I am a member of the FRS Investment Plan and plan to retire in about 6 months. Will I continue to have access to the online ADVISOR SERVICE once I begin taking periodic distributions from my account?
No. Once you retire and take a distribution from the Investment Plan your access to the ADVISOR SERVICE will terminate. The ADVISOR SERVICE was designed to model projected asset accumulation and retirement benefits. It was not designed to model assets once distributions from the account begin. You will have access to the financial planners at the MyFRS Financial Guidance Line so long as you retain an account balance of $1,000 or more.
I don't have any experience or interest in managing an investment account. If I choose the Investment Plan, are there resources that will simplify this task, or even do it for me?
Yes. The CHOICE SERVICE, available on this Web site and through the MyFRS Financial Guidance Line 1-866-446-9377, offers personalized assistance in choosing your own investment portfolio. The MyFRS Financial Guidance Line also offers free one-on-one financial counseling by phone. Once you're in the Investment Plan, the ADVISOR SERVICE will help you with guidance on your portfolio. If you don't want to manage or monitor the investments in your account, the Investment Plan includes three "balanced" investment funds. These funds pre-select combinations of diversified investments. They automatically maintain that balanced combination (asset allocation) over time. Asset allocation is a critical factor in your success as a long-term retirement investor; experts say it determines 90% of your success. These funds are also low-cost. That means more of the funds' investment earnings stay in your account rather than go to the companies that manage the funds' investments.
If I select the Investment Plan, what's the monthly contribution that will be paid to my Plan account?
The monthly contribution depends on your employment class, as shown below.
|Paid by Employee ||Paid by Employer ||Total |
|Regular Class ||3.00% ||3.30% ||6.30% |
|Special RiskClass ||3.00% ||11.00% ||14.00% |
Class - (Legislature/
(County and Local)
Is there a financial penalty if I switch to the Investment Plan and later decide to switch back to the Pension Plan?
No. There's no penalty, but you may need to "buy back" into the Pension Plan. (See the chart below.) This "buy back" cost could make transferring to the Pension Plan unaffordable. If you are an eligible employee who transferred a present-value amount to the Investment Plan as your opening account balance, the total amount you'll need to buy back into the plan is the "present value" of your accumulated benefit in the Pension Plan, assuming all your service had been in that plan. If you did not transfer an opening account balance, your "buy-back" amount will be the total cost of the benefit under the Pension Plan. Your cost to buy into the Pension Plan will be calculated as of the first day of the month following Aon Hewitt's receipt of the election form. If there are any buy-in costs for transferring to the Pension Plan, you will receive a notification stating the amount you owe. Your buy-in payment is due within 60 days of the date on the notification letter. Remember, you can switch only once after you make your initial choice. The following chart shows what you can and cannot do regarding switching your choice.
|If... ||Then... |
|Your total balance in the Investment Plan is greater than the "buy-back" amount... ||Your Investment Plan balance will be reduced by the "buy-back" amount; the rest will stay in the Investment Plan. You will have a benefit in both plans. |
|Your Investment Plan balance is less than the "buy-back" amount and you still want to switch back... ||You must make up the difference out of your own money. |
|You choose the Investment Plan going forward but leave your current benefit frozen in the Pension Plan... ||You cannot move your frozen money later to the Investment Plan; it must stay in the Pension Plan. |
What is the effective day of my plan choice?
Your choice becomes effective on the first day of the month after your choice is made and processed by the Plan Choice Administrator.
How often can I change my investments under the Investment Plan?
Once contributions are in your account, you can generally change the way your account balance is invested on a daily basis, except that Foreign and global investment funds are subject to a minimum holding period of 7-calendar days following any non-exempt transfers into such funds and you may be subject to trading controls on other funds in the event that you are trading excessively. More information on these restrictions is available by calling the MyFRS Financial Guidance Line or by selecting INVESTMENT FUNDS in the toolbar.
How will the present value of my current retirement benefit be determined?
|First, the Division of Retirement will calculate your present value using a formula developed by the Pension Plan's actuary, in accordance with Florida State law. The FRS actuary annually evaluates whether the Pension Plan is adequately funded. The formula to compute your current benefit is:|
|Years of Creditable Service ||X ||Percentage Value (depends on class of FRS membership: 1.6% for regular class) ||X ||Average Final Compensation (average of highest 8* years of salary) ||= ||Yearly Benefit at Normal Retirement Date |
|Then the Division projects the total yearly benefits collected during retirement over your expected lifetime (including a 3% annual increase in benefits). This stream of increasing annual payments is converted to a single lump sum a "present value" (value in today's dollars) using an actuarial conversion factor. The conversion factor reflects a 7.75 percent interest rate and mortality tables specified by Florida Statutes. Please note that the conversion factor will increase monthly until you reach your normal retirement date and will decrease for each month after the normal retirement date.|
Example for a member with Pension Plan service prior to July 1, 2011: Let's say an employee is age 31 and has 12 years of Regular Class FRS service. The employee's normal retirement age will be 49 for his/her class of membership (the point when 30 years of service would be reached).
