November 17, 2019
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       Florida Senate - 2010               CS for CS for CS for SB 1078
       
       
       
       By the Policy and Steering Committee on Ways and Means; the
       Committees on General Government Appropriations; and
       Governmental Oversight and Accountability; and Senator Ring
       
       
       576-05036-10                                          20101078c3
    1                        A bill to be entitled                      
    2         An act relating to state financial matters; amending
    3         s. 121.4501, F.S.; defining the term “electronic
    4         means” and redefining the term “optional retirement
    5         program”; providing for excess account balances in the
    6         Public Employee Optional Retirement Program when an
    7         employee transfers to the defined benefit program and
    8         for the use of such excess balance; requiring the
    9         State Board of Administration to develop procedures to
   10         resolve complaints; providing for the use of records
   11         in resolving such complaints; clarifying the state
   12         board’s rule authority with respect to the program;
   13         requiring that the investment products and approved
   14         providers selected for the Public Employee Optional
   15         Retirement Program conform with the Public Employee
   16         Optional Retirement Program Investment Policy
   17         Statement that is developed by the executive director
   18         of the state board and approved by the Investment
   19         Advisory Council and Trustees of the State Board of
   20         Administration; amending s. 121.4502, F.S.;
   21         establishing a forfeiture account in the Public
   22         Employee Retirement Program Trust Fund and providing
   23         for the use of funds in the account; amending s.
   24         121.591, F.S.; permitting an application for benefits
   25         under the optional retirement program to be submitted
   26         by electronic means; amending s. 121.78, F.S.;
   27         exempting the Division of Retirement, the state board,
   28         and the third-party administrator from liability for
   29         market losses due to acts of God; amending s. 215.44,
   30         F.S.; authorizing the State Board of Administration to
   31         invest the funds of any state university or college or
   32         a direct-support organization of any state agency,
   33         university or college, or local government; requiring
   34         that the board establish and maintain the salaries of
   35         its officers and employees in a manner consistent with
   36         its fiduciary duties; requiring that the council
   37         initiate an investigation at specified intervals for
   38         specified purposes; requiring that the council present
   39         the results of such study to the board; authorizing
   40         the board to delegate certain authority and duties to
   41         the executive director; requiring that the board
   42         create an audit committee for specified purposes;
   43         providing for membership on the committee and term
   44         limits of committee members; providing purposes and
   45         duties of the committee; requiring that the board
   46         produce certain financial statements on an annual
   47         basis and report the information contained in such
   48         statements to the Legislature; requiring that such
   49         statements be audited by an independent third-party
   50         firm working under the direction of the audit
   51         committee; requiring that the board meet at specified
   52         intervals and receive reports containing certain
   53         information from specified entities; amending s.
   54         215.441, F.S.; requiring that the board appoint an
   55         executive director; providing duties of the executive
   56         director; providing requirements for appointment as
   57         executive director; removing a requirement that the
   58         Governor vote in favor of the selection of the
   59         executive director; providing for the determination of
   60         the executive director’s compensation; providing for
   61         the creation, operation, and membership of a search
   62         committee for the purpose of selecting the executive
   63         director; amending s. 215.442, F.S.; requiring that
   64         the executive director present certain information
   65         quarterly to the Investment Advisory Council; amending
   66         s. 215.444, F.S.; requiring that the council meet with
   67         the board’s staff at specified intervals and provide a
   68         quarterly report to the board’s trustees; clarifying
   69         the function of council members; expanding
   70         prerequisites for membership on the council to include
   71         knowledge of and experience with institutional
   72         investments and fiduciary responsibilities; providing
   73         that a council member is an officer, employee, or
   74         agent of the state for specified purposes; requiring
   75         that appointees to the council undergo specified
   76         training; requiring that council members make
   77         recommendations consistent with fiduciary
   78         responsibilities applicable to the board; specifying
   79         duties of the council; authorizing the council to
   80         create subcommittees and direct the executive director
   81         to enter into certain contracts; amending s. 215.47,
   82         F.S.; specifying the bonds, notes, and obligations
   83         into which the trust funds of the state may be
   84         invested and in what amounts; prohibiting the Board of
   85         Administration from investing more than a specified
   86         percentage of any trust fund in corporate obligations
   87         and securities of any kind of a foreign corporation or
   88         a foreign commercial entity having its principal
   89         office located in any country other than the United
   90         States; amending s. 215.475, F.S.; conforming
   91         provisions to changes made by the act; creating s.
   92         215.4754, F.S.; providing intent; requiring that the
   93         contract for an investment adviser or manager include
   94         a standard of conduct; providing for termination of
   95         the contract of an adviser or manager who violates the
   96         standard of conduct; prohibiting a member of the
   97         Investment Advisory Council from contracting with or
   98         providing services for the investment of certain funds
   99         during his or her service on the board and for a
  100         specified period thereafter; creating s. 215.4755,
  101         F.S.; requiring that an investment advisor or manager
  102         annually certify to the board certain activities
  103         regarding investment decisions and standards of
  104         behavior; requiring that certain disclosures be made
  105         at the request of the board regarding pecuniary
  106         interests of an investment adviser or manager;
  107         amending s. 215.52, F.S.; authorizing the board to
  108         implement certain policies, restrictions, or
  109         guidelines; amending s. 218.409, F.S.; providing for
  110         extending a moratorium on contributions to the Local
  111         Government Surplus Funds Trust Fund under certain
  112         circumstances; authorizing the state board to develop
  113         work products that are subject to trademark,
  114         copyright, or patent; providing an effective date.
