February 15, 2019
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CS/CS/HB 1307

1
A bill to be entitled
2An act relating to state financial matters; amending s.
3121.4501, F.S.; revising and providing definitions;
4providing for excess account balances in the Public
5Employee Optional Retirement Program when an employee
6transfers to the defined benefit program; providing for
7the use of such excess balance; requiring the State Board
8of Administration to resolve complaints; providing for the
9use of records in resolving such complaints; clarifying
10the state board's rule authority with respect to the
11program; amending s. 121.4502, F.S.; establishing a
12forfeiture account in the Public Employee Retirement
13Program Trust Fund; providing for the use of funds in the
14account; amending s. 121.591, F.S.; conforming a cross-
15reference; permitting an application for benefits under
16the optional retirement program to be submitted by
17electronic means; amending s. 121.74, F.S.; revising the
18contribution rates for employers participating in the
19Florida Retirement System; amending s. 121.78, F.S.;
20exempting the Division of Retirement, the state board, and
21the third-party administrator from liability for market
22losses due to acts of God; amending s. 215.44, F.S.;
23expanding the authority of the state board to use trust
24agreements; requiring that the state board create an audit
25committee for specified purposes; providing for duties,
26membership, and term limits; requiring that the state
27board annually produce and report to the Legislature
28certain financial statements; requiring that such
29statements be audited by an independent third-party firm
30under the direction of the audit committee; requiring that
31the state board meet at specified intervals and receive
32reports containing certain information from specified
33entities; amending s. 215.441, F.S.; providing minimum
34qualifications for the executive director of the state
35board; amending s. 215.444, F.S.; increasing membership of
36the Investment Advisory Council; revising membership
37requirements; providing council meeting and reporting
38requirements; providing additional requirements for
39council members; authorizing the council to create
40subcommittees; amending s. 215.47, F.S.; expanding the
41types of investments that the state board is authorized to
42make; authorizing moneys available for investment by the
43state board to be invested in certain federally tax-exempt
44bonds, notes, or obligations not subject to the federal
45alternative minimum tax; providing funds that may be
46invested in a foreign entity; creating s. 215.4754, F.S.;
47providing intent; requiring that the contract for an
48investment adviser or manager include a standard of
49conduct; providing for termination of the contract of an
50adviser or manager who violates the standard of conduct;
51prohibiting a member of the council from contracting with
52or providing services for the investment of certain funds
53during his or her service on the council and for a
54specified period thereafter; creating s. 215.4755, F.S.;
55requiring that an investment advisor or manager annually
56certify to the state board certain activities regarding
57investment decisions and standards of behavior; requiring
58that certain disclosures be made at the request of the
59state board regarding pecuniary interests of an investment
60adviser or manager; amending s. 215.52, F.S.; providing
61requirements for rules made by the state board with
62respect to certain fiduciary duties; amending s. 218.409,
63F.S.; providing for extending a moratorium on
64contributions to or withdrawals from the Local Government
65Surplus Funds Trust Fund under certain circumstances;
66authorizing the state board to develop work products that
67are subject to trademark, copyright, or patent; providing
68an effective date.
69
70Be It Enacted by the Legislature of the State of Florida:
71
72     Section 1.  Subsection (2), paragraph (e) of subsection
73(4), subsection (6), and paragraphs (a) and (g) of subsection
74(8) of section 121.4501, Florida Statutes, are amended to read:
75     121.4501  Public Employee Optional Retirement Program.-
76     (2)  DEFINITIONS.-As used in this part, the term:
77     (a)  "Approved provider" or "provider" means a private
78sector company that is selected and approved by the state board
79to offer one or more investment products or services to the
80Public Employee optional retirement program. The term includes a
81bundled provider that offers participants a range of
82individually allocated or unallocated investment products and
83may offer a range of administrative and customer services, which
84may include accounting and administration of individual
85participant benefits and contributions; individual participant
86recordkeeping; asset purchase, control, and safekeeping; direct
87execution of the participant's instructions as to asset and
88contribution allocation; calculation of daily net asset values;
89direct access to participant account information; periodic
90reporting to participants, at least quarterly, on account
91balances and transactions; guidance, advice, and allocation
92services directly relating to the provider's its own investment
93options or products, but only if the bundled provider complies
94with the standard of care of s. 404(a)(1)(A-B) of the Employee
95Retirement Income Security Act of 1974 (ERISA) and if providing
96such guidance, advice, or allocation services does not
97constitute a prohibited transaction under s. 4975(c)(1) of the
98Internal Revenue Code or s. 406 of ERISA, notwithstanding that
99such prohibited transaction provisions do not apply to the
100optional retirement program; a broad array of distribution
101options; asset allocation; and retirement counseling and
102education. Private sector companies include investment
103management companies, insurance companies, depositories, and
104mutual fund companies.
105     (b)  "Average monthly compensation" means one-twelfth of
106average final compensation as defined in s. 121.021(24).
107     (c)  "Covered employment" means employment in a regularly
108established position as defined in s. 121.021(52).
109     (d)  "Defined benefit program" means the defined benefit
110program of the Florida Retirement System administered under part
111I of this chapter "Department" means the Department of
112Management Services.
