19-11.011. Employer and Employee Contributions and ABO or Present Value Transfer Procedures

(1) Employer and Employee contributions.

(a) All state, school district, and local employers (employers) who participate in the Florida Retirement System (FRS) and each employee are responsible for making the contributions required by Chapter 121, F.S.

(b) Employers shall submit, to the Division of Retirement (Division), a monthly retirement report and accompanying employer and employee contributions by the fifth (5th) business day following the month in which the salary was paid. For example, if the salary is paid in March, the monthly retirement report and contributions are due to the Division by the 5th business day of April.

(2) One Percent Penalty for Late Payroll Reporting.

(a) A one percent penalty will be applied to contributions that are late pursuant to Section 121.78(3), F.S. The portion of the one percent penalty assessed on late contributions and accompanying payroll data attributable to contributions for the Investment Plan members shall be proportionally divided and deposited into affected member accounts, using the members’ Investment Plan investment allocation in effect at the time of the deposit.

(b) Any employer requesting a waiver of the delinquency fee in accordance with Section 121.78(3)(c), F.S., shall make a written request, setting forth a full description of the facts and circumstances, to the Office of Defined Contribution Programs, State Board of Administration of Florida (SBA), 1801 Hermitage Blvd., Suite 100, Tallahassee, Florida 32308 or through the Division. The Division will forward any request regarding an Investment Plan waiver to the SBA for review. Waiver of the fee is at the discretion of the SBA. A waiver may be granted only once for an employer in any one fiscal year. Once a delinquency fee has been paid to a member’s account, it cannot be waived.

(3) Market Loss Calculation for Late Retirement Contributions Reporting.

(a) Market loss calculations will be applied to contributions and benefit transfers that are late pursuant to Section 121.78(3), F.S. A market loss occurs when an employer fails to timely remit the monthly retirement report and accompanying employer and employee contributions to the Division by the 5th business day of the next month the retirement report and associated employer and employee contributions are due as described in subsection (1), above, and the receipt of monthly retirement report and/or the employer and employee contributions are received in the month following the due date or after.

(b) The Division will notify the Investment Plan Administrator (Administrator) of the late filing by the employer. Upon notification, the Administrator will determine market losses using the affected member’s investment allocation on record with the Administrator at the time of calculation.

(c) The Administrator will perform the market value calculation using a period certain which is the 15th of the month in which the retirement report is due, or the next succeeding business day if the day falls on a weekend or legal holiday, in which contributions would have been processed, and ending on the date the contributions are received by the Administrator.

(d) If contributions and accompanying retirement report data are not received within the calendar month they are due, but that lateness does not result in market losses to members, only the one percent late assessment will apply to the employer.

(e) The Administrator will not perform the market loss calculation until a covered retirement report and accompanying payroll data is received and processed by the Administrator.

(4) Prior Period Adjustments.

(a) Employer and employee contributions paid for a prior period shall be subject to a delinquent fee of one percent for each calendar month or part thereof that said contributions should have been paid. This includes prior period contributions due to incorrect wages and contributions for an earlier report or wages and contributions that should have been reported, but were not. If the delinquent assessment is not remitted within 30 days following the Division’s invoice date, an additional delinquent assessment of one percent on the invoiced amount shall be assessed for each calendar month or part thereof that said invoice is delinquent. This delinquent assessment cannot be waived.

(b) When an employer requests an adjustment to retirement contributions or accompanying retirement report data for prior periods for Investment Plan members, the adjustment will be processed to the extent administratively possible. Under no circumstance shall the SBA, the FRS Investment Plan Trust Fund, or the Florida Retirement System Trust Fund incur any loss or gain as a result of an employer’s adjustments for an Investment Plan member or a former member.

(5) Employer errors or corrections.

(a) Market loss calculations will be applied to contributions and benefit transfers that are late due to an employer error or correction. An employer error or correction is deemed to have occurred if the employer changes previously reported information that now requires contributions and benefit transfers to be posted retroactively.

(6) If an agency fails to pay the required retirement contributions timely, the SBA or Division maybe begin collection actions as provided in Section 121.061, F.S.

(7) Federally Mandated Monitoring of Contributions and Annual Salary.

(a) The Investment Plan Administrator will be responsible for monitoring federally mandated contribution limits pursuant to Internal Revenue Code s. 415(c) (“Section 415(c) limitation”). The monitoring of federally mandated contribution limits will only be conducted if the employer has properly reported the applicable annual salary and contributions on the retirement reports submitted each month. The Investment Plan Administrator, the Division or SBA will not be held responsible for a failure to monitor the limits due to the employers’ inability or failure to report the necessary data.

(b) The Division will be responsible for monitoring federally mandated annual salary that may be applied towards retirement under a qualified retirement plan pursuant to Internal Revenue Code s. 401(a)(17).

(c) In no event shall the aggregate of the allocation of employer and employee contributions to an Investment Plan member’s account(s) in the Investment Plan and the annual addition to an Investment Plan member’s account(s) in any other defined contribution plan maintained by the employer exceed the Section 415(c) limitations for defined contribution plans.

(d) In no event shall an Investment Plan member have contributions deposited to an Investment Plan account on salary above the Section 401(a)(17) limitations. In the event an Investment Plan member has contributions deposited to an Investment Plan account on salary above the Section 401(a)(17) limit, the excess contributions, and applicable investment earnings on excess contributions, shall be deducted from the member’s Investment Plan account and returned to the entity that submitted the excess contributions.

(e) Employers shall cooperate with the Investment Plan Administrator or its agent in order for the Administrator or its agent to be able to monitor the 415(c) limitation on employer and employee contributions.