  115  
  116  Be It Enacted by the Legislature of the State of Florida:
  117  
  118         Section 1. Subsection (2), paragraph (e) of subsection (4),
  119  subsection (6), paragraphs (a) and (g) of subsection (8), and
  120  subsection (14) of section 121.4501, Florida Statutes, are
  121  amended to read:
  122         121.4501 Public Employee Optional Retirement Program.—
  123         (2) DEFINITIONS.—As used in this part, the term:
  124         (a) “Approved provider” or “provider” means a private
  125  sector company that is selected and approved by the state board
  126  to offer one or more investment products or services to the
  127  Public Employee optional retirement program. The term includes a
  128  bundled provider that offers participants a range of
  129  individually allocated or unallocated investment products and
  130  may offer a range of administrative and customer services, which
  131  may include accounting and administration of individual
  132  participant benefits and contributions; individual participant
  133  recordkeeping; asset purchase, control, and safekeeping; direct
  134  execution of the participant’s instructions as to asset and
  135  contribution allocation; calculation of daily net asset values;
  136  direct access to participant account information; periodic
  137  reporting to participants, at least quarterly, on account
  138  balances and transactions; guidance, advice, and allocation
  139  services directly relating to the provider’s its own investment
  140  options or products, but only if the bundled provider complies
  141  with the standard of care of s. 404(a)(1)(A-B) of the Employee
  142  Retirement Income Security Act of 1974 (ERISA) and if providing
  143  such guidance, advice, or allocation services does not
  144  constitute a prohibited transaction under s. 4975(c)(1) of the
  145  Internal Revenue Code or s. 406 of ERISA, notwithstanding that
  146  such prohibited transaction provisions do not apply to the
  147  optional retirement program; a broad array of distribution
  148  options; asset allocation; and retirement counseling and
  149  education. Private sector companies include investment
  150  management companies, insurance companies, depositories, and
  151  mutual fund companies.
  152         (b) “Average monthly compensation” means one-twelfth of
  153  average final compensation as defined in s. 121.021(24).
  154         (c) “Covered employment” means employment in a regularly
  155  established position as defined in s. 121.021(52).
  156         (d) Defined benefit program” means the defined benefit
  157  program of the Florida Retirement System administered under part
  158  I of this chapter “Department” means the Department of
  159  Management Services.
  160         (e)(e) “Division” means the Division of Retirement within
  161  the department of Management Services.
  162         (f) “Electronic means” means by telephone, if the required
  163  information is received on a recorded line, or through Internet
  164  access, if the required information is captured online.
  165         (g)(f) “Eligible employee” means an officer or employee, as
  166  defined in s. 121.021, who:
  167         1. Is a member of, or is eligible for membership in, the
  168  Florida Retirement System, including any renewed member of the
  169  Florida Retirement System initially enrolled before July 1,
  170  2010; or
  171         2. Participates in, or is eligible to participate in, the
  172  Senior Management Service Optional Annuity Program as
  173  established under s. 121.055(6), the State Community College
  174  System Optional Retirement Program as established under s.
  175  121.051(2)(c), or the State University System Optional
  176  Retirement Program established under s. 121.35.
  177  
  178  The term does not include any member participating in the
  179  Deferred Retirement Option Program established under s.
  180  121.091(13), a retiree of a state-administered retirement system
  181  initially reemployed on or after July 1, 2010, or a mandatory
  182  participant of the State University System Optional Retirement
  183  Program established under s. 121.35.
  184         (h)(g) “Employer” means an employer, as defined in s.
  185  121.021(10), of an eligible employee.
  186         (i) “Optional retirement program” or “optional program”
  187  means the Public Employee Optional Retirement Program
  188  established under this part.
  189         (j)(h) “Participant” means an eligible employee who elects
  190  to participate in the Public Employee Optional Retirement
  191  Program and enrolls in the such optional program as provided in
  192  subsection (4) or a terminated Deferred Retirement Option
  193  Program participant as described in subsection (21).
  194         (i)“Public Employee Optional Retirement Program,”
  195  “optional program,” or “optional retirement program” means the
  196  alternative defined contribution retirement program established
  197  under this section.
  198         (k)(j) “Retiree” means a former participant of the Florida
  199  Retirement System Public Employee optional retirement program
  200  who has terminated employment and has taken a distribution as
  201  provided in s. 121.591, except for a mandatory distribution of a
  202  de minimis account authorized by the state board.
  203         (k)“State board” or “board” means the State Board of
  204  Administration.
  205         (l)“Trustees” means Trustees of the State Board of
  206  Administration.
  207         (l)(m) “Vested” or “vesting” means the guarantee that a
  208  participant is eligible to receive a retirement benefit upon
  209  completion of the required years of service under the Public
  210  Employee optional retirement program.
  211         (4) PARTICIPATION; ENROLLMENT.—
  212         (e) After the period during which an eligible employee had
  213  the choice to elect the defined benefit program or the Public
  214  Employee optional retirement program, or the month following the
  215  receipt of the eligible employee’s plan election, if sooner, the
  216  employee shall have one opportunity, at the employee’s
  217  discretion, to choose to move from the defined benefit program
  218  to the Public Employee optional retirement program or from the
  219  Public Employee optional retirement program to the defined
  220  benefit program. Eligible employees may elect to move between
  221  Florida Retirement System programs only if they are earning
  222  service credit in an employer-employee relationship consistent
  223  with the requirements under s. 121.021(17)(b), excluding leaves
  224  of absence without pay. Effective July 1, 2005, such elections
  225  are shall be effective on the first day of the month following
  226  the receipt of the election by the third-party administrator and
  227  are not subject to the requirements regarding an employer
  228  employee relationship or receipt of contributions for the
  229  eligible employee in the effective month, except that the
  230  employee must meet the conditions of the previous sentence when
  231  the election is received by the third-party administrator. This
  232  paragraph is shall be contingent upon approval from the Internal
  233  Revenue Service for including the choice described herein within
  234  the programs offered by the Florida Retirement System.
  235         1. If the employee chooses to move to the Public Employee
  236  optional retirement program, the applicable provisions of this
  237  section shall govern the transfer.
