Florida House and Senate Agree on FRS Reform!

The changes are substantial, but not nearly as dire as Governor Scott wanted. Employees to contribute 3%, DROP stays at 1.3%


It appears we have a Final Agreement between the House and Senate on changes to the Florida Retirement System.  The changes are substantial, but not nearly as dire as Governor Scott wanted.  There will be NO changes for those already retired, or those already in the DROP, your benefits remain the same. Many of the more radical changes only affect those hired after July 1, 2011.  Changes for new hires only are:

For members after July 1, AFC become the highest 8 fiscal years.

Increases retirement age for all new hires after July 1:

Regular Members normal retirement age will go from age 62 to age 65, or from 30 years of service up to 33 years of service.

For Special Risk Members the normal retirement age will jump from age 55 up to age 60, and the years of service to retire goes from 25 years up to 30 years.

Vesting requirements will go from 6 years of service up to 8 years (new hires)


Changes the will affect current members in FRS are as follows:

First, there is good news and bad news for the Deferred Retirement Option Program.  The DROP program is maintained, but the interest rate paid on the DROP accounts will go from 6.5% to 1.3% for those who enroll after July 1, 2011.

While this is a significant rate decrease, for Regular Members it probably doesn’t eliminate DROP as a viable program.  As an example, a Regular Member with an AFC of $50,000, the DROP amount at 6.5% would have been approximately $150,000. (Under the new rate, that benefit would have decreased to around $132,000if the COLA remained).  If the COLA is eliminated on DROP ( but we believe it will not be eliminated for DROP payments, as you will be entitled to the pro-rated pension payments that are deposited into your DROP account) the DROP benefit will be reduced to about $124,000.  While the loss of $26,000 is significant, it remains an option that will allow you to have a nice lump sum.

All members will be required to make a 3% Contribution for all members on gross compensation.   There will be NO contribution for members who in the DROP.

In what we believe to be the most devastating change, members will no longer receive the Cost of Living Adjustment (COLA) on service after July 1, 2011. The initial language implies the COLA will return to 3% after July 1, 2016 (but we would be very leery of that actually occurring.  This could well be a seemingly soft introduction of the benefit reduction).  The formula for a members COLA will be –  ( service years prior to July 1, divided by total service years, multiplied by 3%).  For instance, if you have 25 years in as of July 1, and continue to work for another 5 years, your COLA calculation will be;   25/30 times 3%, or .83333 times 3%, or a COLA of 2.5% for your retirement.

COLA is a huge factor, not only in members ongoing Pension payments, but as it reduces the pension significantly over time, it will have a serious negative effect on the Lump Sum value that members could transfer to the Investment Plan.  For a member retiring at age 60 (the FRS average) and living to 84, the COLA allows a members pension to double in that time frame.

It appears this is the final proposal, and has been agreed upon by both the House and the Senate.  It will go to the Governor for his signature by May 31, which would make it officially become law and effective with the start of the fiscal year beginning July 1.  The other option the Governor has would be to veto any or all of the proposals.  Governor Scott has indicated if he doesn’t get the budget cuts he wants, he will veto the bill – so it will be interesting to see what happens.  If he veto’s the changes, they will not become effective until the legislature can come to an agreement with the Governor.  Last year you might remember the legislature wanted to cut the interest rate on DROP from 6.5% to 3%, and Governor Crist vetoed it, so no change took place.

We will be posting situations and scenarios over the next few weeks to assist FRS members in making choices as to which FRS Options would be the optimal choice for them.  There is time to plan and implement any changes you may deem attractive before the law and changes take place.


  • Lrs

    One of our employees has 28 years of service and is 74 years old. Would it benefit him to work 2 more years. This is a wonderful service FRS is providing.

  • http://www.floridaretirementsystem.info FRS Options

    For the record, FRSOptions.info is not affiliated with or endorsed by the Florida Retirement System. We are a volunteer, third party resource for interpretations and opinions on what your Options might be within FRS.

    Only if he wants 2 more years of income, or if he can afford to retire with a pension 45% of his AFC instead of 48%.

  • MA

    Am I correct that the average final compensation will still be based on the 5 highest salary years?

  • http://www.floridaretirementsystem.info FRS Options

    For those enrolled prior to July 1, 2011. For those enrolled after July 1, 2011 AFC will be the average of the 8 highest years.

