Florida Division of Retirement Letters Signal Changes to Interpretation Regarding Use of Tax Revenues to Fund Pensions

Recently, the Florida Division of Retirement (the “Division”) issued letters to the Cities of Naples and Hollywood concerning those Cities’ eligibility for and use of future premium tax revenues to fund their respective police and fire pension obligations under Chapters 175 and 185, Florida Statutes. These letters reflect an important change to the Division’s previous position concerning a municipality’s eligibility for and use of premium tax revenues.

In the past, the Division interpreted Section 185.35(2), Florida Statutes, and the similar provision found in Section 175.351(2), Florida Statutes, to mean that in order for a municipality to be eligible to receive any premium tax revenues for its police or firefighter pension plan, that plan had to provide the minimum benefits set forth in Chapters 175 (for firefighters) and 185 (for police officers), Florida Statutes, and provide at least the particular plan’s benefits that were in place on March 12, 1999. Municipalities were permitted to use the premium tax revenues up to the amount received in 1997 (the “base year”) for any firefighter and/or police officer pension costs, but were required to use any amount over the base year amount only for those benefits greater than those provided to the general employees of the municipality and in addition to benefits existing as of March 12, 1999 (“Extra-Benefits”).

Under the new interpretation, firefighter and police officer pension plans in effect on October 1, 1998, must provide the minimum benefits set forth in Chapters 175 and185, Florida Statutes, only to the extent they can be funded with premium tax revenues in excess of the ones the pension plan received in the base year (“Additional Tax Revenues”). Once a municipality has sufficient Additional Tax Revenues to fund the minimum benefits set forth in Chapters 175 and185, Florida Statutes, all subsequent Additional Tax Revenues (“Subsequent Additional Tax Revenues”) will be used to provide Extra Benefits. In other words, the new interpretation appears to allow a municipality to provide benefits below those set forth in Chapters 175 and185, Florida Statutes, if there are insufficient Additional Tax Revenues to fund such minimum benefits. If there are sufficient Additional Tax Revenues to provide the minimum benefits, a municipality is required to provide the minimum benefits and any Subsequent Additional Tax Revenues must be used for Extra Benefits.

In order for a municipality to determine whether the Division’s new interpretation will be beneficial to any pension reform that it is contemplating, the municipality will need to obtain an actuarial analysis.

Chaired by Partner Brett J. Schneider, WSH's Labor and Employment Law Group regularly represents both union and non-union employers in traditional labor law matters.  Our attorneys serve as chief negotiators on behalf of management in collective bargaining, or we advise the employer's chief negotiator on bargaining strategy and specific issues behind the scenes.  We also conduct post-negotiation training of supervisory personnel to assist in ensuring that collectively bargained changes are properly implemented. 

Categories: Labor and Employment
Tags: Public EmployeesEmployment AgreementsPublic EmployersCollective BargainingRaquel ElejabarrietaBrett J. SchneiderFlorida LegislatureFort Lauderdale Employment Law AttorneysMiami Employment Law AttorneysSouth Florida Employment Law AttorneysFort Lauderdale Labor Law AttorneysMiami Labor Law AttorneysSouth Florida Labor Law AttorneysFlorida Labor LawyersFort Lauderdale Employment LawyerFort Lauderdale Employment LawyerMiami Employment AttorneyMiami Employment AttorneyMiami Labor LawyerSouth Florida Employment Lawyers
Author(s): Brett J. Schneider & Raquel Elejabarrieta