  238         2. If the employee chooses to move to the defined benefit
  239  program, the employee must transfer from his or her Public
  240  Employee optional retirement program account, and from other
  241  employee moneys as necessary, a sum representing the present
  242  value of that employee’s accumulated benefit obligation
  243  immediately following the time of such movement, determined
  244  assuming that attained service equals the sum of service in the
  245  defined benefit program and service in the Public Employee
  246  optional retirement program. Benefit commencement occurs on the
  247  first date the employee is would become eligible for unreduced
  248  benefits, using the discount rate and other relevant actuarial
  249  assumptions that were used to value the Florida Retirement
  250  System defined benefit plan liabilities in the most recent
  251  actuarial valuation. For any employee who, at the time of the
  252  second election, already maintains an accrued benefit amount in
  253  the defined benefit program plan, the then-present value of the
  254  such accrued benefit shall be deemed part of the required
  255  transfer amount described in this subparagraph. The division
  256  shall ensure that the transfer sum is prepared using a formula
  257  and methodology certified by an enrolled actuary.
  258         3. Notwithstanding subparagraph 2., an employee who chooses
  259  to move to the defined benefit program and who became eligible
  260  to participate in the Public Employee optional retirement
  261  program by reason of employment in a regularly established
  262  position with a state employer after June 1, 2002; a district
  263  school board employer after September 1, 2002; or a local
  264  employer after December 1, 2002, must transfer from his or her
  265  Public Employee optional retirement program account and, from
  266  other employee moneys as necessary, a sum representing the that
  267  employee’s actuarial accrued liability.
  268         4. An employee’s Employees’ ability to transfer from the
  269  Florida Retirement System defined benefit program to the Public
  270  Employee optional retirement program pursuant to paragraphs (a)
  271  (d), and the ability of a for current employee employees to have
  272  an option to later transfer back into the defined benefit
  273  program under subparagraph 2., shall be deemed a significant
  274  system amendment. Pursuant to s. 121.031(4), any such resulting
  275  unfunded liability arising from actual original transfers from
  276  the defined benefit program to the optional program must shall
  277  be amortized within 30 plan years as a separate unfunded
  278  actuarial base independent of the reserve stabilization
  279  mechanism defined in s. 121.031(3)(f). For the first 25 years, a
  280  no direct amortization payment may not shall be calculated for
  281  this base. During this 25-year period, the such separate base
  282  shall be used to offset the impact of employees exercising their
  283  second program election under this paragraph. It is the
  284  legislative intent of the Legislature that the actuarial funded
  285  status of the Florida Retirement System defined benefit program
  286  not be affected plan is neither beneficially nor adversely
  287  impacted by such second program elections in any significant
  288  manner, after due recognition of the separate unfunded actuarial
  289  base. Following the this initial 25-year period, any remaining
  290  balance of the original separate base shall be amortized over
  291  the remaining 5 years of the required 30-year amortization
  292  period.
  293         5. If the employee chooses to transfer from the optional
  294  retirement program to the defined benefit program, and retains
  295  an excess account balance in the optional program after
  296  satisfying the buy-in requirements under this paragraph, the
  297  excess may not be distributed until the member retires from the
  298  defined benefit program. The excess account balance may be
  299  rolled over to the defined benefit program and used to purchase
  300  service credit or upgrade creditable service in that program.
  301         (6) VESTING REQUIREMENTS.—
  302         (a)1. With respect to employer contributions paid on behalf
  303  of the participant to the Public Employee optional retirement
  304  program, plus interest and earnings thereon and less investment
  305  fees and administrative charges, a participant is shall be
  306  vested after completing 1 work year, as defined in s.
  307  121.021(54), with an employer, including any service while the
  308  participant was a member of the defined benefit retirement
  309  program or an optional retirement program authorized under s.
  310  121.051(2)(c) or s. 121.055(6).
  311         2. If the participant terminates employment before prior to
  312  satisfying the vesting requirements, the nonvested accumulation
  313  must shall be transferred from the participant’s accounts to the
  314  state board for deposit and investment by the state board in the
  315  suspense account created within of the Public Employee Optional
  316  Retirement Program Trust Fund of the board. If the terminated
  317  participant is reemployed as an eligible employee within 5
  318  years, the state board shall transfer to the participant’s
  319  account any amount of the moneys previously transferred from the
  320  participant’s accounts to the suspense account of the Public
  321  Employee Optional Retirement Program Trust Fund, plus the actual
  322  earnings on such amount while in the suspense account.
  323         (b)1. With respect to amounts transferred from the defined
  324  benefit program to the investment program, plus interest and
  325  earnings, and less investment fees and administrative charges, a
  326  participant shall be vested in the amount transferred from the
  327  defined benefit program, plus interest and earnings thereon and
  328  less administrative charges and investment fees, upon meeting
  329  the service requirements for the participant’s membership class
  330  as set forth in s. 121.021(29). The third-party administrator
  331  shall account for such amounts for each participant. The
  332  division shall notify the participant and the third-party
  333  administrator when the participant has satisfied the vesting
  334  period for Florida Retirement System purposes.
  335         2. If the participant terminates employment before prior to
  336  satisfying the vesting requirements, the nonvested accumulation
  337  must shall be transferred from the participant’s accounts to the
  338  state board for deposit and investment by the board in the
  339  suspense account created within of the Public Employee Optional
  340  Retirement Program Trust Fund of the board. If the terminated
  341  participant is reemployed as an eligible employee within 5
  342  years, the state board shall transfer to the participant’s
  343  account any amount of the moneys previously transferred from the
  344  participant’s accounts to the suspense account of the Public
  345  Employee Optional Retirement Program Trust Fund, plus the actual
  346  earnings on such amount while in the suspense account.
  347         (c) Any nonvested accumulations transferred from a
  348  participant’s account to the suspense account shall be forfeited
  349  by the participant if the participant is not reemployed as an
  350  eligible employee within 5 years after termination.
  351         (8) ADMINISTRATION OF PROGRAM.—
  352         (a) The Public Employee optional retirement program shall
  353  be administered by the state board and affected employers. The
  354  board may is authorized to require oaths, by affidavit or
  355  otherwise, and acknowledgments from persons in connection with
  356  the administration of its statutory duties and responsibilities
  357  for this program under this chapter. An No oath, by affidavit or
  358  otherwise, may not shall be required of an employee participant
  359  at the time of enrollment election. Acknowledgment of an
  360  employee’s election to participate in the program shall be no
  361  greater than necessary to confirm the employee’s election. The
  362  state board shall adopt rules to carry out its statutory duties
  363  with respect to administering the optional retirement program,
  364  including, but not limited to, establishing the roles role and
  365  responsibilities of affected state, local government, and
  366  education-related employers, the state board, the department,
  367  and third-party contractors in administering the Public Employee
  368  optional retirement program. The department shall adopt rules
  369  necessary to administer implement the optional program in
  370  coordination with the defined benefit retirement program and the
  371  disability benefits available under the optional program.