  • http://www.floridaretirementsystem.info FRS Options

    I realized what you were saying, but it made it nowhere. We can’t possibly speculate on what might or might not happen, or what the legislature may try. There is no point to it, nor is it a beneficial way to spend our time. I am not saying you have plenty of time, I am not saying anything other than if the Governor signs legislation on May 31, it usually takes affect for the fiscal year starting July 1. If you want to speculate, then we can worry about whether the change a statute and make it retroactive to before legislature was passed.

  • Ted howard

    So the Investment Plan is better then the FRS. Plus I’m not sure if I’ll work unil 25 years or 30 years yet.

  • http://www.floridaretirementsystem.info FRS Options

    I think you will find it is if you want to maximize your lump sum.

  • http://www.floridaretirementsystem.info FRS Options


  • http://www.floridaretirementsystem.info FRS Options

    If you are in DROP it doesn’t affect you. You will get your full 3%.

  • fatgirl54

    Do these changes affect people in the investment plan?

  • http://www.floridaretirementsystem.info FRS Options

    The 3% employee contribution will be required of you .

  • http://www.floridaretirementsystem.info FRS Options

    It’s an actuarial calculation, done by the actuaries and not by the government. Despite popular opinion, they are not out to screw you, and I have yet to see a credit purchase that wasn’t very profitable to the member buying it.

    The cost isn’t about what you made in 1986, it is a calculation to determine how much you need to pay today, for the pension benefit you would have if you had that time in FRS. We are not actuaries, so don’t have the formula.

  • http://www.floridaretirementsystem.info FRS Options

    Regular member and not special risk? In the majority of situations, from a mathematical perspective, I would probably go with the DROP.

  • Adwoman51

    I am very confused…you stated ”
    In what we believe to be the most devastating change, members will no longer receive the Cost of Living Adjustment (COLA) on service after July 1, 2011. The initial language implies the COLA will return to 3% after July 1, 2016 (but we would be very leery of that actually occurring. This could well be a seemingly soft introduction of the benefit reduction). The formula for a members COLA will be – ( service years prior to July 1, divided by total service years, multiplied by 3%). For instance, if you have 25 years in as of July 1, and continue to work for another 5 years, your COLA calculation will be; 25/30 times 3%, or .83333 times 3%, or a COLA of 2.5% for your retirement.”

    Does this mean if I retire in 5 years (before 2016 reinstatement of 3% COLA) I will receive 3% COLA on my monthly FRS pension? If I retire before the 2016 then I get only a percentage (which in this case I think you figured out to be 2.25%)?

  • http://www.floridaretirementsystem.info FRS Options

    If you retire any time after July, 1, 2011 you will get a percentage. There will be no COLA credit for the five year period July 1, 2011, until July 1, 2016. At that point, the DROP is scheduled to be re-instated.

  • http://www.floridaretirementsystem.info FRS Options

    It is.

  • http://www.floridaretirementsystem.info FRS Options

    It might make sense if you don’t plan on sticking around. It vests after 1 year, and you can roll the money to an IRA if you leave.

  • http://www.floridaretirementsystem.info FRS Options

    I suspect if the folks at FRS told you that, it is probably the situation.

  • Caorso1

    How long does it take for an elected official to vest in FRS? What are their pay scales? Do they accrue benefits at the same rate as regular FRS or the special classes?

  • Yvonne

    Thanks for posting this. I have been waiting to read the “final bill”.

  • http://www.floridaretirementsystem.info FRS Options

    All rules for elected officials are the same as all other FRS employees. They vest at 6 years, and all newly elected officials after July 1 will vest in 8 years. The base pay for a legislator is about $30,000 per year. Elected officers like Sheriff, Clerk of Court, etc. have a base of around $130,000.

  • Humble

    im retiring– aug 1,2011 with 28.16 yrs of service

    question will i be recienving Cola for teh next 5 years till i complete drop—–ive heard many different answers——-do i gt cola string aug 1 2011 eneding aug 1,2016???

  • RA

    Is this a mandatory contribution or can I opt out?
    If it is mandatory, why doesn’t every working person mandated to contribute 3% of their salary to a retirement fund? As it is I am a county employee that doesnt get paid enough and now to take another 3% away each month/pay period is troubling to me… Especially when I hae not seen a raise in 4 years… Not even COLA..
    Thanks for listening/reading…

  • http://www.floridaretirementsystem.info FRS Options

    Yes, you do.

