FRS Investment Plan
How It Works
The FRS Investment Plan is a defined contribution plan, in which employer and employee 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 and employee 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.)
Your Investment Plan retirement 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 cost of living payment option (based on the benefit to be distributed) can be purchased and is available with annual 3% cost of living increases.
Why the FRS Is Offering This Plan
The Investment Plan has been offered to FRS employees since 2002 and is similar to other defined contribution plans that have been offered to select groups of FRS employees for over 25 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 six years (if enrolled in the FRS prior to July 1, 2011) or eight years (if enrolled in the FRS on or after July 1, 2011).
Who's Eligible for the FRS Investment Plan?
All FRS employees are eligible for the Pension Plan except:
Participants in the Deferred Retirement Option Program, known as DROP (except as a distribution option).
Mandatory State University System Optional Retirement Program (SUSORP) members. (This is not an FRS plan.)
Teachers' Retirement System members. (This plan is closed to new members.)
How Your Benefit Accumulates
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.
When You Own Your Benefit
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 (if enrolled in the FRS prior to July 1, 2011) or eight years (if enrolled in the FRS on or after July 1, 2011) before you "own" this money. Service in the FRS Investment Plan will count toward the applicable FRS Pension Plan vesting requirement for the transferred value of your FRS Pension Plan benefit.
Employee contributions are immediately vested. This means that if you terminate employment prior to meeting the vesting requirements of the Investment Plan, you will be entitled to a refund of your employee contributions. However, taking such a refund may not be a sound financial decision because you will forfeit any unvested employer contributions and service credit associated with the service and be declared a retiree. As a retiree you will not be entitled to future FRS membership if you return to FRS-covered employment.
If You Change Employers
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). However, if you roll your money out of the Investment Plan, you will be considered retired from the FRS and not entitled to further membership if you return in the future. If you leave prior to vesting, your account balance will be placed in a suspense account for up to five years. If you return to FRS-covered employment within the five-year period you will regain control over your account. If you do not return within the five-year period, you will forfeit the accumulated account balance.
Benefit Paid at Retirement
Under the Investment Plan, your retirement benefit is based on your account balance at termination of employment, which consists of any cumulative employer and employee 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.
Retirement Income Options
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 (MetLife). 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, though Pension Plan DROP participants can roll over their DROP benefit into the Investment Plan following termination from DROP.
DROP Rollover to the FRS Investment Plan
DROP participants (former and current) are permitted to rollover their DROP accumulation into the FRS Investment Plan. This option allows you to take advantage of the low cost investment products offered in the Investment Plan. When you decide to take a distribution of your accumulated funds from the Investment Plan, you have multiple distribution options: a low cost fixed or variable annuity (much like your Pension Plan benefit), periodic payments (quarterly, semiannually, or annually), lump sum payout of your account balance, or a rollover of your account balance to another plan.
Rollovers From Former Investment Plan Members
Former FRS Investment Plan members (retirees) who terminated FRS employment and took a distribution from their Investment Plan account are permitted to roll eligible funds into the FRS Investment Plan. Retirees who roll their funds into the Investment Plan will be able to take advantage of the Investment Plan's low-cost investment funds and access unbiased financial planners provided through the MyFRS Financial Guidance Program to help manage their retirement account.
Health Insurance Subsidy (HIS)
The Health Insurance Subsidy (HIS) is a monthly supplemental payment that you may be eligible to receive if you have health insurance coverage (Cover Florida Health Care Access Program, Medicare and TRICARE coverage are accepted). 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.
The HIS is only available after you have 6 years of service (if enrolled in the FRS prior to July 1, 2011) or 8 years (if enrolled in the FRS on or after July 1, 2011). 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, if you enrolled in the FRS prior to July 1, 2011, 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 of Special Risk service or have a total of 25 years of Special Risk service to qualify. If you enrolled in the FRS on or after July 1, 2011, a Regular Class member must be either age 65 and have 8 years of service or have a total of 33 years of service, and a Special Risk member must be either age 60 with at least 8 years of Special Risk service or have a total of 30 years of Special Risk service to qualify.
If you leave FRS-covered employment and take a benefit distribution prior to satisfying 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 payment of $30 per month and a maximum HIS payment of $150 per month.
Using Quicken or Mint to Manage Your Account
You can download your retirement plan account information to either of two popular personal financial management software packages - Quicken® or Mint® (Windows and Mac versions). At your command, an automated link feeds current (prior business day close), accurate data - including balances and transactions - to the program you're using. With this timesaving capability, you can plan and make decisions while viewing all your investment information at once.
All you need to get started for this one-time set-up is a copy of Quicken® or an account set up on Mint.com, and the following:
Login ID - Your Login ID for Quicken/Mint is your Social Security number, a hyphen, and "14470" (this is the company ID). For example, if your Social Security number is 123456789, the format of the Login ID would be 123456789-14470.
PIN - Your PIN is the 6 digit number sent to you by the FRS in your New Hire Kit (if you need a PIN reminder mailed to you, please call the MyFRS Financial Guidance Line at 1-866-446-9377, Option 4). Please note that your PIN is different than the password you use to log on to MyFRS.com.
*Information obtained from the MyFRS webiste (https://www.myfrs.com/FRSPro_InvestPlan.htm)
W. M. Durham Associates LLC
2010 Raymond Diehl Rd., Ste. 102
Tallahassee, FL 32308
Toll Free: 800-396-3420
W.M. Durham Associates LLC is not affiliated with or endorsed by the Florida Retirement System (FRS), Department of Management Services Division of Retirement or any other government agency.
W.M. Durham Associates LLC is an independent financial services firm that creates retirement strategies using a variety of investment and insurance products. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to protection benefits or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. WM Durham Associates LLC nor any of its employees provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
All material should be regarded as general information.