How does this choice affect the vesting of my retirement plan benefit?
If you stay in the Pension Plan, you are subject to an 8-year* vesting requirement. If you move to the Investment Plan, your Pension Plan benefit (whether you transfer it as in the 100% Transfer Option or freeze it as in the Hybrid Option) will be vested after 8 years. *You will be vested after 1 year of total service for all future employer contributions in your Investment Plan account. You are always fully vested in your own contributions.
Any Pension Plan or Investment Plan service counts toward both of these vesting requirements. For example, if you had 7 years of FRS Pension Plan service and decided to switch to the Investment Plan, here's how the vesting rules would apply: -- You would be vested in the Pension Plan part of your benefit after 1 year of additional service (whether you transfer it or freeze it), because then you would have 8 years (7+1) of total FRS service. -- You would be immediately vested in all future contributions into your Investment Plan account because you already have 7 years of service, which more than satisfies your one-year vesting requirement in the Investment Plan.
*Members who have previous FRS service credit prior to July 1, 2011 are subject to a 6-year vesting requirement.
As a newly hired employee, I have until the end of my fifth month of employment to decide which plan to participate in. Until I make a decision, am I enrolled in the retirement system? What happens if I do not make a decision until my fifth month of employment?
Beginning on your first day of employment, you are automatically enrolled in the FRS Pension Plan and begin to accrue benefits under that plan. If you decide to change to the Investment Plan before the end of your fifth month of employment, all of the retirement contributions (less any earnings) paid on your behalf by your employer into the Pension Plan Trust Fund will be transferred to your Investment Plan account to become your opening account balance. However, since the amount currently being paid by your employer into the Pension Plan is less than the required amount in the Investment Plan, the longer you wait to select the Investment Plan, the longer you postpone receiving the higher contributions.
Do I need to work in FRS covered employment to be eligible for benefits under the Investment Plan?
If you are a current FRS-covered employee and using your 1st or 2nd election opportunity to change plans, your Election Enrollment Form or online election (if applicable) must be submitted and received by the Plan Choice Administrator, Aon Hewitt, while still earning service credit and prior to your termination from employment. If you terminate prior to your online election being made or receipt of the form by Aon Hewitt, your plan change will be rejected. For example, if you make an online election on May 15 or submit your Election Enrollment Form and it is received by Aon Hewitt on May 15, you may terminate beginning on May 16 or after. However, if you terminated on May 12 and you made your online election on May 15 or your form was received by Aon Hewitt on May 15, your election will be rejected.
How many choices do I have in selecting my retirement plan?
There are two very different retirement plans to choose from: the FRS Pension Plan and the FRS Investment Plan. Your most important decision is which of these two plans you want going forward.
Within these plans there is the potential of three choices. The Pension Plan is one choice; the Investment Plan's 100% Transfer Option is a second choice; and the Investment Plan's Hybrid Option is the third choice. See below:
Choice 1: If you choose to remain in the Pension Plan, your benefit will be determined as follows:
Every year and partial year of creditable service that you earn is worth a percentage of your Average Final Compensation (AFC) and serves to increase your retirement benefit. The following formula is used to determine the amount of your normal retirement monthly benefit if you choose an option 1 benefit payout (where monthly benefits are paid to the retiring member for his/her lifetime only).
Retirement Formula: Years of Creditable Service x Percentage Value x AFC = Yearly Option 1 Benefit at Normal Retirement Date.
Yearly benefit divided by 12 equals Monthly Benefit.
If you choose to move to the FRS Investment Plan, you may do it in one of two ways:
- 100% Transfer Option (Choice 2) You can convert the present value of your current pension benefit into the opening balance of the FRS Investment Plan and begin receiving future employer contributions in your FRS Investment Plan account. In this case, you'll receive a retirement benefit only from the FRS Investment Plan, in the payment form you choose.
- Hybrid Option (Choice 3) If you have at least 8* years of FRS service as of the start of your enrollment period, you may freeze your pension benefit (it will remain in the FRS Pension Plan but will not grow), and begin receiving future employer contributions in your FRS Investment Plan account. In this case, you'll receive two retirement benefits a monthly benefit from the FRS Pension Plan and an FRS Investment Plan benefit in whatever payment form you choose. If you have less than 8* years of FRS service at the start of your enrollment period, you are not eligible for this option.
*Members who have previous FRS service credit prior to July 1, 2011 must have 5 years of service to participate in the Hybrid Option.
Second opportunity to switch: Any time after you have made your initial choice or your enrollment period ends, you can decide to switch plans once but only once during your active FRS employment.
What are the differences between the Pension Plan and the Investment Plan?
Click here to get a full description of the differences between the two plans.
If I am in the Investment Plan or Investment Plan hybrid option and use my second choice opportunity to buy back into the Pension Plan, can I participate in the DROP?
Yes, if you are still eligible based on the eligibility criteria for DROP participation. Once you buy back your Pension Plan benefit, you are no longer in the Investment Plan. You are a member of the Pension Plan and are entitled to the full benefits of that plan.