(f) Employers shall be responsible for providing all financial and retirement data which the Investment Plan Administrator or its agent must use to determine whether or not the 415(c) limitation has been exceeded.

(g) Pursuant to Section 121.4501(5)(d), F.S., the Administrator will notify the employer regarding maximum contribution levels permitted under the Internal Revenue Code and if a member exceeds those limits.

(h) The Employer is responsible for notifying a member if the total contributions made to the Investment Plan and to any other such plan exceed federally permitted maximums and to take appropriate steps to correct such excess contributions as set forth in paragraphs (i) and (j), below.

(i) In the event the aggregate annual additions to a member’s account(s) in the Investment Plan and in any other defined contribution plan maintained by the employer exceed the 415(c) limitation during any limitation year, the excess shall be attributed first to such other plans.

(j) If any excess remains after attribution to such other plans, the amount of any such excess attributable to the allocation of forfeitures, to a reasonable error in estimating a member’s annual compensation or to any other circumstances that the Commissioner of Internal Revenue finds is justified, in accordance with the correction principles set forth in the most recent Revenue Procedure, shall be used to reduce the employer’s contributions for such member under the Investment Plan in the next and succeeding limitation years; provided, however, that if the member is not covered by the Investment Plan at the end of the limitation year, such excess amount will be used to reduce the employer’s contributions to remaining members under the Investment Plan in the next, and succeeding, limitation years.

(k) If the correction method, above, is not available, other methods of correcting excess annual additions are permitted if in accordance with Revenue Procedure 2018-52.

(8) Employer errors or corrections. Market loss calculations will be applied to contributions and benefit transfers that are late due to an employer error or correction. An employer error or correction is deemed to have occurred if the employer changes previously reported information that causes contribution and benefit transfer to be posted retroactively.

(9) Contribution Rates.

(a) The employer and employee contributions received by a member of the Investment Plan prior to effective enrollment in the Investment Plan will be at the rate established pursuant to Section 121.71, F.S. The amount will be transferred into the employee’s Investment Plan account as the opening account balance.

(b) After effective enrollment in the Investment Plan, the member shall receive the employer and employee contribution at the rate established by Sections 121.71 and 121.72, F.S. appropriate to that member’s class of membership.

(10) Asset Transfer and True-Up Procedures for Newly-hired Employees with Previous FRS Service.

(a) For members who either elect to enroll or default into the FRS Investment Plan and have prior FRS credible service, the Division will calculate the amount of the member’s ABO or present value of the Pension Plan benefit. This amount shall be transferred to the member’s Investment Plan account and shall be allocated to each investment product selected by the member or/and if no allocations were provided by the member, then to an age-appropriate retirement date fund.

(b) The Division shall determine the member’s ABO or present value as of the last day of the month prior to the employee’s effective date of enrollment in the Investment Plan. For example, if the Division receives the enrollment during the month of June, the effective date of enrollment for the employee in the Investment Plan is July 1 and the Division shall calculate the member’s ABO or present value, if any, through June 30.

(c) By the 25th day of the effective month of enrollment, the Division shall notify the Investment Plan Administrator of the ABO or present value for each Investment Plan member whose effective date of enrollment is the first day of the month. The Administrator shall notify the SBA of the aggregate ABO or present value of members whose effective date of enrollment is the first day of the month.

(d) On the last business day of the effective month of enrollment in the Investment Plan, the SBA shall effectuate the transfer of the aggregate ABO or present value amount to the Investment Plan Administrator for allocation to the applicable Investment Plan member accounts based on the investment option designated by the member, and if no allocations were provided by the member, then to an age-appropriate retirement date fund.

(e) The total amount initially credited to an Investment Plan member’s account who elected to transfer the ABO or present value from the Pension Plan was an estimate of the member’s ABO or present value. Pursuant to Section 121.4501(3)(b)2., F.S., the Division will recalculate the ABO or present value not later than 60 days after the initial transfer of funds. If the re-computed amount differs from the estimated ABO amount by plus or minus $10.00 or more, the Division shall provide the aggregate adjustment amount to be transferred to or from the affected member(s).

(f) The Division shall notify the Administrator of the true-up amounts plus interest by member account within 50 days of the initial transfer. The true-up transfer shall include the true-up amount determined by the Division plus interest at the rates specified in Section 121.4501(3)(b)2., F.S., from the date of the initial transfer to the date of the true-up transfer. The transfer of the true-up amount plus interest shall occur on the 60th day following the initial transfer. In the event the 60th day following the initial transfer falls on a Saturday, Sunday, or a legal holiday, the true-up transfer shall occur on the last business day of the month preceding the Saturday, Sunday, or legal holiday.

(g) The Division shall calculate the interest owed on true-up amounts. If the recalculated ABO is greater than the original amount transferred by plus or minus $10.00 or more, the member will be owed a true-up amount plus interest. Interest will be calculated pursuant to Section 121.4501(3)(b)2., F.S. If the recalculated ABO is less than the original amount transferred by plus or minus $10.00 or more, the member will owe a true-up amount plus interest and the amount will be deducted from the member’s Investment Plan account. Interest will be calculated pursuant to Section 121.4501(3)(b)2., F.S.

(h) The Administrator shall notify the SBA of the aggregate true-up value for those members determined to have a true-up adjustment. On the last business day of the month in which the true-up amount is due, the SBA shall effectuate the transfer of the aggregate true-up amount to the Investment Plan Administrator for allocation to the applicable member accounts based on the investment fund allocations designated by the member(s).

Rulemaking Authority 121.78(3)(c), 121.4501(8) FS. Law Implemented 121.71, 121.72, 121.78, 121.4501 FS. History–New 7-12-12, Amended 12-16-12, 12-30-15, 4-12-17, 2-19-19, 5-11-22, 7-26-23.