Florida Retirement System – Should I Drop? – Civilian Participants

With the Investment Plan, employees can opt out of the pension plan at retirement, and transfer the entire value of their retirement benefit into the Investment Plan. This is known as a “lump sum rollover”.

So … Should I Drop ????? for Civilian participants.

Before we decide, let’s take a look at why we even have a decision to make. FRS added the DROP program to the Pension in 1998 as a way to induce employees to work longer. Prior to 1998, an FRS participant had no options – they retired and received a monthly pension check.  End of story!  FRS further expanded the range of retirement options in 2002 with the addition of the FRS Investment Plan. This change was significant! Now a FRS Participant has several different retirement options to choose from.  There is still the basic Pension, there is a combination Pension and the DROP (Deferred Retirement Option Program), and after 2002, a third alternative whereby you can participate in the FRS Investment Plan, and take control of how your retirement money is invested.  You also have a fourth option, which is to “roll the current value of your retirement into a self-directed IRA account at retirement.

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The DROP basics for Civilian Participants

Since public sector employees may find it difficult to accumulate significant wealth on their often moderate salaries and have had little chance to accumulate wealth in a retirement plan (outside of IRAs or Deferred Comp), the DROP was initially very attractive. It was the only real way to get a decent pension, AND a nice lump sum of money.

The DROP basics for Civilian Participants

DROP is an acronym for Deferred Retirement Option Program. FRS added the DROP program to the Pension in 1998 as a way to induce employees to work longer, in an attempt to keep employees from retiring as soon as they are first eligible. Agencies realized that it cost far less to provide a DROP benefit for a current employee than it would cost to recruit and train a NEW employee. So, in 1998 the Florida Retirement System (FRS) instituted a program that could entice experienced employees to continue to work for up to five more years and at the same time allow them to accumulate a lump sum of money that would be available at retirement – the DROP.

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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.

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The DROP basics for Special Risk Participants

“DROP” is an acronym for Deferred Retirement Option Program. FRS added the DROP program to the Pension in 1998 as a way to induce employees to work longer, in an attempt to keep employees from retiring as soon as they are first eligible. Agencies realized that it cost far less to provide a DROP benefit for a current employee than it would cost to recruit and train a NEW employee. So, in 1998 the Florida Retirement System (FRS) instituted a program that could entice experienced employees to continue to work for up to five more years and at the same time allow them to accumulate a lump sum of money that would be available at retirement – the DROP.

The DROP basics for Special Risk Participants

DROP is an acronym for Deferred Retirement Option Program. FRS added the DROP program to the Pension in 1998 as a way to induce employees to work longer, in an attempt to keep employees from retiring as soon as they are first eligible. Agencies realized that it cost far less to provide a DROP benefit for a current employee than it would cost to recruit and train a NEW employee. So, in 1998 the Florida Retirement System (FRS) instituted a program that could entice experienced employees to continue to work for up to five more years and at the same time allow them to accumulate a lump sum of money that would be available at retirement – the DROP.

Continue reading “The DROP basics for Special Risk Participants”

Florida Retirement System – Should I DROP? – Special Risk Participant

The Florida Retirement System added the DROP program to the Pension in 1998 as a way to induce employees to work longer. So, should I DROP???? MAYBE! Contrary to popular belief, the DROP is not the end-all for everybody.

So … Should I Drop ????? for Special Risk participants.

Before we decide, let’s take a look at why we even have a decision to make. FRS added the DROP program to the Pension in 1998 as a way to induce employees to work longer. Prior to 1998, an FRS participant had no options – they retired and received a monthly pension check.  End of story!  FRS further expanded the range of retirement options in 2002 with the addition of the FRS Investment Plan. This change was significant! Now a FRS Participant has several different retirement options to choose from.  There is still the basic Pension, there is a combination Pension and the DROP (Deferred Retirement Option Program), and after 2002, a third alternative whereby you can participate in the FRS Investment Plan, and take control of how your retirement money is invested.  You also have a fourth option, which is to “roll the current value of your retirement into a self-directed IRA account at retirement.

Continue reading “Florida Retirement System – Should I DROP? – Special Risk Participant”