighter) or Chapter 185
(Police) Defined Benefit Plan
Deferred Compensation Plan
Florida Retirement System
Any Combination of the Above
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There are approximately 450 different
municipal defined benefit pension plans
(some cities have more than 1: general,
police, fire, etc.)
The total asset market value is approximately
$23 billion with approximately 100,000
active employees and 60,000
retirees/beneficiaries.
(This information is from 2009 and is the
most current comprehensive information
available).
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Voluntary participation since 1970
Approximately 150 municipalities participate
in various membership classes, but make up
less than 5% of the participants/members of
the FRS
FRS membership classes include: Special Risk
(Police and Fire), General Employees, Elected
Officials, Senior Management
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Once in, current and future employees are
compulsory members
1996 “opt-out” of FRS authorized for new
employees only – about 50 municipalities
opted out
Issues: mandatory contribution rates;
legislature controls all benefit levels and
participation requirements.
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In 1939 the Municipal Firefighters’
Pension Fund and in 1953 the
Municipal Police Officers’ Pension Fund
were created by the legislature.
 Insurance premium tax revenues
provided to cities to encourage the
creation of defined benefit pensions for
city firefighters and police officers.
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From the 1950s through the 1970s, the
legislature (and police and fire unions)
attempted to direct how insurance premium
tax revenues could be used, directing cities to
provide minimum funding for plans in order
to continue receiving premium tax revenues.
Cities receiving insurance premium tax
revenues also came under the administrative
control of the Department of Insurance,
which required certain annual and actuarial
reporting.
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In 1986, the legislature changed the
composition of a plan’s board of trustees to
include five members: two members selected
by the city, two members selected by the plan
participants/employees, and the 5th member
selected by the other four.
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In 1986, the legislature completely revised
Chapters 175 and 185, Florida Statutes, by
raising the minimum benefits levels and
establishing minimum standards for a “uniform
retirement system” for police officers and
firefighters.
Local governments challenged the
constitutionality of the 1986 amendments, but
the courts determined that the 1986 law did not
violate the constitution. City of Orlando v.
Department of Insurance, 528 So.2d 468 (Fla.1st
DCA 1988).
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In 1986, the state agency charged with
administering 175 and 185 (then the
Department of Insurance) proposed a number
of new rules to implement the 1986
legislation.
The rules essentially mandated that all the
statutory minimum requirements must be
included in all city plans.
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The Florida League of Cities along with a
number of individual cities challenged the
rules.
The courts determined that the Department
of Insurance had exceeded its authority,
holding that the proposed rules were invalid
and did not preempt municipal home rule
powers to set benefit levels. Florida League
of Cities v. Department of Insurance, 540 So.
2d 850 (Fla. 1st DCA 1989)
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In 1988, the legislature lowered the
percentage charge of the tax on insurance
premiums used to fund the plans (Fire went
from 2% to 1.85%, and Police went from 1% to
.85%).
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In 1995, the Division of Retirement withheld
insurance premium tax revenues from a
number of cities, asserting the plans did not
comply with various provisions of Chapters
175 and 185.
The cities successfully challenged the
Division’s actions and the Division was
ordered to release the premium tax monies
and pay the cities’ attorney’s fees.
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In 1996, the Division of Retirement supported
legislation developed by the police and fire
unions to totally rewrite Chapters 175 and
185. Legislation was filed but did not pass in
1996 and 1997.
In 1998, the bill passed but was vetoed by
Governor Chiles because of internal
inconsistencies in the bill and its fiscal impact
on cities.
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Despite continued heavy opposition from
cities, the bill was revised and passed as the
first bill in the 1999 legislative session, was
signed by Governor Bush on March 12, 1999
(not even two weeks into session), and was
codified as Chapter 99-1, Laws of Florida.
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Prior to the 1999 legislation, cities were
largely free to bargain with local police and
fire unions, or provide for their nonunionized police and firefighters, the pension
benefits that best fit the priorities and needs
of the city and its police officers and
firefighters.