The employee's highest five fiscal year earnings are $31,263, $32,826, $34,467, $36,190, and $38,000. So the employee's Average Final Compensation is the average of these numbers, or $34,549.
Years of Creditable Service
|X ||1.6% |
|X ||$34,549 |
Average Final Compensation
|= ||$6,633 |
Yearly Benefit at Normal Retirement Date
|X ||4.0413 |
Conversion Factor (determined by actuary)
|= ||$26,806** |
Present Value of Current Pension Benefit (Transfer Amount)
Can I contribute my own money to my Investment Plan account?
All FRS Investment Plan and Pension Plan members (except those in DROP) make 3% of pay, pretax employee contributions. You are not permitted to make any employee contributions above the 3%. Your employer contributes the majority of your retirement savings.The Investment Plan also accepts rollovers from other qualified retirement plans (i.e., 401(k), traditional IRA, 403(b), 457 plans, etc.). Note: Once you roll over eligible retirement monies into the FRS Investment Plan, you cannot receive any distributions of these funds (or your Investment Plan account balance) until you terminate employment for 3 calendar months. You may be eligible to withdraw up to 10% of your Investment Plan account balance one calendar month following the month of your termination if you meet the normal retirement requirements for the FRS Investment Plan.
Can I buy individual stocks in the FRS Investment Plan?
No, the Investment Plan does not offer you the option of purchasing individual stocks. Such an arrangement, called a self-directed brokerage window, is offered in some 401(k), 403(b) and 457 plans. During the initial research and development of the Investment Plan, suitability of a self-directed brokerage window was evaluated and rejected as an option. On an annual basis, we continue to review Investment Plan options and believe that the current diversified investment funds are most appropriate and manageable at this time. Most Investment Plan participants are satisfied with the diversified array of 20 investment funds that are providing solid investment results.
If you wish to purchase individual securities, you can open a brokerage account or an IRA with a financial institution of your choosing. The Financial Guidance Line counselors can help you understand the types of accounts which may be best suited to meet your needs.
If I use my one-time 2nd election to switch retirement plans and later terminate employment, can I get 100% of my employee contributions?
You are entitled to a refund or distribution of your employee contributions so long as you remain in your current retirement plan, as follows:
- If you terminate employment from the Pension Plan, you are entitled to receive a refund of any employee contributions (without interest) paid while you were a member of the Pension Plan. You may repay the refund with interest by returning to FRS-covered employment for 1 year. A refund under the Pension Plan is not a retiring event.
- If you terminate employment from the Investment Plan, you are entitled to receive a distribution of any employee contributions plus earnings paid while you were a member of the Investment Plan. If you take any distribution from the Investment Plan, you will be considered a retiree and not entitled to future FRS membership.
If you use your 2nd election to switch retirement plans, you will be entitled to receive the following benefits:
- Transfer from Pension Plan to Investment Plan – A Present Value of your Pension Plan benefit will be calculated and transferred to the Investment Plan as your opening account balance. The Present Value calculation is an actuarial determination of your service credit; it is not the total of any employee or employer contributions paid into the Pension Plan.
Note: Your Investment Plan quarterly statement and online account will only reflect employee contributions paid into your account after your transfer. The transferred Present Value will show under “DB Plan Transfer.”
- If you terminate employment prior to meeting the Pension Plan vesting requirements (less than 6 years) you will only be entitled to receive a distribution of:
- If you have less than 1 year of total service, your employee contributions plus earnings paid after your transfer to the Investment Plan, or
- If you have more than 1 year of total service, your employee and employer contributions plus earnings paid after your transfer to the Investment Plan.
- If you terminate employment after meeting the Pension Plan vesting requirements (6 years or more of total Pension Plan and Investment Plan service) you will be entitled to receive a distribution of your opening account balance (the Present Value of your Pension Plan benefit), and the employee and employer contributions plus earnings paid into the Investment Plan after the transfer.
- Transfer from Investment Plan to Pension Plan – You will buy-in to the Pension Plan using the balance in your Investment Plan account (and any additional personal funds, if applicable).
- If you terminate employment prior to meeting the Pension Plan vesting requirements (less than 6 years of service) you will only be entitled to receive a refund of your employee contributions (without interest) paid into the Pension Plan after your transfer.
- If you terminate employment after becoming vested in the Pension Plan (6 years or more) you will be entitled to receive:
- a lifetime monthly benefit from the Pension Plan, or
- a refund of your employee contributions (without interest) paid into the Pension Plan after the transfer
If you have any questions on the benefits you are entitled to after making a 2nd election, please contact the MyFRS Financial Guidance Line at 1-866-446-9377, Option 2.