FRS Investment Plan Basics

The FRS Investment Plan is a “defined contribution” plan as determined by Section 401(a) of the Internal Revenue Code – meaning it is comprised of money the employer deposits into your retirement account, plus any interest, earnings or growth from the investments in the account, less expenses.You have a say in the way your money is invested within the scope of the investments offered within the plan.


FRS Investment Plan Basics

The FRS Investment Plan is a “defined contribution” plan as determined by Section 401(a) of the Internal Revenue Code – meaning it is comprised of money the employer deposits into your retirement account, plus any interest, earnings or growth from the investments in the account, less expenses. The amount of the contributions are determined by law and based on your “membership class”. You have a say in the way your money is invested within the scope of the investments offered within the plan.  You select from a variety of investment funds which in turn are invested in stocks, bonds, foreign companies, foreign bonds, money markets, or portfolio’s managed by FRS.

You must elect to participate in the FRS Investment Plan within the first five months after you are hired.  New employees are automatically enrolled in the FRS Pension Plan when they are hired.  The FRS Investment Plan was designed for shorter term and mobile employees, and specifically for those who may not intend to work for the six years required to vest in the FRS Pension Plan.  If you meet this description, it is possible you should elect the FRS Investment Plan as soon as possible after your start date.  If you don’t meet this description, meaning you intend to put in your 25 years, you will probably want to stay in the Pension Plan until just prior to the date that you retire.

There are exceptions.  Periods like the post-2008 market collapse, could present opportunities in the stock market that would give the opportunity to further enhance their benefits.  For instance, you have over 25 years in, and your lump sum can be rolled into the investment plan.  Assuming the stock market will recover over the next few years, it could mean potential returns in excess of the four or five percent rate that remaining in the pension would grow.  If the market had several good years, the value of your lump sum benefit could grow by significant amounts.  Obviously, this would incur the risks of the stock market, so prudent investment selections, and good diversification would be necessary to offset the risks.  As of December 31, 2009, the Standard and Poors 500 Stock index returned over 25% for the year 2009.  If a special risk participant rolled a $750,000 lump sum into the investment plan, and achieved that return, the plan would gain around $150,000 in that year alone, and the plan could be worth close to $900,000.  It is essential participants understand the risk before making such a decision.

The FRS Investment Plan allows employees to be vested after completing just one year of service.  There is NO requirement to complete 25 or 30 years in order to retire. Once you are vested, whatever the value in your account becomes yours when you leave!  After you terminate your employment under FRS, you may take the value of your account (after a waiting period of three full calendar months) no matter of your age or years of service.  At that point you may receive the entire account in several ways including leaving it with FRS to manage, take the balance as a taxable distribution, or Roll it over to an IRA to defer the taxes until you withdraw from it. See our page on IRA rollovers

Investment plan money cannot be accessed while you are still employed with an FRS covered employer.

With the FRS Investment Plan, there is no need for the four payout options that you must select in the FRS Pension Plan.  You will determine your income from the plan, and how and when you want it distributed. Withdrawals from the account are taxable as income in the year they are taken, and may also be subject to a 10% penalty for pre-mature distributions if you take money out prior to age 59 ½ (you may be able to avoid the pre-mature distribution penalty if you take substantially equal payments, ask your accountant or tax professional).

A major benefit of the Investment Plan is the ability to name one or several beneficiaries that will receive the entire account balance upon your death.  Your beneficiary will default to Florida law which would be your spouse first, but you may designate any person you choose, your estate, a trust, or even an organization of your choice.  In essence, the money is yours to do with what you wish, within the law and respecting taxation rules!

Your ability to roll the value of your Investment Plan into an IRA is what is most attractive about this option.  Once in your IRA, you take control of your retirement finances, and your financial destiny. If you wish to use your one time “second election”, you must do so prior to your last day of employment. They will transfer the current value of your FRS Pension Plan into the Investment Plan, and after you leave employment you can roll it over into your IRA!

  • AaronLS

    Can you give me some hint as to where to start to rollever the investment plan into an IRA? It seems they so very much don’t want you to that it’s difficult to find information on how to actually do it.

  • Mark Davy

    You can do it two ways. You can go to the website and click on the
    frequently used forms, and select the “2nd Election Enrollment Form” and follow
    the instructions, or you can sign into the MyFRS, click on the “2nd Election”
    button on the upper left, and follow those instructions to do it electronically.

    If you have any problems, give us a call and we ca walk you through it.
    Mark A. Davy

    SouthBay Investment Group, llc
    665 S. Orange Avenue, Suite 4
    Sarasota, Florida 34236

    941-952-1937 (fax)


  • Jack

    Is the FRS investment plan impacted by Gov. Rick Scott’s proposal? I understand, the State pays ~10.4 percent into it right now … would that be reduced to 5.4% ?

  • FRS Options

    As the Governor’s plan reads now, as a regular member, the contributions to the Investment Plan would remain virtually the same. 9% of your Gross Compensation would go into your Investment Plan account. 5% from you and 4% from your employer. That is the same as now (the other contribution is for HIS). Special Risk currently gets 22%, which will be cut down to 11.5% total, 5% from the employee and 6.5% from the employer.

  • FRS Options

    Sorry kz, I’m not sure what you are referring to.

  • FRS Options

    The pension plan payout is the following:

    Years of service multiplied by the annual service credit (1.6% for regular members), multiplied by Average Final Compensation. AFC is the average of her highest 5 five years of compensation. If she has 30 years with an AFC of $50,000, her pension would be:

    30 * 1.6% = 48% of $50,000 AFC, for a pension of $24,000 per year.

  • FRS Options

    We certainly can’t tell you what will be in your Investment Plan 15 years out (or even 15 minutes out), no one can.

    If you opt to go back to the Pension Plan, you will have to contact FRS and see what the “buy in” amount is. If you Investment Plan does not have the necessary funds, you would have to come up with those funds from some other source. Sometimes that is difficult to do.

    On the other hand, we presume you opted for the Investment Plan for good reasons, and would surmise those reasons are still valid. If you properly diversify (FRS uses about 70% stocks and 30% bonds) and have the discipline to allow the market to do what it is going to do, you should be fine. The key is diversification and the discipline to allow it to work. If you paniced out when you “took a few hits”, it will be a bit more problem to play catch up. If you follow FRS lead (they took a big hit, but stayed the course and got it all back), then you should be ok.

  • Jovwms

    I worked for the school system 12.9 years. I left the system and have not worked since. I am 59.6 years of age and would like to know when can I begin to withdraw the money I put into the Florida retirement system. My years of service were 1974-1988.

  • FRS Options

    Assuming the school system you were employed by was an FRS member, you should be vested and entitled to a benefit upon reaching age 62.

  • FRS Options

    Since you are vested, you can begin to collect at retirement age, which is age 62 or 30 years of service. You should be eligible when you are 62.

  • Bat Jj

    I worked for the school system for 8 years. I left the state 10 years ago and would like to know how to roll my FRS over into my IRA.

  • FRS Options

    In order to “roll it over” into an IRA you currently have, it would have been necessary to move the funds from the Pension Plan to the Investment Plan prior to your last day on the job with the member employer. If you moved to the Investment Plan and are currently in it and not the Pension Plan, you may roll the funds to an IRA.

  • Mstoya34

    If I am in the Investment plan and have returned to work for FRS employer and I still allowed to participate in the DROP program within the last 5 years of employment?

  • FRS Options

    I don’t think that is going to happen. DROP must be selected within 12 months of attaining your qualified retirement age, either 30 years or age 62. After that 12 month window, you are no longer eligible. We are assuming you retired at your qualified retirement date?