  • http://www.floridaretirementsystem.info FRS Options

    It is mandatory. Non-public workers either contribute, or they have no retirement. It is a sacrifice now, but having a secure retirement will be worth it.

  • Yvonne

    Is 1.68 still going to be the factor used for people who retire from regular class that are 65 years of age and retire after July 1, 2011?

  • http://www.floridaretirementsystem.info FRS Options


    Mark A. Davy
    SouthBay Investment Group
    665 S. Orange Avenue, Ste. 4
    Sarasota, Florida 34236


  • Annabellelamb

    You stated –
    If you don’t DROP and work for the next 5 years, you would gain 3% per year. Where does the 3% come from?

  • http://www.floridaretirementsystem.info FRS Options

    I think you are referring to comments toward special risk, it is from the 3% service credit that makes your pension go up by 3% of AFC per year.

  • http://www.floridaretirementsystem.info FRS Options

    The math works out this way. If you DROP now, your benefit will be about $20,000 more over the 5 years than if you wait the 3 months. Your pension will only by $72 per month higher, so it will take about 14 years for that to breakeven. Based on those numbers, it would be better for you to DROP now. The 3 months won’t help you if you wait.

  • http://www.floridaretirementsystem.info FRS Options

    I can’t imagine what would make the cost change other than 1 days worth. I believe you enrolled in FRS the first day you worked for the FRS employer, that doesn’t change between the Investment Plan and the Pension Plan, and since they are not halting enrollment in the Pension Plan, it shouldn’t matter.

  • http://www.floridaretirementsystem.info FRS Options

    That is probably a conversation too detailed for this blog, shoot us an email through the contact us page, and we will see if we can guide you to some help.

  • http://www.floridaretirementsystem.info FRS Options

    Probably not. The new rules are pretty tough on double plans.

  • http://www.floridaretirementsystem.info FRS Options

    You can defer the DROP until age 57, which will increase both your pension, and the DROP benefit.

  • http://www.floridaretirementsystem.info FRS Options


  • http://www.floridaretirementsystem.info FRS Options

    I think you have to go with the answer from the people you spoke with, as it is they who do the calculation.

  • http://www.floridaretirementsystem.info FRS Options

    Special Risk enter the DROP at age 55, unless they have 30 years in prior to that, then they would be able to defer entering the DROP until age 52. You aren’t eligible until you get 30 years, or age 55.

  • WhoKnows


    I work for the University Of South Florida in Tampa, and
    the HR department there wasn’t able to answer this question. Will we have the option of opting out of the
    FRS altogether so as to avoid having to contribute the 3% now? I can’t afford a pay cut, and I’m wondering
    if we’re allowed to simply decline the FRS benefit completely and just simply
    not have the benefit if we wish. Will
    this be allowed?

  • http://www.floridaretirementsystem.info FRS Options

    Unfortunately no. Participation in FRS is mandatory for all members of a participating employer.

  • http://www.floridaretirementsystem.info FRS Options

    That is a brilliant idea. Guns and Gas cans in the streets. You win the prize for the biggest ASS to write in to this website, which is a field of almost 500,000 people. Congratulations, you should be proud. Accolades to idiot of the year.

  • Big Red

     Some questions and concerns:  1.  For municipalities that have a fiscal year running from Oct to Sept, they will now have a 3% windfall if you will for the remainder of the fiscal year, yes?  In this case having the money come from employee contribution saves the State of Florida ZERO dollars and only takes 3% of our pay.  I will concede that the cities will be able to save some money and hope that they will reinvest the money in much needed infrastructure improvements.  2.  How will we be able to get “our” money should we leave before retirement?   With private funds, one can “cash out” any money that came directly from the employee.  Monies deposited by the employer are subject to vesting but employee monies should belong to the employee.  So what will happen if someone changes jobs before reaching retirement?  Can they take that portion of their money with them as they would in the private sector? 

  • http://www.floridaretirementsystem.info FRS Options

    17% or so of FRS members are state employees, so the 3% will help the state to that amount. The 3%, as you pointed out, is more a savings for the local governments. You can get “your” money without interest or earnings if you decide to leave FRS early. Your contributions are yours (you would want to transfer them to an IRA to avoid taxes and penalties).

