HR UPDATES
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HR Updates Homepage
June, 2011

Current Employees (Initially Hired Prior to July 1, 2011)
All employees participating in the FRS Pension Plan, FRS Investment Plan, or Optional Retirement Program (ORP) will be required to contribute 3% of their gross eligible earnings to their respective retirement plans, except those enrolled in DROP prior to July 1, 2011, or those designated as ‘reemployed’ retirees.

For example, an employee with a biweekly salary of $1,000 will contribute $30 biweekly toward his or her retirement plan. The 3% mandatory employee contribution is exempt from FICA Social Security and Medicare tax. Additionally, these contributions are not subject to federal withholding tax until such time the employee begins receiving distributions.

Pension Plan and Investment Plan participants will see a decrease in their take home pay due to the 3% mandatory employee contribution beginning with the July 15, 2011 pay check. (See “Take Home Pay Calculator” link below.)

ORP participants who currently contribute on a voluntary basis will have their voluntary contributions automatically reduced by 3% beginning with the July 15, 2011 pay check. (The University's contribution rate will be reduced from 10.42% to 7.42%.)  For example:

• An ORP participant who is currently contributing 10.42%, will have their voluntary contributions automatically reduced to 7.42%. The mandatory 3% employee contributions will also be deducted and will be deposited into the ORP employer account. In this scenario, an employee’s take home pay will not be affected.

• An ORP participant who is currently contributing 5%, will have their voluntary contributions automatically reduced to 2%. The mandatory 3% employee contributions will also be deducted and will be deposited into the ORP employer account. In this scenario, an employee’s take home pay will not be affected.

• An ORP participant who is currently contributing less than 3%, will have their voluntary contributions automatically stopped and replaced by the mandatory 3% employee contributions which will be deducted and will be deposited into the ORP employer account. In this scenario, an employee’s take home pay will be decreased.

The mandatory 3% employee contributions will be allocated to the same investment provider(s) as employer contributions and will be subject to the same provisions as the employer contributions, such as no loans, no hardship withdrawals and no in-service distributions.

Additionally, these mandatory contributions are not applied to the IRS annual maximum employee deferral amount. For 2011, the annual maximum employee deferral limit is $16,500 or $22,000 for employees 50 years of age or older. Therefore, employees who wish to increase (or decrease) their new voluntary contribution percentage, will need to complete and submit a ORP-16a form which will be available shortly on the myFRS website and the FGCU Human Resources retirement webpage.

Additional information regarding the 2011 Retirement Legislation is now available on the myFRS website at:

http://myfrs.com/portal/server.pt/community/myfrs/257/2011%20Retirement%20Legislation.

This website includes:

Legislation FAQs - Most commonly asked questions regarding the legislation.

Take-home Pay Calculator - Calculator to assist members in estimating the impact of the 3% contribution on their take-home pay.


Employees Initially Hired On or After July 1, 2011
In addition to the contribution of 3%, employees hired on or after July 1, 2011, who have no prior service credit in the Florida Retirement System will be subject to new provisions:

 FRS Pension Plan:

• Vested upon completion of 8 years of creditable service

• Average final compensation (AFC) is the average of the 8 highest fiscal years of compensation

• Normal retirement

  • Regular class: age 65 and vested (8 years) or completion of 33 years of creditable service regardless of age
  • Special Risk class: age 60 and vested (8 years) or completion of 30 years of creditable service regardless of age

 FRS Investment Plan:

• Vested upon completion of 1 year of creditable service (no change)

• Normal retirement

  • Regular class: age 65 and vested (1 year) or completion of 33 years of creditable service regardless of age
  • Special Risk class: age 60 and vested (1 year) or completion of 30 years of creditable service regardless of age

 Optional Retirement Plan (ORP):

• No additional changes


Cost of Living Adjustment Changes
The legislation eliminates the cost-of-living adjustment (COLA) for service earned during the period of July 1, 2011 through June 30, 2016 for employees in the FRS Pension Plan. The modified formula for calculating the COLA is: (Years of creditable service as of 7/1/2011) / Total Years of Creditable Service) X 3%.

For example: An employee who retires or enrolls in the Deferred Retirement Option Program (DROP) effective July 1, 2012, with 30 years of service of which 29 years occurred before July 1, 2011, will receive a 2.9% COLA each July. (29/30 = .9667 X 3% = 2.9%).

Subject to the availability of funding and the Legislature enacting sufficient employer contributions specifically for the purpose of funding the current 3% COLA, the modified COLA formula will expire effective June 30, 2016, and the current 3% cost-of-living adjustment will be restored.

 


DROP Participants and Retirees
FRS Pension Plan members who begin DROP participation on or after July 1, 2011, will earn an annual interest rate of 1.3% instead of the current percentage of 6.5% on their DROP account funds. Employees who are enrolled in DROP as of June 30, 2011, will continue to receive the 6.5% and will have no changes to retirement plans or benefits—including the COLA, vesting, average final compensation, and normal retirement age or years of service. In addition, DROP participants will NOT be required to make mandatory employee contributions.

The 2011 legislative session did not change the current benefits for retirees; the annual FRS cost-of-living adjustment remains at 3%, and the Retiree Health Insurance Subsidy (HIS) benefit did not change.