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Pension Plan
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(37)
What if I terminate my employment before I am vested in the Pension Plan?
If you have not vested before you terminate, you are not eligible for a benefit under the FRS Pension Plan. However, the service credit you earned is not lost and will be combined with any future service credit you may earn in covered employment in the future.
(39)
What is normal retirement?
Normal retirement occurs when you retire with full (unreduced) benefits based on your age and/or length of service. To qualify for normal retirement:
- Members of the Regular Class must be vested and either be 62 years of age or have credit for 30 years of service (which may include any extra service credit claimed, such as military service), regardless of age.
- Members of the Special Risk Class must be vested and be age 55, or have 25 years of special risk service (which may include military service) and be age 52, or have 25 years of special risk service, regardless of age, or have 30 years of any creditable service, regardless of age.
- For members of the Special Risk Administrative Support Class who do not have 6 years of special risk service, all service in the Special Risk Administrative Support Class will count the same as regular service and your normal retirement date will be the same as for regular members. If you have 6 or more years of special risk service, all service in the Special Risk Administrative Support Class will still count as regular service, but your normal retirement date will be the special risk normal retirement date.
(44)
I am a teacher in the public schools and I would like to know how a full year of service credit is calculated. Does summer school count?
Your years of creditable service are calculated by fiscal year (July 1 through June 30). If you are a teacher and are on a 10-month contract, to receive credit for a full year, you must earn salary in 10 months of the fiscal year. You may not earn more than a year of service credit in any fiscal year. If you work your complete contract, and work summer school, you will receive a full year of service credit. The summer school salary is added to your salary for the rest of the year so you get full credit for all salary earned.
(70)
What is the Deferred Retirement Option Program (DROP)?
The DROP is a Pension Plan program under which you may retire and have your monthly retirement benefits remain in the Florida Retirement System (FRS) Trust Fund instead of being paid directly to you or deposited in your bank. Your benefits will earn interest for you, tax deferred, for as long as you participate in the DROP. In the meantime you continue to work for your FRS employer for a specified and limited period up to the date you pre-selected to stop participation in DROP. When the DROP period ends, you must terminate employment. At that time, you will receive payment of the accumulated DROP benefits, and begin receiving your FRS monthly retirement benefit (in the same amount as determined at retirement, plus annual cost-of-living increases).
(2058)
What makes up the years of creditable service?
"Years of creditable service" means the total of all years and parts of years you worked in a retirement-covered position with an FRS employer. It also includes any additional service credit that you purchase before you retire or enter the Deferred Retirement Option Program (DROP).
(72)
When can I begin the DROP?
You can begin the DROP when you are vested and have reached your normal retirement date. For most FRS members, your normal retirement date is either when you are vested and reach age 62, or when you complete 30 years of service, whichever comes first. If you become vested after age 62, your normal retirement date is the month following the month you reach 6 years of service. For Special Risk Class members, your normal retirement date is when you have at least 6 years of Special Risk Class service and are age 55, or 25 years of Special Risk Class service, whichever comes first; or age 52 and a total of 25 years of service including Special Risk Class service and active duty wartime military service. If you reach 6 years of Special Risk Class service after age 55, your normal retirement date is the month following the month you reached 6 years of Special Risk Class service.
(73)
Can I defer starting DROP?
You must elect DROP participation within 12 months after you first reach your normal retirement date unless you are eligible to defer as follows:
* If you complete 30 years of service before age 57, you may defer DROP and elect to begin participation at any time between completing 30 years and reaching age 57. Special Risk members who complete 25 years of Special Risk service before age 52 may defer to age 52.
* Elected officers who reach normal retirement while holding an elected office, may defer DROP until their next succeeding term of office and may participate for the lesser of 5 years or the length of that term.
* Members in Instructional positions defined by s. 1012.01(2)(a)-(d), F.S., may begin DROP at any time after reaching normal retirement.
(13003)
Has the FRS Pension Plan Trust Fund been impacted by the subprime mortgage crisis?
The FRS Pension Plan Trust has been minimally impacted by the mortgage crisis. In a portfolio of $112 billion and about 14,000 securities, it is natural that from time to time some bond and money market securities will be downgraded below the credit quality requirements for purchase. In those cases, investment managers must make prudent and diligent decisions regarding how to manage such securities. Currently, commercial paper downgraded below the FRS Pension Plan purchase requirements represent about one-half of 1% of total assets.
Pension Plan members should feel comfortable that their retirement benefits are safe since these benefits are guaranteed under Florida law and are not dependant on investment results. The FRS Pension Plan also has one of the largest surpluses of any state retirement system. The State Board of Administration of Florida has an outstanding record of delivering high returns at a level of risk reasonable for a defined benefit trust fund.
(13002)
What caused the subprime mortgage crisis?
The subprime mortgage crisis began in 2006 as a result of the sharp rise in foreclosures in the United States. Subprime mortgages are mortgages issued to people who would not typically qualify for standard mortgages. Some of these mortgages are adjustable rate mortgages in which mortgage payments go up or down based on interest rates. Rising interest rates, increasing monthly payments, and property value declines that occurred after the U.S. real estate market topped out, left many homeowners unable or unwilling to meet financial commitments and lenders without a means to recoup their losses.
The sharp rise in foreclosures caused several major subprime mortgage lenders to shut down or file for bankruptcy. This led to the collapse of stock prices for many companies in the subprime mortgage industry as well as declines in stock prices for some large lenders. Many observers believe this has resulted in a severe credit crunch, threatening the solvency of many financial institutions.
Investment banking firms typically bundle most mortgages (standard and subprime) together in investment pools. The investment bankers then divide the mortgage pools based on many factors, the most important being the perception of how long it will take for borrowers to pay down the mortgages and the odds that any of the mortgages will default. Rating agencies, like Moody's and Standard and Poor's, work with investment banking firms to provide credit ratings for these pools. The highest rating, AAA, usually denotes the fastest pay down and is given to the pools least likely to experience defaults.
Because of the complex structure of any mortgage-backed security and the difficulty in determining the likelihood for downgrade or default, the subprime mortgage crisis spread to other higher rated mortgage-backed pools even though the default rate on these pools had not significantly increased. Most AAA mortgage-backed pools are well-protected from the conditions affecting lower-quality pools. Significant losses in all mortgages would have to occur in a short period of time before these losses would impact the AAA rated pools.
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