113     (e)  "Division" means the Division of Retirement within the
114department of Management Services.
115     (f)  "Electronic means" means by telephone, if the required
116information is received on a recorded line, or through Internet
117access, if the required information is captured online.
118     (g)(f)  "Eligible employee" means an officer or employee,
119as defined in s. 121.021, who:
120     1.  Is a member of, or is eligible for membership in, the
121Florida Retirement System, including any renewed member of the
122Florida Retirement System initially enrolled before July 1,
1232010; or
124     2.  Participates in, or is eligible to participate in, the
125Senior Management Service Optional Annuity Program as
126established under s. 121.055(6), the State Community College
127System Optional Retirement Program as established under s.
128121.051(2)(c), or the State University System Optional
129Retirement Program established under s. 121.35.
130
131The term does not include any member participating in the
132Deferred Retirement Option Program established under s.
133121.091(13), a retiree of a state-administered retirement system
134initially reemployed on or after July 1, 2010, or a mandatory
135participant of the State University System Optional Retirement
136Program established under s. 121.35.
137     (h)(g)  "Employer" means an employer, as defined in s.
138121.021(10), of an eligible employee.
139     (i)  "Optional retirement program" or "optional program"
140means the Public Employee Optional Retirement Program
141established under this part.
142     (j)(h)  "Participant" means an eligible employee who elects
143to participate in the Public Employee Optional Retirement
144Program and enrolls in the such optional program as provided in
145subsection (4) or a terminated Deferred Retirement Option
146Program participant as described in subsection (21).
147     (i)  "Public Employee Optional Retirement Program,"
148"optional program," or "optional retirement program" means the
149alternative defined contribution retirement program established
150under this section.
151     (k)(j)  "Retiree" means a former participant of the Florida
152Retirement System Public Employee optional retirement program
153who has terminated employment and has taken a distribution as
154provided in s. 121.591, except for a mandatory distribution of a
155de minimis account authorized by the state board.
156     (k)  "State board" or "board" means the State Board of
157Administration.
158     (l)  "Trustees" means Trustees of the State Board of
159Administration.
160     (l)(m)  "Vested" or "vesting" means the guarantee that a
161participant is eligible to receive a retirement benefit upon
162completion of the required years of service under the Public
163Employee optional retirement program.
164     (4)  PARTICIPATION; ENROLLMENT.-
165     (e)  After the period during which an eligible employee had
166the choice to elect the defined benefit program or the Public
167Employee optional retirement program, or the month following the
168receipt of the eligible employee's plan election, if sooner, the
169employee shall have one opportunity, at the employee's
170discretion, to choose to move from the defined benefit program
171to the Public Employee optional retirement program or from the
172Public Employee optional retirement program to the defined
173benefit program. Eligible employees may elect to move between
174Florida Retirement System programs only if they are earning
175service credit in an employer-employee relationship consistent
176with the requirements under s. 121.021(17)(b), excluding leaves
177of absence without pay. Effective July 1, 2005, such elections
178are shall be effective on the first day of the month following
179the receipt of the election by the third-party administrator and
180are not subject to the requirements regarding an employer-
181employee relationship or receipt of contributions for the
182eligible employee in the effective month, except that the
183employee must meet the conditions of the previous sentence when
184the election is received by the third-party administrator. This
185paragraph is shall be contingent upon approval from the Internal
186Revenue Service for including the choice described herein within
187the programs offered by the Florida Retirement System.
188     1.  If the employee chooses to move to the Public Employee
189optional retirement program, the applicable provisions of this
190section shall govern the transfer.
191     2.  If the employee chooses to move to the defined benefit
192program, the employee must transfer from his or her Public
193Employee optional retirement program account, and from other
194employee moneys as necessary, a sum representing the present
195value of that employee's accumulated benefit obligation
196immediately following the time of such movement, determined
197assuming that attained service equals the sum of service in the
198defined benefit program and service in the Public Employee
199optional retirement program. Benefit commencement occurs on the
200first date the employee is would become eligible for unreduced
201benefits, using the discount rate and other relevant actuarial
202assumptions that were used to value the Florida Retirement
203System defined benefit plan liabilities in the most recent
204actuarial valuation. For any employee who, at the time of the
205second election, already maintains an accrued benefit amount in
206the defined benefit program plan, the then-present value of the
207such accrued benefit shall be deemed part of the required
208transfer amount described in this subparagraph. The division
209shall ensure that the transfer sum is prepared using a formula
210and methodology certified by an enrolled actuary.
211     3.  Notwithstanding subparagraph 2., an employee who
212chooses to move to the defined benefit program and who became
213eligible to participate in the Public Employee optional
214retirement program by reason of employment in a regularly
215established position with a state employer after June 1, 2002; a
216district school board employer after September 1, 2002; or a
217local employer after December 1, 2002, must transfer from his or
218her Public Employee optional retirement program account, and,
219from other employee moneys as necessary, a sum representing the
220that employee's actuarial accrued liability.
