The FRS Pension Plan is a defined benefit plan, in which you are promised a benefit at retirement if you meet certain criteria. The amount of your future benefit is determined by a formula, based on your earnings, length of service, and membership class, and is adjusted by a 3% cost-of-living each July. Your benefit is pre-funded by contributions paid by your employer. The Florida Retirement System must ensure that sufficient funds are available when your benefits are due and bears the market risk and investment decisions.
The Pension Plan has been offered to employees for over 30 years. It is primarily designed to serve longer-service employees who will be with the FRS for most of their career. Older employees and those employees who do not want to control their retirement plan may also prefer the Pension Plan.
In the Pension Plan, your benefits are generally back-loaded, which means that you accumulate benefits slowly at first and then at a faster rate the longer you stay. This is different from the Investment Plan, where benefits are earned more or less evenly over your career (subject to fluctuations in the financial markets and your investment strategy). So, if you stay with FRS employers for most of your career or for the final years of your career, you're more likely to receive a greater benefit under the Pension Plan.
You will be eligible for a benefit( i.e. be vested) when you complete six years of service in the FRS Pension Plan. If you use your 2nd Choice option to transfer from the FRS Investment Plan to the FRS Pension Plan, you will be able to count your Investment Plan service toward the six-year vesting requirement.
(To transfer from the Investment Plan to the Pension Plan, you will need to "buy in" to the Pension Plan by paying an amount from your Investment Plan account balance, plus any necessary amount from your personal resources. If you have previous Pension Plan service prior to joining the Investment Plan, the buy in cost will be calculated as the present value of the "accrued" FRS Pension Plan benefit. If you do not have previous Pension Plan service, the buy in cost will be the actuarial accrued liability, or total cost, of the "accrued" Pension Plan benefit.)
If You Change Employers
Under the Pension Plan, if you leave FRS-covered employment and go to a non-FRS employer, your Pension Plan benefit is frozen until you return at a later date to continue your FRS-covered employment or begin receiving your early or normal retirement benefit.
Under the Pension Plan, your retirement benefit is based on a formula comprised of your age, length of FRS service, and membership class. The amount of your benefit payments is affected by the retirement income option you choose.
Under the Pension Plan, you may choose to receive your benefit in retirement under one of four lifetime benefit options. Option 1 provides a monthly benefit for your lifetime, but does not provide a continuing benefit to a beneficiary. Option 2 provides a reduced monthly benefit for your lifetime, with a guarantee that your beneficiary will be eligible for a continuing benefit for 10 years from the date you retire. After 10 years of retirement, no benefits are payable to your beneficiary, in the event of your death.
Options 3 and 4 provide a continuing benefit to your spouse or other dependent beneficiary who is your joint annuitant. Option 3 provides a reduced benefit to both you and your joint annuitant in the same amount for as long as you or they are living. Option 4 provides an adjusted monthly benefit for you and your joint annuitant and is reduced upon the death of either. A 3% annual benefit increase is provided each July.
In the Pension Plan, your vested benefit will be paid to your beneficiary or in accordance to Florida law if you die prior to retiring. You may participate in the Deferred Retirement Option Program (DROP) once you have reached normal retirement age or date.
The Health Insurance Subsidy (HIS) is a monthly supplemental payment that you may be eligible to receive if you have health insurance coverage, Medicare, or Champus. This monthly payment, which you must apply for, is calculated by multiplying your total years of service at retirement (up to a maximum of 30 years) by $5. HIS is only available after you have six years of service. You will receive the HIS as part of your early or normal retirement benefit after you have show proper documentation certifying that you have health insurance coverage. The HIS subsidy, which is paid monthly, is $5 for each year of creditable service, with a minimum HIS of $30 per month and a maximum HIS of $150 per month.
Florida Investment Plan
The FRS Investment Plan is a defined contribution plan, in which employer contributions are defined by law, but your ultimate benefit depends in part on the performance of your investment funds.
The FRS Investment Plan is funded by employer contributions that are based on your salary and your FRS membership class (Regular Class, Special Risk Class, etc.). The Investment Plan directs contributions to individual member accounts, and you allocate your contributions and account balance among various investment funds. (Participant contributions are not allowed.)
benefit is the value of your account at termination. Unlike the Pension Plan, there is no fixed benefit level at retirement. However, a guaranteed lifetime payment option (based on the benefit to be distributed) can be purchased and is available with annual 3% benefit increases, like the Pension Plan.
