Let's Dive Into the Florida Retirement System

If you are one of more than 2.5 million members of the Florida Retirement System, then regardless of where you are in your career, you're on your journey to retirement. Some may be just weeks away from their final days, while others are just beginning their journeys. Regardless of where you're at on your path, there are decisions all along the way that will affect your retirement plans. Making the best decisions to set you up for the retirement you want is important. Now, what's the best way to do this? By diving into the Florida Retirement System and understanding your options, plans, and when to make the critical decisions that support your goals. Like every good journey, we need to start at the beginning. So, what is the Florida Retirement System?

What is the Florida Retirement System?

The Florida Retirement System (FRS) is a state-sponsored retirement plan that provides retirement benefits to employees of the State of Florida, State universities, Florida school districts, and counties. Additionally, cities, special districts, charter schools, housing authorities, and independent hospitals have the option to participate in FRS as well. Over 1,000 employers in Florida participate in the Florida Retirement System and employ over 646,000 active FRS members. As of April 30th, 2024, FRS had over $191 billion in net assets.

The FRS consists of two primary components: the Pension Plan and the Investment Plan. FRS also operates several optional retirement programs for eligible employees in certain positions, but in this article and future articles, we'll focus on the Pension and Investment Plans, which account for 97% of FRS plan participants.

Who does this affect? 

As previously stated, FRS has over 646,000 active members. These includes state employees like legislators and judges, as well as public school employees, state police officers, water management employees, and more. To see a full list of participating agencies, click here.

All FRS participants, either Pension Plan or Investment Plan, are assigned to one of five job classes based on their job assignment: (1) Regular Class, (2) Special Risk Class – officers, firefighters (3) Special Risk Administrative Support Class, (4) Elected Officers’ Class, or (5) Senior Management Service Class. The class a participant is assigned is important because it affects their retirement age/years of service and their benefit upon retirement. Most active members, 86.6%, are Regular Class employees with Special Risk Class accounting for 11.6%. The <2% remaining are assigned to one of the other three classes.

Upon entering employment with an FRS participating agency, new members can elect to participate in either the Pension Plan or the Investment Plan. If they do not choose a plan, those in Special Risk Class jobs will default to the Pension Plan, and all others will be placed in the Investment Plan. All Pension and Investment Plan participants make a mandatory 3% of gross income contribution to the plan. The contribution is pre-tax and is deducted directly from their pay. FRS employers are also required to contribute to the plan for each employee based on their job class. The amount is updated each fiscal year and ranges between 9.1% and 36% of the employee’s gross pay for most members. While those high percentages may have grabbed your attention, not all of that is invested in the employee's retirement. Employers forward their contributions and contributions from their employees to the FRS to fund the payment of benefits and administrative costs.

Want a guide to help you understand the Florida Retirement System? Our Journey to Retirement Flowchart maps out your route to retirement. Click the button and download it for free to help you better understand this article! 

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What is the difference between the Pension Plan and the Investment Plan? 

The FRS Pension Plan is a “defined benefit” qualified retirement plan. Retirees will receive a lifetime monthly benefit, which is determined by a formula based on their Average Final Compensation (average annual earnings), years of qualifying service, and a multiplier determined by their job class. In lieu of a lifetime benefit for themselves, retiring members may choose an optional benefit plan that pays a benefit if the member or their spouse is alive, but this results in a lower beginning monthly benefit.

The FRS Investment Plan is a “defined contribution” plan that operates much like a 401(k). The participant’s 3% contribution and a portion of the employer’s contribution are deposited into an investment account for the employee’s benefit. Participants choose how to invest their money from among nine FRS proprietary mutual funds. More experienced investors can also participate in a Self-directed Brokerage Account, allowing them to choose from among thousands of investments. 

Unlike Pension Plan participants, those who choose the Investment Plan do not have a guaranteed monthly benefit in retirement. Upon retiring they will receive the current value of their investment account, which may or may not be sufficient to fund their retirement income needs.

Does FRS provide any opportunities to change your plan?

What if a member changes their mind and wants to change from the Pension Plan to the Investment Plan, or vice-versa? Members are offered a single, irrevocable opportunity, known as the “second election,” to change from one plan to the other. However, there are risks associated with making such a choice, and members should consult a trusted financial advisor first.

In upcoming articles, we will explore the Pension and Investment Plans and their advantages and disadvantages. Stay tuned, and if you have specific questions concerning your pension choices, give me a call at (863) 688-1725 or email me at Rick@cpsinvest.com.


About Richard

During his time in public service, Rick was dismayed at the number of people, including other public servants, who failed to plan for retirement and ultimately made poor financial decisions when it was time to retire; many were ultimately forced to return to work. Realizing that sage and timely advice from a financial planning professional could have prevented these unfortunate outcomes, Rick was determined to pursue a second career helping people plan for and achieve a financially secure retirement.