221     4.  An employee's Employees' ability to transfer from the
222Florida Retirement System defined benefit program to the Public
223Employee optional retirement program pursuant to paragraphs (a)-
224(d), and the ability of a for current employee employees to have
225an option to later transfer back into
226program under subparagraph 2., shall be
227system amendment. Pursuant to s.
228unfunded liability arising from actual original transfers from
229the defined benefit program to the optional program must shall
230be amortized within 30 plan years as a separate unfunded
231actuarial base independent of the reserve stabilization
232mechanism defined in s. 121.031(3)(f). For the first 25 years, a
233no direct amortization payment may not shall be calculated for
234this base. During this 25-year period, the such separate base
235shall be used to offset the impact of employees exercising their
236second program election under this paragraph. It is the
237legislative intent of the Legislature that the actuarial funded
238status of the Florida Retirement System defined benefit program
239not be affected plan is neither beneficially nor adversely
240impacted by such second program elections in any significant
241manner, after due recognition of the separate unfunded actuarial
242base. Following the this initial 25-year period, any remaining
243balance of the original separate base shall be amortized over
244the remaining 5 years of the required 30-year amortization
245period.
246     5.  If the employee chooses to transfer from the optional
247retirement program to the defined benefit program and retains an
248excess account balance in the optional program after satisfying
249the buy-in requirements under this paragraph, the excess may not
250be distributed until the member retires from the defined benefit
251program. The excess account balance may be rolled over to the
252defined benefit program and used to purchase service credit or
253upgrade creditable service in that program.
254     (6)  VESTING REQUIREMENTS.-
255     (a)1.  With respect to employer contributions paid on
256behalf of the participant to the Public Employee optional
257retirement program, plus interest and earnings thereon and less
258investment fees and administrative charges, a participant is
259shall be vested after completing 1 work year, as defined in s.
260121.021(54), with an employer, including any service while the
261participant was a member of the defined benefit retirement
262program or an optional retirement program authorized under s.
263121.051(2)(c) or s. 121.055(6).
264     2.  If the participant terminates employment before prior
265to satisfying the vesting requirements, the nonvested
266accumulation must shall be transferred from the participant's
267accounts to the state board for deposit and investment by the
268state board in the suspense account created within of the Public
269Employee Optional Retirement Program Trust Fund of the board. If
270the terminated participant is reemployed as an eligible employee
271within 5 years, the state board shall transfer to the
272participant's account any amount of the moneys previously
273transferred from the participant's accounts to the suspense
274account of the Public Employee Optional Retirement Program Trust
275Fund, plus the actual earnings on such amount while in the
276suspense account.
277     (b)1.  With respect to amounts transferred from the defined
278benefit program to the investment program, plus interest and
279earnings, and less investment fees and administrative charges, a
280participant shall be vested in the amount transferred from the
281defined benefit program, plus interest and earnings thereon and
282less administrative charges and investment fees, upon meeting
283the service requirements for the participant's membership class
284as set forth in s. 121.021(29). The third-party administrator
285shall account for such amounts for each participant. The
286division shall notify the participant and the third-party
287administrator when the participant has satisfied the vesting
288period for Florida Retirement System purposes.
289     2.  If the participant terminates employment before prior
290to satisfying the vesting requirements, the nonvested
291accumulation must shall be transferred from the participant's
292accounts to the state board for deposit and investment by the
293state board in the suspense account created within of the Public
294Employee Optional Retirement Program Trust Fund of the board. If
295the terminated participant is reemployed as an eligible employee
296within 5 years, the state board shall transfer to the
297participant's account any amount of the moneys previously
298transferred from the participant's accounts to the suspense
299account of the Public Employee Optional Retirement Program Trust
300Fund, plus the actual earnings on such amount while in the
301suspense account.
302     (c)  Any nonvested accumulations transferred from a
303participant's account to the suspense account shall be forfeited
304by the participant if the participant is not reemployed as an
305eligible employee within 5 years after termination.
306     (8)  ADMINISTRATION OF PROGRAM.-
307     (a)  The Public Employee optional retirement program shall
308be administered by the state board and affected employers. The
309board may is authorized to require oaths, by affidavit or
310otherwise, and acknowledgments from persons in connection with
311the administration of its statutory duties and responsibilities
312for this program under this chapter. An No oath, by affidavit or
313otherwise, may not shall be required of an employee participant
314at the time of enrollment election. Acknowledgment of an
315employee's election to participate in the program shall be no
316greater than necessary to confirm the employee's election. The
317state board shall adopt rules to carry out its statutory duties
318with respect to administering the optional retirement program,
319including establishing the roles role and responsibilities of
320affected state, local government, and education-related
321employers, the state board, the department, and third-party
322contractors in administering the Public Employee optional
323retirement program. The department shall adopt rules necessary
324to administer implement the optional program in coordination
325with the defined benefit retirement program and the disability
326benefits available under the optional program.
