What is this about?
The Florida Retirement System (FRS) has two (2) retirement plans: the Regular Pension Plan (Defined Benefit) and the Investment Plan. If you do not elect either the Regular Pension Plan or the Investment Plan, you automatically default to the Regular Pension Plan. Even if you make an election, you are still entitled to one change in that election at some point during your FRS career. Thus, you have a one-time opportunity to switch from the FRS Pension Plan to the FRS Investment Plan or vice versa. Once you have made your election, you may not switch back.
Is a Second Election Right for me?
MAYBE. This plan change — called your “2nd Election” — is not for everyone. Only you can make that determination. You need to fully understand the costs, the differences in vesting requirements, the differences in benefit payouts and survivor options, your health insurance subsidy and more.
Beginning on your first day of employment, you are automatically enrolled in and begin to accrue benefits under the FRS Pension or Defined Benefit Plan. If you elect to join the Investment Plan before your enrollment deadline, 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. There is no fixed benefit at retirement in the Investment Plan; and Investment Plan members may not participate in the DROP.
Under the Defined Benefit (Pension Plan), the FRS is required by law to pay you a defined monthly benefit upon your retirement based on a predetermined formula. The FRS assumes the risk of loss from investments inherent with market fluctuations and still has to pay you a definite retirement benefit based on your earnings and years of service. This definite monthly benefit is payable to you for the rest of your life. There is no such assurance of a definite monthly lifetime benefit under the Investment Plan.
If you select the Investment Plan, you retirement benefit ultimately depends in part on the performance of your investment funds. There is no fixed benefit level at retirement. You allocate your contributions and account balance among various investment funds. You will need to be comfortable with your understanding of finances, confident in choosing among the available funds and willing to seek out appropriate guidance from a qualified financial and legal advisor.
Where can I get information about making the switch?
The FRS website presents a short and informative guide: Is a 2nd ELECTION Right for You? This flyer may be found at the MyFRS website. https://www.myfrs.com/pdf/forms/2nd_election.pdf Additional and much more detailed information about making the
switch is also available on the FRS website under the heading: Changing Mid-Stream https://www.myfrs.com/FRSPro_Getting_Change.htm
What is the cost to switch?
If you initially join the Investment Plan and later want to switch to the Pension Plan, there may be a significant cost to do so. Due to this cost, you may not be able to make the switch after being in the Investment Plan for several years.
Where can I get more information about the Investment Plan Funds as I consider the Second Election?
Be sure you take advantage of all the resources available under the MyFRS Financial Guidance Program and review the FRS brochure: https://www.myfrs.com/imageserver/pdf/forms/invest_fund_summary.pdf or contact the MyFRS Financial Guidance Program by phone at 1-866-446-9377, Option 2, or go online to MyFRS.com. You can use the CHOICE SERVICE or 2nd Election CHOICE SERVICE on MyFRS.com to receive guidance on specific investment funds. If you join the Investment Plan, you’ll also have access to the online ADVISOR SERVICE, which provides you with ongoing investment guidance. For more detailed investment fund information, investigate the fund information on MyFRS.com by clicking on the “Investment Funds” section.
Doesn’t the FRS have advisors to help me with the decision?
Yes; the website advises that FREE help is available through FRS Advisor Services. However, FREE may not be the best source for
information, particularly if you do not personally understand the information provided. In addition, you will note that the FRS
Financial Guidance Line is not staffed by FRS employees but by private financial planners and other investment professionals. And while the advisors may not have a financial interest in the funds available, you should note that the DISCLAIMERS on the FRS website advise: FRS does not endorse or approve the information provided. The website notice also encourages you not to act before first obtaining the advice of legal professionals.
Previous I.U.P.A. Legal Updates in the I.U.P.A. Briefing Room:
The I.U.P.A. Legal Department periodically publishes articles in the I.U.P.A. Briefing Room to provide our members with legal updates. Previously, articles have been published about:
- Legal Update: Fitness-For-Duty Testing
- Legal Update: Good Faith Bargaining
- Legal Update: The Law on Medical Marijuana Use in Florida
Please Contact I.U.P.A. Legal Services if you think a member’s rights have been violated. https://iupa.org/legal/