To amend Rule 19-11.001, F.A.C., to add a definition of “Retirement Date Fund,” and make a technical correction. To amend Rule 19-11.004, F.A.C., to indicate that members having a Self-Directed Brokerage Account (“SDBA”) are not subject to the ...

 

STATE BOARD OF ADMINISTRATION

RULE NOS.:RULE TITLES:

19-11.001Definitions

19-11.004Excessive Trading in the FRS Investment Plan

19-11.006Enrollment Procedures for New Hires

19-11.007Second Election Enrollment Procedures for the FRS Retirement Programs

19-11.008Forfeitures

19-11.012Rollovers or Plan to Plan Transfers to or from the FRS Investment Plan

PURPOSE AND EFFECT: To amend Rule 19-11.001, F.A.C., to add a definition of “Retirement Date Fund,” and make a technical correction. To amend Rule 19-11.004, F.A.C., to indicate that members having a Self-Directed Brokerage Account (“SDBA”) are not subject to the excessive trading policy discussed in the rule with respect to that account, but rather are subject to the applicable rules and restrictions of the funds contained within the SDBA. To amend Rule 19-11.006, F.A.C., to adopt the latest versions of the enrollment forms, and to indicate that the default investment fund is an age appropriate retirement date fund. To amend Rule 19-11.007, F.A.C., to adopt the updated Second Election forms. To amend Rule 19-11.008, F.A.C., to indicate that un-vested account benefits placed in a suspense account will be invested in the Pyramis Intermediate Duration Pool Fund. To amend Rule 19-11.012, F.A.C., to adopt the latest versions of the rollover forms.

SUMMARY: To update information and forms necessitated by the offering of a SDBA, and by certain changes to available investment funds of the FRS Investment Plan. There are no other rules incorporating any of these proposed rules. The proposed amendments do not have an impact on any other rules. Legislative ratification of these rule amendments is not required.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION: The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the Agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: Upon review of the proposed changes to the rules as well as all incorporated materials, the State Board of Administration has determined that the rules do not meet the statutory threshold for ratification by the legislature. There will be no impact on economic growth, job creation or employment, private-sector investment, or business competitiveness, and no increase in regulatory costs.

Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.

RULEMAKING AUTHORITY: 121.4501(8) FS.

LAW IMPLEMENTED: 121.021, 121.051, 121.055, 121.35, 121.78, 121.091, 121.4501(3), (4), (5), (13), (14) (15), (20), (21), 121.591, 732.802 FS.

IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE, TIME AND PLACE SHOWN BELOW:

DATE AND TIME: Friday, July 18, 2014, 9:00 a.m. – 11:00 a.m.

PLACE: Hermitage Room, the Hermitage Centre, 1801 Hermitage Blvd., Tallahassee, Florida 32308

Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 days before the workshop/meeting by contacting: Tina Joanos, Agency Clerk, Office of the General Counsel, State Board of Administration, 1801 Hermitage Blvd., Tallahassee, Florida 32308, [phone], [e-mail]. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Ruth A. Smith, Assistant General Counsel, State Board of Administration, 1801 Hermitage Blvd., Tallahassee, Florida 32308, [phone], [e-mail]

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

19-11.001 Definitions.

The following words and terms shall have the following meanings for purposes of Chapters 19-11 and 19-13, F.A.C.:

(1) through (21) No change.“

(22) “Excessive trading” means multiple occurrences of Market Timing Trades by a member. The definition of a Market Timing Trade is set forth in subsection (35)(31) herein.

(23) through (41) No change.

(42) “Retirement Date Fund” or “Target Date Fund” is a diversified portfolio of other Investment Plan primary funds that is based on the amount of time a member has before retirement. The portfolio gradually changes as the member gets closer to retirement.

(43)(42) “Roundtrip Trade” occurs when a member conducts a series of at least two non-exempt transactions that include one or more transfers into an authorized investment fund and one or more transfers out of the same authorized investment fund in either order (i.e., in/out or out/in), regardless of any multiple transfers from or to other different authorized investment funds during the roundtrip. A roundtrip trade includes a trade from an Investment Plan primary fund to the SDBA and a trade from the SDBA to an Investment Plan primary fund.

(44)(43) “SBA” means the State Board of Administration of Florida, the plan sponsor for the FRS Investment Plan.

(45)(44) Self-Directed Brokerage Account” or “SDBA” shall mean an account within the Investment Plan that allows a member access to additional investment opportunities that are not available in the Investment Plan primary funds.

(46)(45) “Third Party Administrator,” “Administrator,” “Plan Administrator”, or “TPA” shall mean the Investment Plan Administrator hired by the State Board of Administration of Florida pursuant to Section 121.4501(8), F.S.