  372         (g) The state board shall develop procedures to receive and
  373  resolve participant complaints against the program, the third
  374  party administrator, or any program vendor or provider and shall
  375  resolve any conflict between the third-party administrator and
  376  an approved provider if when such conflict threatens the
  377  implementation or administration of the program or the quality
  378  of services to employees, and may resolve any other conflicts.
  379  The third-party administrator shall retain all participant
  380  records for at least 5 years for use in resolving any
  381  participant conflicts. The state board, the third-party
  382  administrator, or a provider is not required to produce
  383  documentation or an audio recording to justify action taken with
  384  regard to a participant if the action occurred 5 or more years
  385  before the complaint is submitted to the board. It is presumed
  386  that all action taken 5 or more years before the complaint is
  387  submitted was taken at the request of the participant and with
  388  the participant’s full knowledge and consent. To overcome this
  389  presumption, the participant must present documentary evidence
  390  or an audio recording demonstrating otherwise.
  391         (14) INVESTMENT POLICY STATEMENT.—
  392         (a) Investment products and approved providers selected for
  393  the Public Employee Optional Retirement Program shall conform
  394  with the Public Employee Optional Retirement Program Investment
  395  Policy Statement, herein referred to as the “statement,” as
  396  developed by the executive director of the state board and
  397  approved by the Investment Advisory Council and Trustees of the
  398  State Board of Administration. The statement must include, among
  399  other items, the investment objectives of the Public Employee
  400  Optional Retirement Program, manager selection and monitoring
  401  guidelines, and performance measurement criteria. As required
  402  from time to time, the executive director of the state board may
  403  present recommended changes in the statement to the board for
  404  approval.
  405         (b) Before Prior to presenting the statement, or any
  406  recommended changes thereto, to the state board, the executive
  407  director of the board shall present such statement or changes to
  408  the Investment Advisory Council for review and approval. The
  409  council shall present the results of its review to the board
  410  prior to the board’s final approval of the statement or changes
  411  in the statement.
  412         Section 2. Subsection (3) is added to section 121.4502,
  413  Florida Statutes, to read:
  414         121.4502 Public Employee Optional Retirement Program Trust
  415  Fund.—
  416         (3) A forfeiture account shall be created within the Public
  417  Employee Optional Retirement Program Trust Fund to hold the
  418  assets derived from the forfeiture of benefits by participants.
  419  Pursuant to a private letter ruling from the Internal Revenue
  420  Service, the forfeiture account may be used only for paying
  421  expenses of the Public Employee Optional Retirement Program and
  422  reducing future employer contributions to the program.
  423  Consistent with Rulings 80-155 and 74-340 of the Internal
  424  Revenue Service, unallocated reserves within the forfeiture
  425  account must be used as quickly and as prudently as possible
  426  considering the state board’s fiduciary duty. Expected
  427  withdrawals from the account must endeavor to reduce the account
  428  to zero each fiscal year.
  429         Section 3. Paragraph (b) of subsection (1) of section
  430  121.591, Florida Statutes, is amended to read:
  431         121.591 Benefits payable under the Public Employee Optional
  432  Retirement Program of the Florida Retirement System.—Benefits
  433  may not be paid under this section unless the member has
  434  terminated employment as provided in s. 121.021(39)(a) or is
  435  deceased and a proper application has been filed in the manner
  436  prescribed by the state board or the department. The state board
  437  or department, as appropriate, may cancel an application for
  438  retirement benefits when the member or beneficiary fails to
  439  timely provide the information and documents required by this
  440  chapter and the rules of the state board and department. In
  441  accordance with their respective responsibilities as provided
  442  herein, the State Board of Administration and the Department of
  443  Management Services shall adopt rules establishing procedures
  444  for application for retirement benefits and for the cancellation
  445  of such application when the required information or documents
  446  are not received. The State Board of Administration and the
  447  Department of Management Services, as appropriate, are
  448  authorized to cash out a de minimis account of a participant who
  449  has been terminated from Florida Retirement System covered
  450  employment for a minimum of 6 calendar months. A de minimis
  451  account is an account containing employer contributions and
  452  accumulated earnings of not more than $5,000 made under the
  453  provisions of this chapter. Such cash-out must either be a
  454  complete lump-sum liquidation of the account balance, subject to
  455  the provisions of the Internal Revenue Code, or a lump-sum
  456  direct rollover distribution paid directly to the custodian of
  457  an eligible retirement plan, as defined by the Internal Revenue
  458  Code, on behalf of the participant. If any financial instrument
  459  issued for the payment of retirement benefits under this section
  460  is not presented for payment within 180 days after the last day
  461  of the month in which it was originally issued, the third-party
  462  administrator or other duly authorized agent of the State Board
  463  of Administration shall cancel the instrument and credit the
  464  amount of the instrument to the suspense account of the Public
  465  Employee Optional Retirement Program Trust Fund authorized under
  466  s. 121.4501(6). Any such amounts transferred to the suspense
  467  account are payable upon a proper application, not to include
  468  earnings thereon, as provided in this section, within 10 years
  469  after the last day of the month in which the instrument was
  470  originally issued, after which time such amounts and any
  471  earnings thereon shall be forfeited. Any such forfeited amounts
  472  are assets of the Public Employee Optional Retirement Program
  473  Trust Fund and are not subject to the provisions of chapter 717.
  474         (1) NORMAL BENEFITS.—Under the Public Employee Optional
  475  Retirement Program:
  476         (b) If a participant elects to receive his or her benefits
  477  upon termination of employment as defined in s. 121.021, the
  478  participant must submit a written application or an application
  479  by electronic means an equivalent form to the third-party
  480  administrator indicating his or her preferred distribution date
  481  and selecting an authorized method of distribution as provided
  482  in paragraph (c). The participant may defer receipt of benefits
  483  until he or she chooses to make such application, subject to
  484  federal requirements.