327     (g)  The state board shall receive and resolve participant
328complaints against the program, the third-party administrator,
329or any program vendor or provider; shall resolve any conflict
330between the third-party administrator and an approved provider
331if when such conflict threatens the implementation or
332administration of the program or the quality of services to
333employees; and may resolve any other conflicts. The third-party
334administrator shall retain all participant records for at least
3355 years for use in resolving any participant conflicts. The
336state board, the third-party administrator, or a provider is not
337required to produce documentation or an audio recording to
338justify action taken with regard to a participant if the action
339occurred 5 or more years before the complaint is submitted to
340the state board. It is presumed that all action taken 5 or more
341years before the complaint is submitted was taken at the request
342of the participant and with the participant's full knowledge and
343consent. To overcome this presumption, the participant must
344present documentary evidence or an audio recording demonstrating
345otherwise.
346     Section 2.  Subsection (3) is added to section 121.4502,
347Florida Statutes, to read:
348     121.4502  Public Employee Optional Retirement Program Trust
349Fund.-
350     (3)  A forfeiture account shall be created within the
351Public Employee Optional Retirement Program Trust Fund to hold
352the assets derived from the forfeiture of benefits by
353participants. Pursuant to a private letter ruling from the
354Internal Revenue Service, the forfeiture account may be used
355only for paying expenses of the Public Employee Optional
356Retirement Program and reducing future employer contributions to
357the program. Consistent with Rulings 80-155 and 74-340 of the
358Internal Revenue Service, unallocated reserves within the
359forfeiture account must be used as quickly and as prudently as
360possible considering the state board's fiduciary duty. Expected
361withdrawals from the account must endeavor to reduce the account
362to zero each fiscal year.
363     Section 3.  Paragraphs (a) and (b) of subsection (1) of
364section 121.591, Florida Statutes, are amended to read:
365     121.591  Benefits payable under the Public Employee
366Optional Retirement Program of the Florida Retirement System.-
367Benefits may not be paid under this section unless the member
368has terminated employment as provided in s. 121.021(39)(a) or is
369deceased and a proper application has been filed in the manner
370prescribed by the state board or the department. The state board
371or department, as appropriate, may cancel an application for
372retirement benefits when the member or beneficiary fails to
373timely provide the information and documents required by this
374chapter and the rules of the state board and department. In
375accordance with their respective responsibilities as provided
376herein, the State Board of Administration and the Department of
377Management Services shall adopt rules establishing procedures
378for application for retirement benefits and for the cancellation
379of such application when the required information or documents
380are not received. The State Board of Administration and the
381Department of Management Services, as appropriate, are
382authorized to cash out a de minimis account of a participant who
383has been terminated from Florida Retirement System covered
384employment for a minimum of 6 calendar months. A de minimis
385account is an account containing employer contributions and
386accumulated earnings of not more than $5,000 made under the
387provisions of this chapter. Such cash-out must either be a
388complete lump-sum liquidation of the account balance, subject to
389the provisions of the Internal Revenue Code, or a lump-sum
390direct rollover distribution paid directly to the custodian of
391an eligible retirement plan, as defined by the Internal Revenue
392Code, on behalf of the participant. If any financial instrument
393issued for the payment of retirement benefits under this section
394is not presented for payment within 180 days after the last day
395of the month in which it was originally issued, the third-party
396administrator or other duly authorized agent of the State Board
397of Administration shall cancel the instrument and credit the
398amount of the instrument to the suspense account of the Public
399Employee Optional Retirement Program Trust Fund authorized under
400s. 121.4501(6). Any such amounts transferred to the suspense
401account are payable upon a proper application, not to include
402earnings thereon, as provided in this section, within 10 years
403after the last day of the month in which the instrument was
404originally issued, after which time such amounts and any
405earnings thereon shall be forfeited. Any such forfeited amounts
406are assets of the Public Employee Optional Retirement Program
407Trust Fund and are not subject to the provisions of chapter 717.
408     (1)  NORMAL BENEFITS.-Under the Public Employee Optional
409Retirement Program:
410     (a)  Benefits in the form of vested accumulations as
411described in s. 121.4501(6) are payable under this subsection in
412accordance with the following terms and conditions:
413     1.  To the extent vested, benefits are payable only to a
414participant.
415     2.  Benefits shall be paid by the third-party administrator
416or designated approved providers in accordance with the law, the
417contracts, and any applicable board rule or policy.
418     3.  To receive benefits, the participant must be terminated
419from all employment with all Florida Retirement System
420employers, as provided in s. 121.021(39).
421     4.  Benefit payments may not be made until the participant
422has been terminated for 3 calendar months, except that the board
423may authorize by rule for the distribution of up to 10 percent
424of the participant's account after being terminated for 1
425calendar month if the participant has reached the normal
426retirement date as defined in s. 121.021 of the defined benefit
427plan.
428     5.  If a member or former member of the Florida Retirement
429System receives an invalid distribution from the Public Employee
430Optional Retirement Program Trust Fund, such person must repay
431the full invalid distribution to the trust fund within 90 days
432after receipt of final notification by the state board or the
433third-party administrator that the distribution was invalid. If
434such person fails to repay the full invalid distribution within
43590 days after receipt of final notification, the person may be
436deemed retired from the optional retirement program by the state
437board, as provided pursuant to s. 121.4501(2)(k)(j), and is
438subject to s. 121.122. If such person is deemed retired by the
439state board, any joint and several liability set out in s.
