Rule 19-13.001 is being amended to make some editorial revisions and to indicate that ten Target Date Funds have now replaced the three balanced fund options. Rule 19-13.004 is being amended to state that the Investment Plan Administrator is ...

 

STATE BOARD OF ADMINISTRATION

RULE NOS.:RULE TITLES:

19-13.001 Roles and Responsibilities of the State Board of Administration of Florida

19-13.004Role and Responsibilities of Third Party Vendors

PURPOSE AND EFFECT: Rule 19-13.001 is being amended to make some editorial revisions and to indicate that ten Target Date Funds have now replaced the three balanced fund options. Rule 19-13.004 is being amended to state that the Investment Plan Administrator is responsible for providing a Self-Directed Brokerage Account, and an education provider also provides financial planning.

SUMMARY: To update certain information regarding the duties and responsibilities of the State Board of Administration and its third party vendors concerning the FRS Investment Plan. There are no other rules incorporating either of these amended rules. The proposed amendments do not have an impact on any other rules.

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: There will be no impact on economic growth, job creation or employment, private-sector investment, or business competitiveness, and no increase in regulatory costs caused by the amendments of these rules.

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: 121.4501(4), (8) (9), (10), (14), (15), (19) 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(IF NOT REQUESTED, THIS HEARING WILL NOT BE HELD):

DATE AND TIME: Monday, October 5, 2015, 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:

 

19-13.001 Roles and Responsibilities of the State Board of Administration of Florida.

(1) The State Board of Administration of Florida (“SBA”) is responsible for establishing, implementing, and administering the defined contribution program, referred to as called the “Florida Retirement System Investment Plan” or “Investment Plan”, in accordance with Section 121.4501(1), F.S. The SBA is the Plan Sponsor. The plan documents consist of the Florida Statutes and rules adopted thereunder. The Summary Plan Description (SPD) is a summary of the plan documents for the convenience of members. The SPD can be changed by the SBA at any time without prior notice to Florida Retirement System (FRS) members. The SBA’s primary responsibilities are set out in paragraphs (1)(a) through (1)(n), below. Each of these major responsibilities involves additional decisions which then in turn need to be implemented. Those decisions, to the extent they are not solely on a case-by-case basis, are adopted by rule. The SBA must ensure that all of the following individual responsibilities are carried out:

(a) Hiring general and specialized consultants to assist in the implementation and on-going operation of the Investment Plan. Their roles and responsibilities are found in Rule 19-13.004, F.A.C.

(b) Hiring a third party administrator (“Administrator”), educational service providers, investment option providers, and contracting with the Division of Retirement (“Division”) within the Department of Management Services to provide certain administrative services. Their roles and responsibilities are found, respectively, in Rules 19-13.004 and 19-13.002, F.A.C.

(c) Adhering to and enforcing the fiduciary standards and responsibilities required by certain sections of the Employee Retirement Income Security Act of 1974, which are incorporated in Florida law in Section 121.4501(15), F.S.

(d) Coordinating with the Division in providing the education component described in Sections 121.4501(10)(c) and (d), F.S., and a communication component to provide information to employers as described in Section 121.4501(10)(f), F.S., and maintaining a contractual relationship with the Division regarding certain administrative activities.

(e) Providing information to Investment Plan members on a quarterly basis, pursuant to Section 121.4501(11), F.S.

(f) Obtaining and maintaining the tax qualified status of the Investment Plan and for compliance with the federal Internal Revenue Code.

(g) Directing and monitoring the activities of all service providers vendors providing various services to the operation of the Investment Plan. These service providers vendors include the third party administrator, the education service providers, and the investment product providers.

(h) Directing and monitoring the services provided by activities of the Division with which the SBA has an interagency agreement for provision of services.

(i) Movement of assets from the FRS Pension Plan to the FRS Investment Plan upon the election of a member to transfer and making such adjustments to plan accounts and member accounts as are necessary to process election reversals and prior period corrections to contributions and accompanying payroll data.

(j) Developing an investment policy statement for the program.

(k) Choosing, monitoring, and terminating investment options in the Investment Plan; mapping account balances of members in the event of investment option termination; distributing all data regarding these investment options for presentation to member; and rebalancing and reconstituting multiple manager investment options and also the ten (10) Target Date Funds (“TDF”) three balanced options provided in the investment policy statement utilizing information from a registered investment advisor and fiduciary to the Florida Retirement System.