  485         Section 4. Subsection (3) of section 121.78, Florida
  486  Statutes, is amended to read:
  487         121.78 Payment and distribution of contributions.—
  488         (3)(a) Employer contributions and accompanying payroll data
  489  received after the 5th working day of the month are shall be
  490  considered late. The employer shall be assessed by the Division
  491  of Retirement a penalty of 1 percent of the contributions due
  492  for each calendar month or part thereof that the contributions
  493  or accompanying payroll data are late. Proceeds from the 1
  494  percent assessment against contributions made on behalf of
  495  participants of the defined benefit program shall be deposited
  496  in the Florida Retirement System Trust Fund, and proceeds from
  497  the 1-percent assessment against contributions made on behalf of
  498  participants of the optional retirement program shall be
  499  transferred to the third-party administrator for deposit into
  500  participant accounts, as provided in paragraph (b).
  501         (b) If contributions made by an employer on behalf of
  502  participants of the optional retirement program or accompanying
  503  payroll data are not received within the calendar month they are
  504  due, including, but not limited to, contribution adjustments as
  505  a result of employer errors or corrections, and if that
  506  delinquency results in market losses to participants, the
  507  employer shall reimburse each participant’s account for market
  508  losses resulting from the late contributions. If a participant
  509  has terminated employment and taken a distribution, the
  510  participant is responsible for returning any excess
  511  contributions erroneously provided by employers, adjusted for
  512  any investment gain or loss incurred during the period such
  513  excess contributions were in the participant’s Public Employee
  514  Optional Retirement Program account. The state board of
  515  Administration or its designated agent shall communicate to
  516  terminated participants any obligation to repay such excess
  517  contribution amounts. However, the state board of
  518  Administration, its designated agents, the Public Employee
  519  Optional Retirement Program Trust Fund, the department of
  520  Management Services, or the Florida Retirement System Trust Fund
  521  may shall not incur any loss or gain as a result of an
  522  employer’s correction of such excess contributions. The third
  523  party administrator, hired by the state board pursuant to s.
  524  121.4501(8), shall calculate the market losses for each affected
  525  participant. If When contributions made on behalf of
  526  participants of the optional retirement program or accompanying
  527  payroll data are not received within the calendar month due, the
  528  employer shall also pay the cost of the third-party
  529  administrator’s calculation and reconciliation adjustments
  530  resulting from the late contributions. The third-party
  531  administrator shall notify the employer of the results of the
  532  calculations and the total amount due from the employer for such
  533  losses and the costs of calculation and reconciliation. The
  534  employer shall remit to the Division of Retirement the amount
  535  due within 30 10 working days after the date of the penalty
  536  notice sent by the division. The division shall transfer that
  537  said amount to the third-party administrator, which who shall
  538  deposit proceeds from the 1-percent assessment and from
  539  individual market losses into participant accounts, as
  540  appropriate. The state board may is authorized to adopt rules to
  541  administer implement the provisions regarding late
  542  contributions, late submission of payroll data, the process for
  543  reimbursing participant accounts for resultant market losses,
  544  and the penalties charged to the employers.
  545         (c) Delinquency fees may be waived by the Division of
  546  Retirement, with regard to defined benefit program
  547  contributions, and by the state board of Administration, with
  548  regard to optional retirement program contributions, only if
  549  when, in the opinion of the division or the board, as
  550  appropriate, exceptional circumstances beyond the employer’s
  551  control prevented remittance by the prescribed due date
  552  notwithstanding the employer’s good faith efforts to effect
  553  delivery. Such a waiver of delinquency may be granted an
  554  employer only once one time each state fiscal year.
  555         (d) If contributions made by an employer on behalf of
  556  participants in the optional retirement program are delayed in
  557  posting to participant accounts due to acts of God beyond the
  558  control of the Division of Retirement, the state board, or the
  559  third-party administrator, as applicable, market losses
  560  resulting from the late contributions are not payable to the
  561  participants.
  562         Section 5. Subsections (1) and (2) of section 215.44,
  563  Florida Statutes, are amended to read:
  564         215.44 Board of Administration; powers and duties in
  565  relation to investment of trust funds.—
  566         (1) Except as when otherwise specifically provided by the
  567  State Constitution and subject to any limitations of the trust
  568  agreement relating to a trust fund, the Board of Administration,
  569  hereinafter sometimes referred to as “trustees” or “board,”
  570  composed of the Governor as chair, the Chief Financial Officer,
  571  and the Attorney General, shall invest all the funds in the
  572  System Trust Fund, as defined in s. 121.021 s. 121.021(36), and
  573  all other funds specifically required by law to be invested by
  574  the board pursuant to ss. 215.44-215.53 to the fullest extent
  575  that is consistent with the cash requirements, trust agreement,
  576  and investment objectives of the fund.
  577         (a) Notwithstanding any other law to the contrary, the
  578  State Board of Administration may invest any funds of any state
  579  agency, any state university or college, or any unit of local
  580  government, or any direct-support organization thereof pursuant
  581  to the terms of a trust agreement with the head or governing
  582  body of the respective entity state agency or the governing body
  583  of the unit of local government, or pursuant to the enrollment
  584  requirements stated in s. 218.407, including investing such
  585  funds in the Local Government Surplus Funds Trust Fund
  586  established by s. 218.405. which trust agreement shall govern
  587  the investment of such funds, provided that
  588         (b) The board shall approve the undertaking of investments
  589  subject to a trust agreement such investment before execution of
  590  the trust agreement by the State Board of Administration. The
  591  funds and the earnings therefrom are exempt from the service
  592  charge imposed by s. 215.20.
  593         (c) As used in this subsection, the term “state agency” has
  594  the same meaning as that provided in s. 216.011(1) s. 216.001,
  595  and the terms “governing body” and “unit of local government”
  596  have the same meaning as that provided in s. 218.403.