440121.091(9)(d)2. becomes null and void, and the state board, the
441department, or the employing agency is not liable for gains on
442payroll contributions that have not been deposited to the
443person's account in the retirement program, pending resolution
444of the invalid distribution. The member or former member who has
445been deemed retired or who has been determined by the board to
446have taken an invalid distribution may appeal the agency
447decision through the complaint process as provided under s.
448121.4501(9)(g)3. As used in this subparagraph, the term "invalid
449distribution" means any distribution from an account in the
450optional retirement program which is taken in violation of this
451section, s. 121.091(9), or s. 121.4501.
452     (b)  If a participant elects to receive his or her benefits
453upon termination of employment as defined in s. 121.021, the
454participant must submit a written application or an application
455by electronic means an equivalent form to the third-party
456administrator indicating his or her preferred distribution date
457and selecting an authorized method of distribution as provided
458in paragraph (c). The participant may defer receipt of benefits
459until he or she chooses to make such application, subject to
460federal requirements.
461     Section 4.  Section 121.74, Florida Statutes, is amended to
462read:
463     121.74  Administrative and educational expenses.-In
464addition to contributions required under s. 121.71, effective
465July 1, 2010, through June 30, 2014, employers participating in
466the Florida Retirement System shall contribute an amount equal
467to 0.03 0.05 percent of the payroll reported for each class or
468subclass of Florida Retirement System membership; effective July
4691, 2014, the contribution rate shall be 0.04 percent of the
470payroll reported for each class or subclass of membership. The,
471which amount contributed shall be transferred by the Division of
472Retirement from the Florida Retirement System Contributions
473Clearing Trust Fund to the State Board of Administration's
474Administrative Trust Fund to offset the costs of administering
475the optional retirement program and the costs of providing
476educational services to participants in the defined benefit
477program and the optional retirement program. Approval of the
478trustees of the State Board of Administration is required before
479prior to the expenditure of these funds. Payments for third-
480party administrative or educational expenses shall be made only
481pursuant to the terms of the approved contracts for such
482services.
483     Section 5.  Subsection (3) of section 121.78, Florida
484Statutes, is amended to read:
485     121.78  Payment and distribution of contributions.-
486     (3)(a)  Employer contributions and accompanying payroll
487data received after the 5th working day of the month are shall
488be considered late. The employer shall be assessed by the
489Division of Retirement a penalty of 1 percent of the
490contributions due for each calendar month or part thereof that
491the contributions or accompanying payroll data are late.
492Proceeds from the 1-percent assessment against contributions
493made on behalf of participants of the defined benefit program
494shall be deposited in the Florida Retirement System Trust Fund,
495and proceeds from the 1-percent assessment against contributions
496made on behalf of participants of the optional retirement
497program shall be transferred to the third-party administrator
498for deposit into participant accounts, as provided in paragraph
499(b).
500     (b)  If contributions made by an employer on behalf of
501participants of the optional retirement program or accompanying
502payroll data are not received within the calendar month they are
503due, including, but not limited to, contribution adjustments as
504a result of employer errors or corrections, and if that
505delinquency results in market losses to participants, the
506employer shall reimburse each participant's account for market
507losses resulting from the late contributions. If a participant
508has terminated employment and taken a distribution, the
509participant is responsible for returning any excess
510contributions erroneously provided by employers, adjusted for
511any investment gain or loss incurred during the period such
512excess contributions were in the participant's Public Employee
513Optional Retirement Program account. The state board of
514Administration or its designated agent shall communicate to
515terminated participants any obligation to repay such excess
516contribution amounts. However, the state board of
517Administration, its designated agents, the Public Employee
518Optional Retirement Program Trust Fund, the department of
519Management Services, or the Florida Retirement System Trust Fund
520may shall not incur any loss or gain as a result of an
521employer's correction of such excess contributions. The third-
522party administrator, hired by the state board pursuant to s.
523121.4501(8), shall calculate the market losses for each affected
524participant. If When contributions made on behalf of
525participants of the optional retirement program or accompanying
526payroll data are not received within the calendar month due, the
527employer shall also pay the cost of the third-party
528administrator's calculation and reconciliation adjustments
529resulting from the late contributions. The third-party
530administrator shall notify the employer of the results of the
531calculations and the total amount due from the employer for such
532losses and the costs of calculation and reconciliation. The
533employer shall remit to the Division of Retirement the amount
534due within 30 10 working days after the date of the penalty
535notice sent by the division. The division shall transfer that
536said amount to the third-party administrator, which who shall
537deposit proceeds from the 1-percent assessment and from
538individual market losses into participant accounts, as
539appropriate. The state board may is authorized to adopt rules to
540administer implement the provisions regarding late
541contributions, late submission of payroll data, the process for
542reimbursing participant accounts for resultant market losses,
543and the penalties charged to the employers.
544     (c)  Delinquency fees may be waived by the Division of
545Retirement, with regard to defined benefit program
546contributions, and by the state board of Administration, with
547regard to optional retirement program contributions, only if
548when, in the opinion of the division or the board, as
549appropriate, exceptional circumstances beyond the employer's
550control prevented remittance by the prescribed due date
551notwithstanding the employer's good faith efforts to effect
552delivery. Such a waiver of delinquency may be granted an
553employer only once one time each state fiscal year.