(l) Implementing the confidentiality provisions in Section 121.4501(19), F.S.

(m) Developing all contracts used in the Investment Plan; and

(n) All rulemaking for the Investment Plan.

Rulemaking Authority 121.4501(8) FS. Law Implemented 121.4501(1), (4), (8), (9), (10), (14), (15), (19) FS. History–New 10-21-04, Amended 7-12-12, 12-16-12, _____________.

 

19-13.004 Role and Responsibilities of Third Party Vendors.

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

(p) Provide a Self-Directed Brokerage Account (“SDBA”) to eligible FRS Investment Plan members.

(2)(a) No change.

(b) Another education provider furnishes one-on-one employee and employer education and counseling. More specifically, the provider:

1. Conducts seminars and workshops for employees and employers;

2. Provides one-on-one, face-to-face, employee financial counseling, when requested;

3. Provides telephone support of education and guidance regarding:

(I) The defined contribution plan design and the investment options;

(II) Defined benefit/defined contribution choice information;

(III) Retirement planning; and

(IV) Financial planning; and

(IV) Support of the online modeling service through which investment guidance or investment advice is rendered.

(c) Other education providers focus on printed educational material. More specifically, the providers companies:

1. Create the education campaign and the overall deployment strategy;

2. Research, monitor, and measure the education campaign;

3. Create the look, theme, and branding for the education campaign;

4. Determine message positioning and delivery; and

5. Assist in graphic design and the content of the website.

(d) Another education provider focuses on the MyFRS website. This provider coordinates software application integration and the design and content of the MyFRS website among the other educational service providers, the Administrator, the Division, and the SBA.

(3) Multiple providers hired by the SBA furnish the investment options for Investment Plan members. Section 121.4501, F.S., is generally constructed as an unbundled architecture, meaning that neither the Administrator nor the education providers are permitted to offer investment products, and as a consequence, the SBA has hired multiple institutional investment managers and providers of mutual funds. Some of the providers are unbundled institutional investment managers, which manage assets in a particular asset class and in a particular style, and which are responsible solely for money management. Other providers are bundled providers which provide mutual funds or investment options in collective trusts which are their own funds or funds contracted for or from another money management group. Some bundled providers provide solely their own funds; others provide solely other fund family’s funds; and others provide a combination. An additional investment provider has been hired to offer annuities to retiring members. Each investment manager:

(a) Has authority and discretion, delegated by each manager’s contract, to invest employee payroll contributions deposited with the custodian and recorded by the Administrator for individual Investment Plan accounts;

(b) Transmits product values and performance data to the custodian; and

(c) Is monitored by manager monitoring guidelines incorporated in each of their contracts.

(4) An annuity provider has been hired by the SBA to offer annuities to retiring members.

(5)(4) The custodian, hired by the SBA pursuant to Section 121.4501(8), F.S., is required to do the following:

(a) Hold cash, non-cash and all securities delivered to it or which are held in accounts established by it, or in the Federal Reserve book-entry system;

(b) Invest contributions that it receives, transfer amounts among investment funds, or liquidate securities, after receipt of proper instructions from the SBA, Administrator, or Investment Managers;

(c) Release and deliver securities held as directed by the SBA;

(d) Maintain a database of securities registered in the name of the Investment Plan;

(e) Remit or credit income;

(f) Communicate with the SBA regarding registered investment company shares and fund securities;

(g) Lend securities;

(h) Determine the value of assets; and

(i) Calculate rates of return of investment products.

(6)(5) Miscellaneous consultants have been hired by the SBA to assist the SBA in the operations of the Investment Plan. Their responsibilities may include, but are not limited to, the following:

(a) Assisting in the selection process for the Administrator, the educational vendors, and the investment product providers;

(b) Assisting in all general investment product reviews;

(c) Assisting in the evaluation and selection of annuity product providers;

(d) Consulting on the educational program and general Investment Plan matters;

(e) Consulting on unbundled investment fund design;

(f) Assisting in the selection and evaluation of all investment product providers;

(g) Assisting in developing and implementing investment product manager monitoring guidelines; and

(h) Making recommendations for retention and termination of investment product providers.

Rulemaking Authority 121.4501(8) FS. Law Implemented 121.4501(4), (8)(b), (e)1., (9)(a), (10) FS. History–New 10-21-04, Amended 7-12-12, 12-16-12,_____________.

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Joan Haseman, Office of Defined Contributions Programs

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

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: September 01, 2015

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: August 5, 2015