  597         (2)(a) The board shall have the power to make purchases,
  598  sales, exchanges, investments, and reinvestments for and on
  599  behalf of the funds referred to in subsection (1), and it shall
  600  be the duty of the board to see that moneys invested under the
  601  provisions of ss. 215.44-215.53 are at all times handled in the
  602  best interests of the state.
  603         (b)Pursuant to s. 110.205, the State Board of
  604  Administration shall establish and maintain the salaries and
  605  benefits of its officers and employees in a manner consistent
  606  with the board’s fiduciary responsibility to recruit and retain
  607  highly qualified and effective key personnel. Not less than
  608  every 5 years, the Investment Advisory Council shall cause a
  609  total compensation study to be conducted by a private consulting
  610  firm having expertise in institutional investments salary and
  611  benefit administration. The study shall be designed to determine
  612  competitive salary ranges, other compensation, and benefits for
  613  positions within the board based on comparable public-sector
  614  peer investment entities. The Investment Advisory Council shall
  615  present the total compensation study along with its
  616  recommendations to the board, and such recommendations are
  617  subject to review and ratification or reversal by the board. The
  618  board may delegate to the executive director the authority and
  619  duty to set staff salaries within the ranges approved by the
  620  board.
  621         (c)(b) In exercising investment authority pursuant to s.
  622  215.47, the board may retain investment advisers or managers, or
  623  both, external to in-house staff, to assist the board in
  624  carrying out the power specified in paragraph (a).
  625         (d)The board shall create an audit committee to assist the
  626  board in fulfilling its oversight responsibilities. The
  627  committee shall consist of three members appointed by the board.
  628  Members shall be appointed for 4-year terms. A vacancy shall be
  629  filled for the remainder of the unexpired term. The committee
  630  shall annually elect a chair and vice chair from its membership.
  631  A member may not be elected to consecutive terms as chair or
  632  vice chair. Persons appointed to the audit committee must have
  633  relevant knowledge and expertise as determined by the board. The
  634  audit committee shall serve as an independent and objective
  635  party to monitor processes for financial reporting, internal
  636  controls and risk assessment, audit processes, and compliance
  637  with laws, rules, and regulations. The audit committee shall
  638  direct the efforts of the board’s independent external auditors
  639  and the board’s internal audit staff. The committee shall
  640  periodically, but not less than quarterly, report to the
  641  executive director of the state board and the board. The board
  642  shall produce a set of financial statements for the Florida
  643  Retirement System programs on an annual basis, which shall be
  644  reported to the Legislature and audited by a commercial
  645  independent third-party audit firm under the direction of the
  646  audit committee.
  647         (e)The board shall meet at least quarterly and shall
  648  receive reports from the audit committee, investment advisory
  649  committee, inspector general, general counsel, executive
  650  director, and such other persons or entities as the board may
  651  require about the financial status, operations, and investment
  652  activities of the board.
  653         Section 6. Section 215.441, Florida Statutes, is amended to
  654  read:
  655         215.441 Board of Administration; appointment of executive
  656  director.—
  657         (1)The board shall appoint an executive director to manage
  658  and invest funds as directed by the board. The executive
  659  director shall, at a minimum, possess substantial experience,
  660  proven knowledge, and expertise in the oversight of
  661  institutional investment portfolios and must meet any other
  662  requirements determined by the board to be necessary to the
  663  overall management and investment of funds.
  664         (2) The appointment of the executive director of the State
  665  Board of Administration shall be subject to the approval by a
  666  majority vote of the Board of Trustees of the State Board of
  667  Administration, and the Governor must vote on the prevailing
  668  side. Such appointment must be reaffirmed in the same manner by
  669  the board of trustees on an annual basis.
  670         (3)The compensation for the executive director shall be
  671  determined by the board, consistent with the requirements of s.
  672  215.44(2)(b).
  673         (4)Before the appointment of the executive director, the
  674  board shall appoint a search committee to develop minimum
  675  position requirements, review applications, and make
  676  recommendations to the board with regard to qualified applicants
  677  for the position. At a minimum, the search committee shall
  678  consist of at least three members of the Investment Advisory
  679  Council.
  680         Section 7. Subsection (1) of section 215.442, Florida
  681  Statutes, is amended to read:
  682         215.442 Executive director; reporting requirements; public
  683  meeting.—
  684         (1) Beginning October 2007 and quarterly thereafter, the
  685  executive director shall present to the Board of Trustees and
  686  the Investment Advisory Council of the State Board of
  687  Administration a quarterly report to include the following:
  688         (a) The name of each equity in which the State Board of
  689  Administration has invested for the quarter.
  690         (b) The industry category of each equity.
  691         Section 8. Section 215.444, Florida Statutes, is amended to
  692  read:
  693         215.444 Investment Advisory Council.—
  694         (1) There is created a six-member Investment Advisory
  695  Council to review the investments made by the staff of the Board
  696  of Administration and to make recommendations to the board
  697  regarding investment policy, strategy, and procedures. The
  698  council shall meet with staff of the board no less than
  699  quarterly and shall provide a quarterly report directly to the
  700  trustees at a meeting of the board.
  701         (2) The members of the council shall be appointed by the
  702  board as a resource to the trustees and shall be subject to
  703  confirmation by the Senate. These individuals shall possess
  704  special knowledge, experience, and familiarity with financial
  705  investments and portfolio management, institutional investments,
  706  and fiduciary responsibilities. Individuals may have extensive
  707  experience in managing or overseeing investment portfolios or
  708  providing research to any two or more of the following areas:
  709  domestic equities, international equities, fixed-income
  710  securities, cash management, marketable and nonmarketable
  711  alternative investments, or real estate. Members shall be
  712  appointed for 4-year terms. A vacancy shall be filled for the
  713  remainder of the unexpired term. The council shall annually
  714  elect a chair and a vice chair from its membership. A member may
  715  not be elected to consecutive terms as chair or vice chair.