554     (d)  If contributions made by an employer on behalf of
555participants in the optional retirement program are delayed in
556posting to participant accounts due to acts of God beyond the
557control of the Division of Retirement, the state board, or the
558third-party administrator, as applicable, market losses
559resulting from the late contributions are not payable to the
560participants.
561     Section 6.  Subsections (1) and (2) of section 215.44,
562Florida Statutes, are amended to read:
563     215.44  Board of Administration; powers and duties in
564relation to investment of trust funds.-
565     (1)  Except when otherwise specifically provided by the
566State Constitution and subject to any limitations of the trust
567agreement relating to a trust fund, the Board of Administration,
568hereinafter sometimes referred to in this chapter as "board," or
569"Trustees of the State Board of Administration," composed of the
570Governor as chair, the Chief Financial Officer, and the Attorney
571General, shall invest all the funds in the System Trust Fund, as
572defined in s. 121.021(36), and all other funds specifically
573required by law to be invested by the board pursuant to ss.
574215.44-215.53 to the fullest extent that is consistent with the
575cash requirements, trust agreement, and investment objectives of
576the fund. Notwithstanding any other law to the contrary, the
577State Board of Administration may invest any funds of any state
578agency, any state university or college, or any unit of local
579government, or any direct-support organization thereof pursuant
580to the terms of a trust agreement with the head of the state
581agency or the governing body of the state university or college,
582unit of local government, or direct-support organization
583thereof, or pursuant to the enrollment requirements stated in s.
584218.407, and may invest such funds in the Local Government
585Surplus Funds Trust Fund created by s. 218.405., which trust
586agreement shall govern the investment of such funds, provided
587that The board shall approve the undertaking of investments
588subject to a trust agreement such investment before execution of
589such the trust agreement by the State Board of Administration.
590The funds and the earnings therefrom are exempt from the service
591charge imposed by s. 215.20. As used in this subsection, the
592term "state agency" has the same meaning as that provided in s.
593216.011 216.001, and the terms "governing body" and "unit of
594local government" have the same meaning as that provided in s.
595218.403.
596     (2)(a)  The board shall have the power to make purchases,
597sales, exchanges, investments, and reinvestments for and on
598behalf of the funds referred to in subsection (1), and it shall
599be the duty of the board to see that moneys invested under the
600provisions of ss. 215.44-215.53 are at all times handled in the
601best interests of the state.
602     (b)  In exercising investment authority pursuant to s.
603215.47, the board may retain investment advisers or managers, or
604both, external to in-house staff, to assist the board in
605carrying out the power specified in paragraph (a).
606     (c)  The board shall create an audit committee to assist
607the board in fulfilling its oversight responsibilities. The
608committee shall consist of three members appointed by the board.
609Members shall be appointed for 4-year terms. A vacancy shall be
610filled for the remainder of the unexpired term. The committee
611shall annually elect a chair and vice chair from its membership.
612A member may not be elected to consecutive terms as chair or
613vice chair. Persons appointed to the audit committee must have
614relevant knowledge and expertise as determined by the board. The
615audit committee shall serve as an independent and objective
616party to monitor processes for financial reporting, internal
617controls and risk assessment, audit processes, and compliance
618with laws, rules, and regulations. The audit committee shall
619direct the efforts of the board's independent external auditors
620and the board's internal audit staff. The committee shall
621periodically, but not less than quarterly, report to the board
622and the executive director of the board.
623     (d)  The board shall produce a set of financial statements
624for the Florida Retirement System on an annual basis, which
625shall be reported to the Legislature and audited by a commercial
626independent third-party audit firm.
627     (e)  The board shall meet at least quarterly and shall
628receive reports from the audit committee, the investment
629advisory committee, the inspector general, the general counsel,
630the executive director, and such other persons or entities as
631the board may require about the financial status, operations,
632and investment activities of the board.
633     Section 7.  Section 215.441, Florida Statutes, is amended
634to read:
635     215.441  Board of Administration; appointment of executive
636director.-The appointment of the executive director of the State
637Board of Administration shall be subject to the approval by a
638majority vote of the Board of Trustees of the State Board of
639Administration, and the Governor must vote on the prevailing
640side. Such appointment must be reaffirmed in the same manner by
641the board of trustees on an annual basis. The executive director
642shall, at a minimum, possess substantial experience, knowledge,
643and expertise in the oversight of investment portfolios and must
644meet any other requirements determined by the board to be
645necessary to the overall management and investment of funds.
646     Section 8.  Section 215.444, Florida Statutes, is amended
647to read:
648     215.444  Investment Advisory Council.-
649     (1)  There is created a six-member Investment Advisory
650Council to review the investments made by the staff of the Board
651of Administration and to make recommendations to the board
652regarding investment policy, strategy, and procedures. Beginning
653February 1, 2011, the membership of the council shall be
654expanded to nine members. The council shall meet with staff of
655the board at least once each quarter and shall provide a
656quarterly report directly to the Board of Trustees of the State
657Board of Administration at a meeting of the board.