  • Steve B

    I have had this discussion with co-workers. It seems to me that when we entered into employment with our respective gov’t agencies, the FRS is a “contract” arrangement. If we’re wrong on that point, correct us and explain why it’s not considered a contract ?
    When I started with my first gov’t agency, the language was laid out, about all the benefits etc.

    If it is, in any way, shape or form, a type of “contract”, how can it be breached (changed in mid-stream) by passing any type of law ?

    And if it can be modified now, does this not set a dangerous precedent for the future ? Who says it can’t be changed further, or scrapped altogether ? I think messing with any component of the FRS is bad news.


  • http://www.floridaretirementsystem.info FRS Options

    I suspect it is a case of “I want it to be a contract”. What were your conditions to the “contract”. You have the right to quit at any time for any reason, so I don’t know what the bi-lateral part would be. I also think you will find, since the changes are all prospective – only affecting future benefits that have not been earned, you will find it is legal. Just as they can give you a raise, or increase your benefits, it seems reasonable that they can alter them the other way, as long as they don’t take away what you have already earned. We also believe you should keep in mind that “vested” is not “earned”. Florida is a right-to-work state, which means you can quit or be terminated for any reason that is not illegal (bias), so I would have to guess that technically, the job offer has changed, and you have the option of accepting or seeking employment elsewhere. Did you sign something that stipulated your job terms were guaranteed for as long as you choose to work? Over the last 15 or 20 years, your “contract” has been breached at least 9 times to your benefit, so I have to think you don’t have a contract. Your job is governed by statute, and the statutes are made by the legislators. As long as they violate NO constitutional or literal contracts, I don’t think you will get far pursuing the “breach” concept.

    There may be some gray area in the union side, concerning the right to collective bargaining, but I have to think that the legislators are by-and-large attorneys, so they have covered those bases.

    That said, they had no real reason to mess with FRS, but the budget problems are a different story, and they have chosen to balance it primarily with FRS and education. Not good! Time will tell how it plays out over the long term.

  • http://www.floridaretirementsystem.info FRS Options

    That has been a common lament for FRS members. While not an attorney, we would offer the following for consideration.

    Contracts are bilateral, meaning consideration must be given from both sides. You are free to quit at any time, and have no obligations, so it lacks a bilateral componenet as best we can tell.

    To the best of my knowledge, if you are offered employment with certain terms and benefits, those terms and benefits can be changed as time goes on, unless you have signed a “contract” which stipulates otherwise. As you have recieved pay raises, benefit changes (all to your advantage up until now), and possibly job description changes, we would suggest it is not a contract.

    FRS benefits have been increased about 9 times in the last 15 years – that didn’t arouse any breach controversy.

    Most of our legislators are attorneys, we would guess (and hope) that they explored the legality before making the changes.

    Florida law has been pretty firm in that retirement employment changes that are for future service, and not already earned, can be changed. All of the changes are prospective, and nothing that has been earned (for time up to now) was changed, so the legal position seems intact.

    In simple terms, Florida is a right-to-work state, which basically means you can quit for any or no reason, and your employer can terminate you or your position for any or no reason (other than bias), so we would view it as, you got what you were promised up until now, and if you want to accept the new terms, you can continue to work. You also have the right to quit if you don’t want to accept those terms.

    You are right. There was no reason to mess with FRS, but the budget issues are a different story, and the legislators decided to balance the budget on the backs of public workers and education. Time will tell how it plays out, but it stinks now!

  • http://www.floridaretirementsystem.info FRS Options

    By all means wait until you have your 25. The last five years are the biggest in terms of how your lump sum is calculated.

  • Dpeterson

    Looking for an answer.  I am in private city plan that the new laws supposely changed the OT and sick/vac time pay out which benefits retirement salary.  Is the 300 hours over 5 years or per year? 

  • http://www.floridaretirementsystem.info FRS Options

    Unfortunately, we only really follow FRS, but as I understand it, the new local plans cap overtime at 300 hours, and eliminate unused leave time from retirement plan calculations. We would urge you to verify with your HR department.

  • Scott is evil

    What of former state employees that were previously in the FRS that are rehired after July 1?  Do they vest after 6 years or 8?

  • http://www.floridaretirementsystem.info FRS Options

    The statute says “enrolled after July 1”, so if you were enrolled originally before that, we would think you would be good at 6.