  716         (3)In carrying out the provisions of this section, a
  717  member of the council is an officer, employee, or agent of the
  718  state for purposes of the state’s waiver of sovereign immunity
  719  contained in s. 768.28. This section does not make appointees to
  720  the council fiduciaries; however, appointees to the council must
  721  undergo regular fiduciary training as required by the board, and
  722  must complete an annual conflict disclosure statement. In
  723  carrying out their duties, council members must make
  724  recommendations consistent with the fiduciary standards
  725  applicable to the board.
  726         (4)In addition to the duties in subsection (1), the duties
  727  of the council shall include approving the investment policy
  728  statements of the board, participating in the selection process
  729  regarding an executive director, obtaining periodic compensation
  730  studies and providing recommendations thereon, meeting quarterly
  731  to review the investment performance of funds, and performing
  732  any other duties as determined by the board. The council may
  733  create subcommittees as necessary to carry out its duties and
  734  responsibilities and may direct the executive director to enter
  735  into contracts with independent compensation consultants.
  736         Section 9. Paragraphs (b) and (c) of subsection (1),
  737  paragraph (a) of subsection (2), and subsection (5) of section
  738  215.47, Florida Statutes, are amended, paragraph (o) is added to
  739  subsection (1) of that section, and subsection (20) is added to
  740  that section, to read:
  741         215.47 Investments; authorized securities; loan of
  742  securities.—Subject to the limitations and conditions of the
  743  State Constitution or of the trust agreement relating to a trust
  744  fund, moneys available for investments under ss. 215.44-215.53
  745  may be invested as follows:
  746         (1) Without limitation in:
  747         (b) State Bonds, notes, or obligations of any state,
  748  organized territory of the United States, or the District of
  749  Columbia which pledge pledging the full faith and credit of the
  750  state, territory, or district; and revenue bonds, notes, or
  751  obligations of any state, organized territory of the United
  752  States, or the District of Columbia additionally secured by the
  753  full faith and credit of the state, territory, or district.
  754         (c) Bonds, notes, or obligations of the several counties or
  755  districts in any the state, organized territory of the United
  756  States, or the District of Columbia containing a pledge of the
  757  full faith and credit of the county or district involved.
  758         (o)Bonds, notes, or obligations described in 26 U.S.C. s.
  759  149(g)(3)(B), if investment in such bonds, notes, or obligations
  760  is necessary in order to comply with covenants in documents or
  761  proceedings relating to bonds issued pursuant to s. 215.555(6).
  762  Investments made pursuant to this paragraph may be purchased
  763  only from the proceeds of bonds issued pursuant to s. 215.555(6)
  764  and must be authorized under documents or proceedings relating
  765  to such bonds.
  766         (2) With no more than 25 percent of any fund in:
  767         (a) Bonds, notes, or obligations of any state or organized
  768  territory of the United States or the District of Columbia; of
  769  any municipality or political subdivision, or any agency,
  770  district, or authority thereof; or of any agency or authority of
  771  this state, if the obligations are rated investment grade by at
  772  least one nationally recognized statistical rating organization.
  773         (5) With no more than 25 percent of any fund in corporate
  774  obligations and securities of any kind of a foreign corporation
  775  or a foreign commercial entity having its principal office
  776  located in any country other than the United States of America
  777  or its possessions or territories, not including United States
  778  dollar-denominated securities listed and traded on a United
  779  States exchange which are a part of the ordinary investment
  780  strategy of the board.
  781         (20)Notwithstanding the provisions in subsection (5)
  782  limiting such investments to 25 percent of any fund, the board
  783  may invest no more than 35 percent of any fund in corporate
  784  obligations and securities of any kind of a foreign corporation
  785  or a foreign commercial entity having its principal office
  786  located in any country other than the United States or its
  787  possessions or territories, not including United States dollar
  788  denominated securities listed and traded on a United States
  789  exchange which are a part of the ordinary investment strategy of
  790  the board.
  791         Section 10. Subsection (1) of section 215.475, Florida
  792  Statutes, is amended to read:
  793         215.475 Investment policy statement.—
  794         (1) In making investments for the System Trust Fund
  795  pursuant to ss. 215.44-215.53, the board shall make no
  796  investment which is not in conformance with the Florida
  797  Retirement System Defined Benefit Plan Investment Policy
  798  Statement, hereinafter referred to as “the IPS,” as developed by
  799  the executive director and approved by the Investment Advisory
  800  Council and the board. The IPS must include, among other items,
  801  the investment objectives of the System Trust Fund; permitted
  802  types of securities in which the board may invest; and
  803  evaluation criteria necessary to measure the investment
  804  performance of the fund. As required from time to time, the
  805  executive director of the board may present recommended changes
  806  in the IPS to the Investment Advisory Council and the board for
  807  approval.
  808         Section 11. Section 215.4754, Florida Statutes, is created
  809  to read:
  810         215.4754Ethics requirements for investment advisers and
  811  managers and members of the Investment Advisory Council.—The
  812  intent of this section is to promote independence and the
  813  avoidance of conflicts and improper influence by certain
  814  investment advisers and managers without creating unnecessary
  815  barriers to the board performing its investment duties
  816  consistent with its fiduciary standards, investment performance,
  817  and business relationships.
  818         (1)A contract under which an investment adviser or manager
  819  has been retained to exercise investment authority on behalf of
  820  the board for direct holdings, as defined in s. 215.473(1)(e),
  821  shall require that the investment adviser or manager abide by a
  822  standard of conduct pursuant to s. 215.4755, and any such
  823  contract may be terminated by the board if the investment
  824  adviser or manager violates such standard of conduct.
  825         (2)An Investment Advisory Council member or any business
  826  organization or any affiliate thereof which is owned by or
  827  employs such member may not directly or indirectly contract with
  828  or provide any services for the investment of trust funds
  829  invested by the board during the time of such member’s service
  830  on the council or for 2 years thereafter.
  831         Section 12. Section 215.4755, Florida Statutes, is created
  832  to read:
  833         215.4755Certification and disclosure requirements for
  834  investment advisers and managers.—
  835         (1)An investment adviser or manager who has discretionary
  836  investment authority for direct holdings, as defined in s.
  837  215.473(1)(e), and who is retained as provided in s.
