Cost-of-Living Adjustments

Cost-of-living adjustments are intended to help your retirement benefit payments keep pace with the rise in cost of goods and services over time.

FRS Pension Plan

FRS Investment Plan

  • Each July 1 after retirement, you will receive a fixed 3% cost-of-living increase on your June 30 monthly benefit amount (increase only applicable for FRS service earned prior to July 1, 2011). The increase does not include the Health Insurance Subsidy. Regardless of whether inflation is greater or less than 3%, your pre-July 1, 2011 benefit will still be adjusted by 3%.
  • If you have been retired for less than twelve months, your initial cost of living is prorated.
  • Pension Plan members will earn a 3% COLA for all service prior to July 1, 2011. Any retirement service earned on or after July 1, 2011 will not be subject to a COLA.
  • You may purchase one of several fixed annuities that offer an annual 3% cost-of-living increase payout feature at any time after retiring. You can use some or all of your account balance to buy these annuities, which are guaranteed by a highly rated private-sector insurance company (The Hartford Insurance Company). These annuities can provide guaranteed payments for life, payments over certain periods or have joint and survivor benefits. You can choose monthly or other payment periods. Under these payout options, if inflation is greater or less than 3%, your benefit will still be adjusted by 3%.
  • You may also choose to invest in the U.S. Treasury Inflation-Protected Securities (TIPS) Index Fund, which pays a rate of interest that is adjusted to keep up with the actual rate of inflation. A variable annuity is available that uses this and other funds to provide guaranteed benefit payments for life or other periods. However, your future benefit payments could be affected by market risk in this fund or a variable annuity that could cause benefits to grow faster or slower than inflation. Other variable annuity options may similarly be used to create a guaranteed distribution plan with payments that generally climb over time to offset the effects of inflation.
  • If you elect a lump-sum distribution or you choose not to purchase an annuity that offers a cost-of-living increase, you will not receive an automatic annual cost-of-living increase. Whether your benefits keep up with inflation will depend on the performance of your investment funds.
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