FRS Pension Plan Option 2 Explained

Описание: FRS Pension Plan Option 2 Explained by Dagean Larsen CEO of The Core Financial Group (thecorefinancialgroup.com)

In the Florida Retirement System (FRS) Pension Plan, Option 2 is known as the "Deferred Retirement Option Program" or DROP. This program allows eligible FRS members to retire from their regular FRS-covered positions while continuing to work and receive salary for up to 60 months while their retirement benefits accumulate in a DROP account. Here's an overview of Option 2, or the DROP program, in the FRS Pension Plan:

1. Eligibility: To participate in DROP, FRS members must meet certain eligibility requirements, including age and years of creditable service. Here are the typical eligibility criteria:

You must be a vested FRS member.
You must have reached your normal retirement age, which varies based on your FRS membership class.
You must have a minimum number of years of creditable service, which also varies by membership class.

2. Participation: When you enter the DROP, you officially retire from your regular FRS-covered position, but you continue working in your current job for up to 60 months (5 years). During this period, you receive both your regular salary and your retirement benefits into a DROP account.

3. DROP Account: The retirement benefits you would have received had you fully retired are placed into a DROP account, which is an interest-bearing account. The interest rate is typically set by the Florida Retirement System and is generally competitive. Your DROP account balance will grow during your participation in the program.

4. Pension Calculation: The pension benefits you would have received upon retirement are calculated based on your years of service, average final compensation (AFC), and your chosen retirement option (e.g., Single-Life, Joint and Survivor). However, while you're in the DROP, you're not actually receiving these pension payments directly; they are accumulating in your DROP account.

5. Salary and Pension: As a DROP participant, you continue to receive your salary, and your pension benefits are diverted to your DROP account. You are effectively "double-dipping" in the sense that you receive your regular pay along with the accumulation of pension benefits. You will not earn additional service credit while in the DROP.

6. DROP Distribution: At the end of your DROP participation, which can last for up to 60 months, you must terminate your employment with the participating employer. At that point, you can choose to receive the funds in your DROP account as a lump-sum distribution or roll them over into an eligible retirement plan, such as an IRA or another qualified retirement account.

7. Retirement Benefit: Upon leaving the DROP, you will start receiving your FRS pension benefits based on the formula mentioned in your pension calculation, and you can select the retirement option that best suits your needs.

The DROP program can provide flexibility and financial benefits to FRS members who meet the eligibility requirements and wish to delay receiving their retirement benefits while continuing to work. Keep in mind that the specifics of the DROP program may vary by your FRS membership class and other factors, so it's essential to consult the Florida Division of Retirement or a retirement specialist for personalized guidance and detailed information regarding your DROP options.