Why the FRS Is Offering This Plan
The Investment Plan has been offered to FRS employees since 2002. However, it is similar to other defined contribution plans that have been offered to select groups of FRS employees for about 20 years. It is primarily designed to serve shorter-service and mobile employees. Other employees that might find the Investment Plan appealing are older employees that don't expect to work at least 6 years and employees that want greater control over their retirement plan.
All 625,000 FRS employees are eligible for the Investment Plan except:
- Participants in the Deferred Retirement Option Program, known as DROP.
- State University System Optional Retirement Program (SUSORP) members. (This is not an FRS plan.)
- Teachers' Retirement System members. (This plan is closed.)
- State and County Officers and Employees' Retirement System members. (This plan is closed.)
In the Investment Plan, benefits are earned more or less evenly over your career (subject to fluctuations in the financial markets and your investment strategy). This is different from the Pension Plan, in which you accumulate benefits slowly at first and then at a faster rate the longer you stay.
So, if you don't stay with FRS employers for most of your career or for the final years of your career, you're more likely to receive a greater benefit under the Investment Plan.
You will be vested (that is, you will own the assets in your Investment Plan account) when you complete one year of service in the FRS Investment Plan. If you transfer from the FRS Pension Plan to the FRS Investment Plan, you will be able to count your Pension Plan service toward the one-year vesting requirement.
(If you transfer the present value of your FRS Pension Plan benefit to your FRS Investment Plan account, you need to complete six years of service before you "own" this money. Service in the FRS Investment Plan will count toward the six-year FRS Pension Plan vesting requirement for the transferred value of your FRS Pension Plan.)
Under the Investment Plan, if you leave FRS-covered employment after vesting and go to a non-FRS employer, you can choose to leave your account invested in the Plan. There, it will continue to earn market returns until you begin to draw it down during retirement. You may also "roll it over" to an Individual Retirement Account (IRA) or to the plan of your new employer (if allowed by that plan). If you leave prior to vesting, your account balance will be placed in a suspense account for up to 5 years. If you return to FRS-covered employment within the 5-year period you will regain control over your account. If you do not return within the 5-year period, you will forfeit the accumulated account balance.
Under the Investment Plan, your retirement benefit is based on your account balance at termination of employment, which consists of any cumulative employer contributions, dividends and interest, and investment gains or losses, less expenses. The amount of your benefit payments is affected by the retirement income option you choose.
Under the Investment Plan, you may choose to receive your account balance at termination of employment as a lump sum or to take periodic withdrawals on demand or by a pre-determined payout schedule you select. There may be tax penalties if you withdraw your money before age 59 1/2. You may also use some or all of your account balance to purchase the same types of lifetime payment options (annuities) as offered in the FRS Pension Plan, with payments guaranteed by a private sector insurance company (Hartford Life Insurance Company). Survivor benefits and 3% annual benefit increase option are available, as well as a number of other retirement income options.
In the Investment Plan, your vested account balance will be paid to your beneficiary or estate if you die. DROP participation is not available under the Investment Plan.
The health insurance subsidy is a monthly supplemental payment that you may be eligible to receive if you have health insurance coverage, medicare, or Champus. This monthly payment, which you must apply for, is calculated by multiplying your total years of service at retirement (up to a maximum of 30 years) by $5.
HIS is only available after you have six years of service. To be eligible to receive the HIS under the Investment Plan, you must meet the normal retirement age or service requirements of the Pension Plan for your class of membership and provide proper documentation certifying that you have health insurance coverage. For example, a Regular Class member must be either age 62 and have 6 years of service or have a total of 30 years of service, and a Special Risk member must be either age 55 with 6 years or have a total of 25 years of service.
If you leave FRS-covered employment and take a benefit distribution prior to the normal retirement requirements, you must wait until you reach normal retirement age to begin receiving your HIS benefit. If you elect the Hybrid Option, you will receive your HIS payment once you begin receiving your Pension Plan benefit.
The HIS subsidy is $5 for each year of creditable service, with a minimum HIS of $30 per month and a maximum HIS of $150 per month.