(47)(46) “True-up Amount” means the difference between the ABO calculated by using the member’s actual creditable service and the actual final average compensation as of the member’s effective date in the FRS Investment Plan and the ABO initially transferred.

Rulemaking Authority 121.78(3)(c), 121.4501(8) FS. Law Implemented 121.78, 121.4501 FS. History–New 12-8-02, Amended 3-9-06, 7-12-12, 12-16-12,____________.

 

19-11.004 Excessive Trading in the FRS Investment Plan.

(1) through (2)(b)5. No change.

6. Members who engage in Market Timing Trades and who have previously received a direction letter as described in subparagraph 5., above, will be sent another direction letter, delivered by courier. The direction letter shall require that the member shall only be permitted to conduct trades involving primary funds via paper trading forms for the remainder of any time that any balance exists in the member’s Investment Plan account following the date of the direction letter. The form to be used by the member in conducting the trades is the “Transfer Request Form, Excessive Fund Trading Violators,” Form EFTPV-1, rev. 06/10. This form must be notarized and returned to the Office of Defined Contribution Programs, via US mail, certified\return receipt requested.

7. Members who received direction letters and who were placed on restricted trading within their primary funds, as provided in subparagraphs 2., 3., 4., 5. and 6. of paragraph (2)(b), shall be allowed to make automated trades in, out and within the SDBA. The member must meet the requirements of the SDBA as provided in Rule 19-11.013, F.A.C. The member’s activity within the SDBA is not subject to this policy, but will be subject to the applicable excessive trading rules and purchase restrictions of the funds in the SDBA.

(3)(a) through (g) No change.

(h) If Member A transfers $50,000 out of Fund A and into the SDBA on January 2, and then transfers $35,000 from the SDBA into Fund A on January 25, the transaction is a Roundtrip Trade and a Market Timing Trade because the aggregate amount of all trades into and out of Fund A exceeded $75,000 within a 30 day period.

(i) If Member A transfers $40,000 out of Fund B and into the SDBA on February 15, and then transfers $55,000 from Fund C into Fund B on March 3, the transaction is a Roundtrip Trade and a Market Timing Trade because the aggregate amount of all trades into and out of Fund B exceeded $75,000 within a 30 day period.

(4)(5) For all members, Roundtrip and Market Timing Trades are calculated using a rolling 30-calendar day time period. For example, iIf a trade occurs on May 15 and the following 30-calendar day period, from May 16 through June 14, includes a sufficient number of trades to fit the definition of a Market Timing Trade, this rule shall apply.

Rulemaking Authority 121.4501(8) FS. Law Implemented 121.4501(13), (14), (15) FS. History–New 10-21-04, Amended 3-9-06, 10-25-07, 12-8-08, 1-7-10, 7-12-12,____________.

 

19-11.006 Enrollment Procedures for New Hires.

(1) through (2)(b) No change.

(c) The SBA has designed the forms set forth below for ease of use for employees in the several membership classes of the Florida Retirement System. As an alternative, an employee not wishing to use the forms may provide the same information requested by the forms available for use for the appropriate membership class in a separate document. Employees may determine their membership class by contacting the agency’s human resources office. The forms available are: an EZ Retirement Plan Enrollment Form, Form ELE-1-EZ, rev. 06/14 10/13,  http://www.flrules.org/Gateway/reference.asp?No=Ref-0438 http://www.flrules.org/Gateway/reference.asp?No=Ref-03317, which is only for regular, special risk, and special risk administrative support class employees; a General Retirement Plan Enrollment Form, Form ELE-1, rev. 06/14 10/13,  http://www.flrules.org/Gateway/reference.asp?No=Ref-04389 http://www.flrules.org/Gateway/reference.asp?No=Ref-03318 for regular, special risk, and special risk administrative support class employees; an Elected Officers’ Class Retirement Plan Form, Form EOC-1, rev. 06/14 10/13, http://www.flrules.org/Gateway/reference.asp?No=Ref-04390 http://www.flrules.org/Gateway/reference.asp?No=Ref-03321; a Community College Optional Retirement Program (CCORP) Enrollment Form, Form OCC-1, rev. 06/14 10/13, http://www.flrules.org/Gateway/reference.asp?No=Ref-04391 http://www.flrules.org/Gateway/reference.asp?No=Ref-03324; a State University System Optional Retirement Program (SUSORP) Retirement Plan Enrollment Form, Form ORP-16, rev. 10/13, http://www.flrules.org/Gateway/reference.asp?No=Ref-03657; a State Senior Management Service Employees Retirement Plan Enrollment Form, Form SMS-1, Rev. 06/14 10/13, http://www.flrules.org/Gateway/reference.asp?No=Ref-04392 http://www.flrules.org/Gateway/reference.asp?No=Ref-03322; and a Local Senior Management Service Employees Retirement Plan Enrollment Form, Form SMS-3, rev. 06/14 10/13,  http://www.flrules.org/Gateway/reference.asp?No=Ref-04393 http://www.flrules.org/Gateway/reference.asp?No=Ref-03323. All of the preceding forms are hereby adopted and incorporated by this reference.