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The 1999 law made virtually all provisions of
Chapters 175 and 185 expressly applicable to
all participating police and firefighter pension
plans.
All plans were required to meet the specific
“minimum benefit” standards.
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The requirement to provide “extra benefits.”
The 1999 law substantially revised how cities
could use insurance premium tax revenues.
Remember the original intent of the tax
revenue was to encourage cities to create and
fund pension plans for their police officers
and firefighters.
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The 1999 law turned this revenue source on its
head and provided that additional insurance
premium tax revenues over a base amount must
be used to provide additional or “extra” benefits
in firefighter and police officer plans.
The legislature further defined the term “extra
benefits” to mean benefits in addition to those
given to general employees and in existence in a
pension plan after March 12, 1999
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What this means is if a city provided a new
pension benefit under its firefighter or police
officer pension plan on or before March 11,
1999, the city could not use additional insurance
premium tax revenue to pay for the benefit;
however, if the city had provided the exact same
benefit on or after March 13, 1999, it could have
used additional insurance premium tax revenues
to pay for the benefit.
This arbitrary date punishes cities that offered
heightened pension benefits to their firefighters
and police officers prior to March 12, 1999.
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In aggregate numbers, it is estimated that cities
have had to provide over $400 million in “extra
pension benefits” to firefighters and police
officers since March 12, 1999. $400 million is
the amount of additional insurance premium tax
revenues over the stated base amount.
Stated differently, city tax payers have had to
fund $400 million in pension costs while at the
same time an additional $400 million in tax
proceeds was required to be spent on new or
extra pension benefits for firefighters and police
officers.
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The 1999 legislation did not specify exactly
what “extra benefits” must be provided;
rather, the legislature left this to be
negotiated between cities and the unions
representing their police officers and
firefighters.
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Examples of extra benefits that have been
adopted include:
◦ An increased benefit multiplier (multipliers of 3%,
3.5%, 4% and even higher)
◦ Yearly cost-of-living adjustments
◦ Lower retirement ages
◦ A 13th monthly pension check
◦ The creation of “share plans”, which is basically a
defined contribution plan funded with additional
insurance premium tax revenues and is in addition
to the defined benefit plan
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The effect of the 1999 law and similar state
pension mandates has been to massively increase
cities’ funding liabilities and to create a structural
deficit that worsens with every passing year.
As a result, many cities are paying amounts equal
to 50, 60, and 70 percent of a police officer or
firefighter’s salary toward funding their pensions.
By comparison, counties and the state typically
pay only 20 to 25% for employees in the Special
Risk Class (police and firefighters) of the Florida
Retirement System.
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Section 112.18, Florida Statutes, establishes a
disability presumption for firefighters and
police officers who suffer any health
condition caused by hypertension or heart
disease. The presumption is that the
condition occurred because of the job.
The presumption can only be “overcome”
upon meeting a high evidentiary standard.
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The presumption is frequently used to obtain
workers’ compensation and disability pension
benefits.
Removal of the presumption does not mean
that firefighters and police officers are not
entitled to workers’ compensation or
disability pension benefits, rather it means
that they would have to show entitlement to
the benefit just like every other benefit
claimant.
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Section 112.0801, Florida Statutes, requires
every city (as well as the state, counties, and
other governmental entities) that provides
life, health, accident, hospitalization, or any
other kind of insurance for its officers and
employees and their eligible dependents to
allow former personnel who have retired, and
their eligible dependents, the option to
continue to participate in the group insurance
plan or self-insurance plan.
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Retirees and their eligible dependents must be
offered the same health and hospitalization
insurance coverage as is offered to active
employees at a premium cost of no more than
the premium cost applicable to active employees.
The cost for this coverage may be paid by the
employer or by the retired employees.
To determine health and hospitalization plan
costs, the employer must comingle the claims
experience of the retiree group with the claims
experience of the active employees.
This is a significant other post-employment
benefit (OPEB) on government employers.
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Can cities use all Chapters 175 and 185 (fire
and police) insurance premium tax revenues
to pay for current plan benefits and
obligations?