658     (2)  The members of the council shall be appointed by the
659board as a resource to the Board of Trustees of the State Board
660of Administration and shall be subject to confirmation by the
661Senate. These individuals shall possess special knowledge,
662experience, and familiarity with financial investments and
663portfolio management, institutional investments, and fiduciary
664responsibilities. Members shall be appointed for 4-year terms. A
665vacancy shall be filled for the remainder of the unexpired term.
666The council shall annually elect a chair and a vice chair from
667its membership. A member may not be elected to consecutive terms
668as chair or vice chair.
669     (3)  The council members must undergo regular fiduciary
670training as required by the board and must complete an annual
671conflict disclosure statement. In carrying out their duties,
672council members must make recommendations consistent with the
673fiduciary standards applicable to the board.
674     (4)  The council may create subcommittees as necessary to
675carry out its duties and responsibilities.
676     Section 9.  Paragraphs (b) and (c) of subsection (1),
677paragraph (a) of subsection (2), and subsection (5) of section
678215.47, Florida Statutes, are amended, paragraph (o) is added to
679subsection (1) of that section, and subsection (20) is added to
680that section, to read:
681     215.47  Investments; authorized securities; loan of
682securities.-Subject to the limitations and conditions of the
683State Constitution or of the trust agreement relating to a trust
684fund, moneys available for investments under ss. 215.44-215.53
685may be invested as follows:
686     (1)  Without limitation in:
687     (b)  State Bonds, notes, or obligations of any state or
688organized territory of the United States or the District of
689Columbia that pledge pledging the full faith and credit of the
690state, territory, or district; and revenue bonds, notes, or
691obligations of any state or organized territory of the United
692States or the District of Columbia additionally secured by the
693full faith and credit of the state, territory, or district.
694     (c)  Bonds, notes, or obligations of the several counties
695or districts in any the state or organized territory of the
696United States or the District of Columbia containing a pledge of
697the full faith and credit of the county or district involved.
698     (o)  Bonds, notes, or obligations described in 26 U.S.C. s.
699149(g)(3)(B), if investment in such bonds, notes, or obligations
700is necessary in order to comply with covenants in documents or
701proceedings relating to bonds issued pursuant to s. 215.555(6).
702Investments made pursuant to this paragraph may be purchased
703only from the proceeds of bonds issued pursuant to s. 215.555(6)
704and must be authorized under documents or proceedings relating
705to such bonds.
706     (2)  With no more than 25 percent of any fund in:
707     (a)  Bonds, notes, or obligations of any state or organized
708territory of the United States or the District of Columbia; of
709any municipality or political subdivision or any agency,
710district, or authority thereof; or of any agency or authority of
711this state, if the obligations are rated investment grade by at
712least one nationally recognized statistical rating organization.
713     (5)  With no more than 25 percent of any fund in corporate
714obligations and securities of any kind of a foreign corporation
715or a foreign commercial entity having its principal office
716located in any country other than the United States of America
717or its possessions or territories, not including United States
718dollar-denominated securities listed and traded on a United
719States exchange which are a part of the ordinary investment
720strategy of the board.
721     (20)  Notwithstanding the provisions in subsection (5)
722limiting such investments to 25 percent of any fund, the board
723may invest no more than 35 percent of any fund in corporate
724obligations and securities of any kind of a foreign corporation
725or a foreign commercial entity having its principal office
726located in any country other than the United States or its
727possessions or territories, not including United States dollar-
728denominated securities listed and traded on a United States
729exchange that are a part of the ordinary investment strategy of
730the board.
731     Section 10.  Section 215.4754, Florida Statutes, is created
732to read:
733     215.4754  Ethics requirements for investment advisers and
734managers and members of the Investment Advisory Council.-The
735intent of this section is to promote independence and the
736avoidance of conflicts and improper influence by certain
737investment advisers and managers without creating unnecessary
738barriers to the board performing its investment duties
739consistent with its fiduciary standards, investment performance,
740and business relationships.
741     (1)  A contract under which an investment adviser or
742manager has been retained to exercise investment authority on
743behalf of the board for direct holdings shall require that the
744investment adviser or manager abide by a standard of conduct
745pursuant to s. 215.4755. Any such contract may be terminated by
746the board if the investment adviser or manager violates such
747standard of conduct.
748     (2)  An Investment Advisory Council member or any business
749organization or any affiliate thereof that is owned by or
750employs such member may not directly or indirectly contract with
751or provide any services for the investment of trust funds
752invested by the board during the time of such member's service
753on the council or for 2 years thereafter.
754     Section 11.  Section 215.4755, Florida Statutes, is created
755to read:
756     215.4755   Certification and disclosure requirements for
757investment advisers and managers.-
758     (1)  An investment adviser or manager who has discretionary
759investment authority for direct holdings and who is retained as
760provided in s. 215.44(2)(c) shall agree pursuant to contract to
761annually certify in writing to the board that:
762     (a)  All investment decisions made on behalf of the trust
763funds and the board are made in the best interests of the trust
764funds and the board and not made in a manner to the advantage of
765such investment adviser or manager, other persons, or clients to
766the detriment of the trust funds and the board.