1. All enrollment forms can be obtained at the sources listed in paragraph (1)(g)(f), above.

2. Only members of the regular, special risk, and special risk administrative support classes of employees may use the EZ form, “EZ Retirement Plan Enrollment Form for Regular, Special Risk and Special Risk Administrative Support Class Employees,” Form ELE-1-EZ. If an employee chooses to use the EZ form, only limited information (i.e., name, plan choice, social security number and signature) is required. The FRS Select Moderate Balanced Fund An age appropriate retirement date fund as provided under the Plan provisions is the only initial investment option (although that investment option may be changed by the member once the account is funded). A member’s initial beneficiary designation will be per Florida law, as provided in Section 121.4501(20), Florida Statutes. However, a bBeneficiary designations may be made as set forth in Rule 19-11.002, F.A.C.

(d)1. The enrollment by form or electronic means shall be complete and the election shall be final if all the required information is clearly indicated and if the enrollment is received by the FRS Plan Choice Administrator by 4:00 p.m. Eastern Time on the last business day of the 5th month following the date of hire. The form shall be transmitted via mail, courier, or by fax to 1(888)310-5559.

2. The FRS Plan Choice Administrator shall determine that the employee’s enrollment in the FRS Investment Plan is within the prescribed time period, is complete, and the employee’s election is clearly indicated. If the Administrator determines that the enrollment is incomplete, the employee will be required to resubmit a completed enrollment. An incomplete enrollment by form is a form which is missing the name of the member, social security number, plan selection, or signature, or one on which the investment elections total greater than or less than 100%. If the form is incomplete only because the member has made no investment selection, the form will be processed and the member will be defaulted into an age appropriate retirement date fund as provided under the Plan provisions the FRS Select Moderate Balanced Fund for investing any his accumulated benefit obligation and all future contributions. Note that this default selection may be changed by the member at any time once the account is activated. An incomplete enrollment by electronic means is one in which the FRS Plan Choice Administrator has no record of receipt and/or processing of the electronic enrollment.

(e) through (3)(e) No change.

Rulemaking Authority 121.4501(3)(c)4., (8)(a) FS. Law Implemented 121.051, 121.055, 121.35, 121.4501(2), (3), (4), (5), (6), (8), (15), 121.73, 121.74, 121.78, 215.44(8)(b), 1012.875(3) FS. History–New 10-21-04, Amended 3-9-06, 10-25-07, 12-8-08, 5-19-09, 2-4-10, 7-12-12, 12-16-12, 1-28-14,____________.

 

19-11.007 Second Election Enrollment Procedures for the FRS Retirement Programs.

(1) through (2) No change.

(3) General Procedures.

(a) All members who wish to change their FRS retirement plan using their 2nd election must use a 2nd election enrollment form or, if moving from the FRS Pension Plan to the FRS Investment Plan or FRS Investment Plan Hybrid Option, may do so online by accessing the Second Choice Service at MyFRS.com. There are two types of enrollment forms. The “2nd Election Retirement Plan Enrollment Form” Form ELE-2, rev. 06/14 10-13, http://www.flrules.org/Gateway/reference.asp?No=Ref-04394 http://www.flrules.org/Gateway/reference.asp?No=Ref-03319, which is hereby adopted and incorporated by reference. This form allows the member to select different investment fund options if the member is changing from the FRS Pension Plan to either the FRS Investment Plan or the FRS Investment Plan Hybrid Option. Alternatively, the member can complete the “2nd Election EZ Retirement Plan Enrollment Form,” Form ELE-2EZ, rev. 06/14 10/13, http://www.flrules.org/Gateway/reference.asp?No=Ref-04397 http://www.flrules.org/Gateway/reference.asp?No=Ref-03320, which is hereby adopted and incorporated by reference. By completing this form, the member is choosing to have the employer and employee contributions and any transfers from the FRS Pension Plan invested in an age appropriate retirement date fund as provided under the Plan provisions the FRS Select Moderate Balanced Fund. The member may change the investment selection at any time after the FRS Investment Plan or the FRS Investment Plan Hybrid Option account is activated. Activation occurs when contributions are deposited to the member’s FRS Investment Plan account.

(3)(b) through (4)(e)  No change.

Rulemaking Authority 121.4501(8) FS. Law Implemented 121.4501(3), (4), (8), (15)(b), (20) FS. History–New 10-21-04, Amended 3-9-06, 10-25-07, 12-8-08, 5-19-09, 1-7-10, 7-12-12, 12-16-12, 12-28-14,____________.

