FRS Pension Basics 2010

Your FRS Pension is a “defined benefit plan” which means any contributions made by your employer on your behalf have no real bearing on the amount of your pension benefit.

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PENSION Basics

Your FRS Pension is a “defined benefit plan” which means any contributions made by your employer on your behalf have no real bearing on the amount of your pension benefit.  Instead, your pension benefit is determined by a percentage of what you were earning in the last few years prior to retirement. An alternative plan is a “defined contribution plan” such as the FRS Investment Plan, deferred compensation, or a 401K.  In a defined contribution plan your retirement benefit is determined by the value of the accumulated contributions to your account, plus the investment returns the account has achieved. Your income will only determine how much you can contribute!

The FRS Pension Plan for special risk awards a 3% credit for each year of your qualified service.  If you decide to retire after your retirement eligibility date (either 25 years of service or you reach age 55, regardless of years of service) you simply multiply your credited years of service by your Average Final Compensation (AFC).

The FRS Pension Plan for Civilians awards a 1.6% credit for each year of your qualified service.  If you decide to retire after your retirement eligibility date (either 30 years of service or you reach age 62, regardless of years of service) you simply multiply your credited years of service by your Average Final Compensation (AFC).

Special Risk Example:

If you have completed 25 years of service and the average of your  five years high pay is $50,000, your pension amount is calculated as follows;$50,000 (AFC) x .75(25 years multiplied by .03 per year) = $37,500 per year, divided by 12 months = $3,125 per month benefit.

Civilian Example:

If you have completed 30 years of service and the average of your five years high pay is $50,000, your pension amount is calculated as follows;

$50,000 (AFC) x .48 (30 years multiplied by .016 per year) = $24,000 per year, divided by 12 months = $2,000 per month benefit.

The maximum benefit you can achieve is 100% of your AFC, so working past 33 1/3 years (special risk) will provide no additional retirement benefit.  This is something to keep in mind if you choose to work longer than that. If you make no alternate choices when you begin work, you will automatically be enrolled in the Pension Plan.  Once you retire and cash your first pension check, your decision is irreversible. This is why it is so important to be sure that this is the best choice for you before you retire! This is really only important for Special Risk, or Elected Officials.  Civilians would have to achieve some 59 years of service to get to 100% benefit!

If you choose to take the Pension benefit, FRS offers four different options, three of them intend to provide some benefit for your spouse. Any option other than Option 1 reduces your monthly benefit. For a discussion of the Pay-Out Options, please refer to the Spousal Protection Page

A Frank Discussion about your Pension

We recognize that you probably have had your eye on your pension for many years, and view it as the light at the end of the tunnel! As an accumulation vehicle your FRS pension is hard to beat.  It would be difficult to match the lump sum value of your pension in almost any kind of defined contribution plan, especially when you consider the lack of risk taken.  The contributions made into your investment account could grow to a similar amount of money, but it becomes a function of time See our page on Investment Plan basics. Simply put, the pension can provide a great way to grow your retirement nest egg with no effort from you, and virtually no risk!  BUT, at retirement there may be much better options available as a way to COLLECT your benefit.

One potential downside to the Pension is it is an unbreakable contract.  Once you take that first check, you have no option other than receive the monthly checks.  There is no access to your lump sum retirement amount for emergencies, college, or any other unexpected financial need.

Despite the three percent COLA allowance, real inflation can be significantly higher than three percent. FRS calculates inflation in their own hypotheticals at an average of four percent. What this might mean to you is this – FRS is paying you only 75% of what inflation has been historically.  This could have a dramatic impact on your standard of living after just a few years. After 20 years, you only have $4 to buy $5 worth of life’s necessities!  It really means the buying power of your pension is 20% less after 20 years, so your standard of living takes a serious hit.

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We urge you to verify FRS information by referring to MyFRS.com, as well as the links provided on the links page.  We do not provide tax or legal advice.  You should consult your tax and legal advisors before taking any action that could have tax or legal consequences.  Information contained throughout this website is deemed to be accurate, but should be verified with the appropriate sources before action is taken.

  • http://www.floridaretirementsystem.info Mark Davy

    There is a very interesting article in the Sarasota Herald Tribune from Sarasota, Florida concerning the growing problems municipalities face in regard to the costs of their traditional Pension Plans. The city council will investigate the possibility of converting from a traditional defined benefit pension plan, to am employee contributory plan like a 401 k. An escalating number of public employee retirement plans are considering converting to save costs up front, and also the liability of promising very lucrative pensions down the road. The article is well worth reading if you are a public employee, as the writing may well be on the wall for traditional Pension Plans in the future.
    http://www.heraldtribune.com/article/20100211/A

  • http://www.floridaretirementsystem.info Mark Davy

    There is a very interesting article in the Sarasota Herald Tribune from Sarasota, Florida concerning the growing problems municipalities face in regard to the costs of their traditional Pension Plans. The city council will investigate the possibility of converting from a traditional defined benefit pension plan, to am employee contributory plan like a 401 k. An escalating number of public employee retirement plans are considering converting to save costs up front, and also the liability of promising very lucrative pensions down the road. The article is well worth reading if you are a public employee, as the writing may well be on the wall for traditional Pension Plans in the future.
    http://www.heraldtribune.com/article/20100211/A

  • http://www.floridaretirementsystem.info Mark Davy

    The FRS Pension Plan is 12% UNDER funded. This is the first time the plan has NOT been fully funded since 1997. Assets in the plan dropped from $134 billion in July 2007 down to $99.5 billion in July of 2009. That is a 26% drop. Add that drop to falling tax revenues, and fewer employees, and the funding shortfalls become more difficult to manage. WE WOULD LIKE TO HEAR ABOUT YOUR CONCERNS.

  • http://www.floridaretirementsystem.info Mark Davy

    The FRS Pension Plan is 12% UNDER funded. This is the first time the plan has NOT been fully funded since 1997. Assets in the plan dropped from $134 billion in July 2007 down to $99.5 billion in July of 2009. That is a 26% drop. Add that drop to falling tax revenues, and fewer employees, and the funding shortfalls become more difficult to manage. WE WOULD LIKE TO HEAR ABOUT YOUR CONCERNS.