767     (b)  Appropriate policies, procedures, or other safeguards
768have been adopted and implemented to ensure that relationships
769with any affiliated persons or entities do not adversely
770influence the investment decisions made on behalf of the trust
771funds and the board.
772     (c)  A written code of ethics, conduct, or other set of
773standards, which governs the professional behavior and
774expectations of owners, general partners, directors or managers,
775officers, and employees of the investment adviser or manager,
776has been adopted and implemented and is effectively monitored
777and enforced. The investment advisers' and managers' code of
778ethics shall require that:
779     1.  Officers and employees involved in the investment
780process refrain from personal business activity that could
781conflict with the proper execution and management of the
782investment program over which the investment adviser or manager
783has discretionary investment authority or that could impair
784their ability to make impartial decisions with respect to such
785investment program; and
786     2.  Officers and employees refrain from undertaking
787personal investment transactions with the same individual with
788whom business is conducted on behalf of the board.
789     (d)  The investment adviser or manager has proactively and
790promptly disclosed to the board, notwithstanding subsection (2),
791any known circumstances or situations that a prudent person
792could expect to create an actual, potential, or perceived
793conflict of interest, including specifically:
794     1.  Any material interests in or with financial
795institutions with which officers and employees conduct business
796on behalf of the trust funds and the board; and
797     2.  Any personal financial or investment positions of the
798investment advisor or manager that could be related to the
799performance of an investment program over which the investment
800adviser or manager has discretionary investment authority on
801behalf of the board.
802     (2)  At the board's request, an investment adviser or
803manager who has discretionary investment authority over direct
804holdings and who is retained as provided in s. 215.44(2)(c)
805shall disclose in writing to the board:
806     (a)  Any nonconfidential, nonproprietary information or
807reports to substantiate the certifications required under
808subsection (1).
809     (b)  All direct or indirect pecuniary interests that the
810investment adviser or manager has in or with any party to a
811transaction with the board, if the transaction is related to any
812discretionary investment authority that the investment adviser
813or manager exercises on behalf of the board.
814     (3)  An investment adviser or manager certification
815required under subsection (1) shall be provided annually, no
816later than January 31, for the reporting period of the previous
817calendar year on a form prescribed by the board.
818     Section 12.  Section 215.52, Florida Statutes, is amended
819to read:
820     215.52  Rules and regulations.-The board shall have the
821power and authority to make reasonable rules and regulations
822necessary to carry out the provisions of ss. 215.44-215.53. The
823rules shall provide for full transparency and accountability in
824fulfillment of the board's fiduciary duties in the areas of
825compliance, ethics, training, and audit procedures.
826     Section 13.  Paragraph (a) of subsection (8) of section
827218.409, Florida Statutes, is amended to read:
828     218.409  Administration of the trust fund; creation of
829advisory council.-
830     (8)(a)  The principal, and any part thereof, of each and
831every account constituting the trust fund is shall be subject to
832payment at any time from the moneys in the trust fund. However,
833the executive director may, in good faith, on the occurrence of
834an event that has a material impact on liquidity or operations
835of the trust fund, for 48 hours limit contributions to or
836withdrawals from the trust fund to ensure that the board can
837invest moneys entrusted to it in exercising its fiduciary
838responsibility. Such action must shall be immediately disclosed
839to all participants, the trustees, the Joint Legislative
840Auditing Committee, the Investment Advisory Council, and the
841Participant Local Government Advisory Council. The trustees
842shall convene an emergency meeting as soon as practicable from
843the time the executive director has instituted such measures and
844review the necessity of those measures. If the trustees are
845unable to convene an emergency meeting before the expiration of
846the 48-hour moratorium on contributions and withdrawals, the
847moratorium may be extended by the executive director until the
848trustees are able to meet to review the necessity for the
849moratorium. If the trustees agree with such measures, the
850trustees shall vote to continue the measures for up to an
851additional 15 days. The trustees must convene and vote to
852continue any such measures before prior to the expiration of the
853time limit set, but in no case may the time limit set by the
854trustees exceed 15 days.
855     Section 14.  Trademarks, copyrights, or patents.-The State
856Board of Administration, on behalf of the Florida Retirement
857System or any other trust fund under its jurisdiction, may
858develop work products that are subject to trademark, copyright,
859or patent statutes. The board may, in its own name or through
860the growth initiative program created pursuant to s. 215.47(7),
861Florida Statutes, or any other program developed with or for the
862board:
863     (1)  Perform all things necessary to secure letters of
864patent, copyrights, or trademarks on any work products and
865enforce its rights therein.
866     (2)  License, lease, assign, or otherwise give written
867consent to any person for the manufacture or use of its work
868products on a royalty basis or for such other consideration as
869the board deems proper.
870     (3)  Take any action necessary, including legal action, to
871protect its work products against improper or unlawful use or
872infringement.
873     (4)  Enforce the collection of any sums due the board for
874the manufacture or use of its work products by any other party.
875     (5)  Sell any of its work products and execute all
876instruments necessary to consummate any such sale.
877     (6)  Do all other acts necessary and proper for the
878execution of powers and duties provided under this section.
879     Section 15.  This act shall take effect July 1, 2010.


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