 

19-11.008 Forfeitures.

(1) Forfeitures after Separation or Retirement from FRS Employment.

(a) If a member terminates FRS-covered employment before vesting in an Investment Plan benefit or any transferred Pension Plan benefit, the member will not be entitled to any benefit. In such case, the unvested account balance will be placed in a suspense account for a period not to exceed five (5) years from the date of the member’s termination. The suspense account shall be invested in the Pyramis Intermediate Duration Pool Fund FRS Select U.S. Treasury Inflation-Protected Securities (TIPS) Fund, where it will accrue actual investment earnings or losses.

(b) If the member returns to work for an FRS employer in an FRS-covered position within the five (5) years from the date of termination, the member will be returned to the Investment Plan and the unvested account balance- reflecting plus any earnings or losses while invested in the Pyramis Intermediate Duration Pool TIPS Fund, will be returned to the member’s account, together with the associated service credit. Any additional service credit earned will be applied towards vesting of the member’s benefit.

(c) If the member never returns to work for an FRS employer in an FRS-covered position or if the member returns to FRS covered employment 5 or more years after the date of termination, the member will forfeit the unvested account balance and the associated service credit.

(d) If the member leaves FRS-covered employment after vesting in an Investment Plan benefit, but before the member vests in any transferred Pension Plan benefit, the member shall only be entitled to receive the vested Investment Plan benefit. However, if the member takes any self-initiated distribution from the vested Investment Plan benefit, the unvested Pension Plan benefit transferred into the Investment Plan, plus any earnings on these funds will be forfeited along with the associated service credit.

(e) If the member does not take a self-initiated distribution of any vested Investment Plan benefit after terminating from all FRS employment, the unvested Pension Plan benefit will be transferred six months following termination to a suspense account. The suspense account is invested in the Pyramis Intermediate Duration Pool FRS Select U.S. Treasury Inflation-Protected Securities (TIPS) Fund, where it will accrue actual investment earnings or losses. If the member returns to FRS covered employment within five (5) years from the date of termination, the member’s benefit, reflecting plus any earnings or losses while invested in the Pyramis Intermediate Duration Pool TIPS Fund, will be returned to the member’s account, together with the associated service credit. Any additional service credit earned will be applied towards the vesting of the member’s benefit.

(f) through (2)(f) No change.

(g) If a member receives a pardon for any crime applicable to any FRS employment, the member shall have all benefits previously forfeited returned to his FRS Investment Plan account reflecting plus any earnings or losses while invested in the Pyramis Intermediate Duration Pool TIPS Fund.

(3)(a) through (d) No change.

Rulemaking Authority 121.4501(8) FS. Law implemented 112.3173, 121.021(29), (39), 121.091(5), 121.4501(6), (13), 121.591, 732.802 FS. History–New 11-26-07, Amended 12-8-08, 7-12-12,____________.

 

19-11.012 Rollovers or Plan to Plan Transfers to or from the FRS Investment Plan.

(1) through (8)(a) No change.

(b) Current members shall use Form IPRO-1, rev. 06/14 10-12, “Employee Rollover Deposit Instructions and Form,” http://www.flrules.org/Gateway/reference.asp?No=Ref-04398 http://www.flrules.org/Gateway/reference.asp?No=Ref-01827, which is hereby adopted and incorporated by reference, to effect rollovers described in this rule.

(c) Current DROP members planning to roll over their DROP accumulation shall use Form IP-DROP-AD-1, “DROP Accumulation Direct Rollover Form for Current DROP Members,” rev. 06/14 10/12, http://www.flrules.org/Gateway/reference.asp?No=Ref-04399 http://www.flrules.org/Gateway/reference.asp?No=Ref-01825, which hereby is adopted and incorporated by reference, to effect rollovers described in this rule.

(d) Former DROP members shall use Form IP-DROP-RO-1, “DROP Direct Rollover Form for Former DROP Members,” rev. 06/14 10/12, http://www.flrules.org/Gateway/reference.asp?No=Ref-04400 http://www.flrules.org/Gateway/reference.asp?No=Ref-01826, which hereby is adopted and incorporated by reference, to effect rollovers described in this rule.

(9) through (12) No change.

Rulemaking Authority 121.4501(8), (5)(e) FS. Law Implemented 121.4501(4)(g)5., (5)(e), (21), 121.591 FS. History–New 7-12-12, Amended 12-16-12, 10-15-13, 1-28-14,____________.

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Ron Poppel, Office of Defined Contribution Programs

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: Trustees of the State Board of Administration

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: June 17, 2014

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: May 21, 2014