Answer: No
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Can cities under Chapters 175 and 185 (fire
and police) prevent using overtime and
payments for unused leave times in
determining “average final compensation?”
Answer: No
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Can cities under Chapters 175 and 185 (fire
and police) place newly hired firefighters and
police officers in the Florida Retirement
System and continue to receive insurance
premium tax revenues until the current
pension plan is fully funded?
Answer: No
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Can cities under Chapters 175 and 185 (fire
and police) change the governance structure
of pension boards of trustees?
Answer: No
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Are actuaries required to give 30 year cost
projections on any proposed benefit increase
to a defined benefit pension plan?
Answer: No
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Can cities reduce defined benefit pension
levels if it is determined to be actuarially
appropriate in order to stabilize the plan’s
funding and keep the plan properly funded?
Answer: Non-chapters 175 and 185 Plans:
Possibly yes – if agreed to or impasse.
Answer: Chapters 175 and 185 Plans: No
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Can the state Division of Retirement perform
non-rule based administrative activities and
provide interpretations of state statutes
related to public pensions (Chapters 112, 175
and 185) that result in increased pension
costs to cities?
Answer: Yes
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Can cities in the Florida Retirement System
opt to move their employees to a different
retirement plan, such as a hybrid or modified
“defined benefit/defined contribution” plan?
Answer: No
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If a city firefighter or police officer suffers a
health condition associated with heart
disease or hypertension, is the condition
presumed to be job related thereby enabling
the employee to claim workers’ compensation
benefits and disability pension benefits?
Answer: Yes
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Do city retirees have the option to continue in
the city’s health, hospitalization and other
insurance coverages at the same premium
costs applicable to current city employees?
Answer: Yes
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1.
Allow cities receiving insurance premium
tax revenues under Chapters 175 or 185,
Florida Statutes, (fire and police defined
benefit pension plans) to use these funds
to pay for current plan benefits. This
would remove the state law mandate that
specified insurance premium tax revenues
be used only for “new or extra” pension
benefits for firefighters and police
officers.
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2.
Require that determinations of average
final compensation in public employee
defined benefit pension plans include
salary only, and do not include pay for
overtime, unused leave times, or any other
additional payments.
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3.
Allow cities to convert firefighter and
police officer defined benefit pension
plans operating under Chapters 175 or
185, Florida Statutes, to the Florida
Retirement System without losing
insurance premium tax revenues.
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4.
Allow cities desiring to place their public
safety officers (police and fire) into the
Special Risk Class of the Florida
Retirement System the opportunity to
purchase past credit service at an up to 3%
annual accrual rate rather than the current
up to 2%. This will remove a practical
barrier to convert plans to the Florida
Retirement System.
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5.
Change the governance structure of
pension boards of trustees to move away
from having plan participants serve on the
boards.
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6.
Require 30 year cost projections on any
proposed benefit increase to a defined
benefit pension plan.
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7.
Allow cities to reduce defined benefit
pension levels within all plans if it is
determined to be actuarially appropriate
in order to stabilize the plan’s funding
and keep the plan properly funded.
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8.
Restrain the state Division of Retirement’s
non-rule based administrative activities
and restrict the Division’s broad
interpretations of the provisions in
Chapters 112, 175 and 185, Florida
Statutes, that result in increased pension
costs to cities.
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9.
Provide flexibility to cities in the Florida
Retirement System by allowing them to
either retain a standard defined benefit
plan, or at the employer’s option move
to a different retirement plan, such as a
hybrid, or modified “defined benefit/defined
contribution” plan. This will provide flexibility
to cities in the FRS to decide at the employer
level which pension plan to provide to its
employees. The goal would be to reduce long
term tax payer impacts and provide a
reasonable pension plan with economic
diversification for plan members.
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10. Remove statutory disability presumptions
for firefighters and police officers claiming
disability pension or workers’
compensation benefits.
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11. Remove statutory provisions requiring that
cities and other governments offer
subsidized health, hospitalization and
other insurance coverages to retirees.
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