  838  215.44(2)(c) shall agree pursuant to contract to annually
  839  certify in writing to the board that:
  840         (a)All investment decisions made on behalf of the trust
  841  funds and the board are made in the best interests of the trust
  842  funds and the board, and not made in a manner to the advantage
  843  of such investment adviser or manager, other persons, or clients
  844  to the detriment of the trust funds and the board.
  845         (b)Appropriate policies, procedures, or other safeguards
  846  have been adopted and implemented to ensure that relationships
  847  with any affiliated persons or entities do not adversely
  848  influence the investment decisions made on behalf of the trust
  849  funds and the board.
  850         (c)A written code of ethics, conduct, or other set of
  851  standards, which governs the professional behavior and
  852  expectations of owners, general partners, directors or managers,
  853  officers, and employees of the investment adviser or manager,
  854  has been adopted and implemented and is effectively monitored
  855  and enforced. The investment advisers’ and managers’ code of
  856  ethics shall require that:
  857         1.Officers and employees involved in the investment
  858  process shall refrain from personal business activity that could
  859  conflict with the proper execution and management of the
  860  investment program over which the investment adviser or manager
  861  has discretionary investment authority or that could impair
  862  their ability to make impartial decisions with respect to such
  863  investment program; and
  864         2.Officers and employees shall refrain from undertaking
  865  personal investment transactions with the same individual with
  866  whom business is conducted on behalf of the board.
  867         (d)The investment adviser or manager has proactively and
  868  promptly disclosed to the board, notwithstanding subsection (2),
  869  any known circumstances or situations that a prudent person
  870  could expect to create an actual, potential, or perceived
  871  conflict of interest, including specifically:
  872         1.Any material interests in or with financial institutions
  873  with which officers and employees conduct business on behalf of
  874  the trust funds and the board; and
  875         2.Any personal financial or investment positions of the
  876  investment advisor or manager which could be related to the
  877  performance of an investment program over which the investment
  878  adviser or manager has discretionary investment authority on
  879  behalf of the board.
  880         (2)At the board’s request, an investment adviser or
  881  manager who has discretionary investment authority over direct
  882  holdings, as defined in s. 215.473(1)(e), and who is retained as
  883  provided in s. 215.44(2)(c) shall disclose in writing to the
  884  board:
  885         (a)Any nonconfidential, nonproprietary information or
  886  reports to substantiate the certifications required under
  887  subsection (1).
  888         (b)All direct or indirect pecuniary interests that the
  889  investment adviser or manager has in or with any party to a
  890  transaction with the board, if the transaction is related to any
  891  discretionary investment authority that the investment adviser
  892  or manager exercises on behalf of the board.
  893         (3)An investment adviser or manager certification required
  894  under subsection (1) shall be provided annually, no later than
  895  January 31, for the reporting period of the previous calendar
  896  year on a form prescribed by the board.
  897         Section 13. Section 215.52, Florida Statutes, is amended to
  898  read:
  899         215.52 Rules and regulations.—The board shall have the
  900  power and authority to make reasonable rules, policies, and
  901  regulations necessary or appropriate to carry out the provisions
  902  of ss. 215.44-215.53. The rules shall provide for full
  903  transparency and accountability in fulfillment of its fiduciary
  904  duties in the areas of compliance, ethics, training, and audit
  905  procedures.
  906         Section 14. Paragraph (a) of subsection (8) of section
  907  218.409, Florida Statutes, is amended to read:
  908         218.409 Administration of the trust fund; creation of
  909  advisory council.—
  910         (8)(a) The principal, and any part thereof, of each and
  911  every account constituting the trust fund is shall be subject to
  912  payment at any time from the moneys in the trust fund. However,
  913  the executive director may, in good faith, on the occurrence of
  914  an event that has a material impact on liquidity or operations
  915  of the trust fund, for 48 hours limit contributions to or
  916  withdrawals from the trust fund to ensure that the board can
  917  invest moneys entrusted to it in exercising its fiduciary
  918  responsibility. Such action must shall be immediately disclosed
  919  to all participants, the trustees, the Joint Legislative
  920  Auditing Committee, the Investment Advisory Council, and the
  921  Participant Local Government Advisory Council. The trustees
  922  shall convene an emergency meeting as soon as practicable from
  923  the time the executive director has instituted such measures and
  924  review the necessity of those measures. If the trustees are
  925  unable to convene an emergency meeting before the expiration of
  926  the 48-hour moratorium on contributions and withdrawals, the
  927  moratorium may be extended by the executive director until the
  928  trustees can meet to review the necessity for the moratorium. If
  929  the trustees agree with such measures, the trustees shall vote
  930  to continue the measures for up to an additional 15 days. The
  931  trustees must convene and vote to continue any such measures
  932  before prior to the expiration of the time limit set, but in no
  933  case may the time limit set by the trustees exceed 15 days.
  934         Section 15. Trademarks, copyrights, or patents.—The State
  935  Board of Administration, on behalf of the Florida Retirement
  936  System or any other trust fund under its jurisdiction, may
  937  develop work products that are subject to trademark, copyright,
  938  or patent statutes. The board may, in its own name or through
  939  the growth initiative program created pursuant to s. 215.47(7),
  940  Florida Statutes, or any other program developed with or for the
  941  board:
  942         (1) Perform all things necessary to secure letters of
  943  patent, copyrights, or trademarks on any work products and
  944  enforce its rights therein.
  945         (2) License, lease, assign, or otherwise give written
  946  consent to any person for the manufacture or use of its work
  947  products on a royalty basis or for such other consideration as
  948  the board deems proper.
  949         (3) Take any action necessary, including legal action, to
  950  protect its work products against improper or unlawful use of
  951  infringement.
  952         (4)Enforce the collection of any sums due to the board for
  953  the manufacture or use of its work products by any other party.
  954         (5) Sell any of its work products and execute all
  955  instruments necessary to consummate any such sale.
  956         (6) Do all other acts necessary and proper for the
  957  execution of powers and duties provided under this section.
  958         Section 16. This act shall take effect July 1, 2010.

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