New Florida Law: Assessing Benefit Plan Costs for New Cancer Benefits Owed to Florida’s Bravest
Wednesday, May 8, 2019

This alert focuses on Florida governmental entities that provide benefits to firefighters. Newly adopted Florida Statutes chapter 112.1816, scheduled to go into effect July 1, 2019, provides additional minimum benefits to certain firefighters diagnosed with certain cancers. Following are excerpts describing the new or additional benefits that must be provided, and our initial reaction on whether this will likely impact the cost of retirement plan benefits, group health plan benefits, or retiree medical. With retiree medical, it is important to keep in mind that while some entities do not differentiate between health coverage provided to retirees and active employees for funding purposes, many prefund retiree medical benefits because of certain accounting rules established by the Governmental Accounting Standards Board (GASB). If you are familiar with terms like “OPEB,” “implicit subsidy,” and “explicit subsidy,” then your organization probably follows these retiree medical prefunding rules and your organization may have greater prefunding obligations.

Benefit

Impacted Benefit Plan

Comments

Reimbursement “for any out-of-pocket deductible, copayment, or coinsurance costs incurred due to the treatment of cancer.”

Group health and retiree medical

This and the next benefit must be made available to former employees for at least 10 years. Those who prefund benefits for GASB purposes will probably treat this as an implicit subsidy and the next benefit as an explicit subsidy.

“A one-time cash payout of $25,000, upon the firefighter’s initial diagnosis of cancer.”

Unclear

It may affect retirement benefits if this is included as pensionable income, but this flat dollar amount is more likely to be allocated as an expense of the general fund for active employees and a retiree health subsidy for former employees. While we have not scrutinized this for tax purposes, it probably is not a “health plan expense” since it bears no relationship to medical expenses incurred. For this same reason, our initial reaction is that this payment should be included in the employee’s taxable income for both income and employment tax purposes.

“[T]he retirement plan must consider the firefighter totally and permanently disabled in the line of duty” and if the firefighter dies, “the retirement plan must consider the firefighter to have died in the line of duty.”

Retirement

“Where firefighters participate in a defined contribution plan, there will be questions as to whether this or the next benefit will apply, as most defined contribution plans do not provide additional benefits for disability in or outside the line of duty.

 

It is also unclear how this will apply to a firefighter who terminated employment under the disability provisions, began receiving distributions, and then later dies from the cancer.”

“If the firefighter does not participate in an employer-sponsored retirement plan, the employer must provide a disability retirement plan that provides the firefighter with at least 42 percent of his or her annual salary, at no cost to the firefighter.”

Retirement or health

This may have relatively little impact, as most firefighters probably participate in a defined benefit plan. In general, this type of benefit can be more easily provided by an insurance policy or a defined benefit plan than a defined contribution plan.

“If the firefighter did not participate in an employer-sponsored retirement plan, the employer must provide a death benefit to the firefighter’s beneficiary … totaling at least 42 percent of the firefighter’s most recent annual salary for at least 10 years.”

None

Health plans do not generally pay death benefits, so unless a separate insurance policy is obtained, this is likely to be paid out of the general fund. This payment is probably also subject to income and employment taxation.

“The employer or employers … are solely responsible … to fund the increased actuarial costs.”

Retirement and retiree health

 

“An employer may not increase employee contributions required to participate in a retirement plan or system to fund the costs associated with enhanced benefits provided in subsections (3) and (4).”

Retirement and retiree health

 
 

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