New Legislation is a Boon to Florida Retirement System Members
On May 5, 2023, Florida Senate Bill 7024 was unanimously approved by the Florida House of Representatives and Senate. It will now go to the Governor for approval, but it is almost certain to become law on July 1st, 2023. The bill makes several changes to the Florida Retirement System (FRS) and will affect current FRS members and retirees.Here is a summary of the changes:
- Special Risk Class members, which include law enforcement, fire, corrections, EMS, & some forensic technicians, will now qualify for normal retirement at age 55 or 25 years of service. This is a return to the age and service requirements that existed prior to July 1st, 2011.
- Investment Plan members will receive an additional 2% of gross pay contributed to their retirement account by their employer.
- FRS retirees currently receive a subsidy of $5 monthly for each year of service toward their health insurance costs, with a maximum of $150 per month. This bill will increase the subsidy to $7.50 per month for each year of service, with a maximum of $225.
Several rule changes were also made for those Pension Plan members who choose to participate in the Deferred Retirement Option (DROP):
- The previous twelve-month “eligibility window” to enter DROP has been eliminated. Now all FRS Pension Plan members, regardless of class of membership, can enroll in DROP at any time after they become eligible to retire.
- Previously most members could participate in DROP for a maximum of 5 years, with 3-year extensions available to law enforcement officers and school instructional personnel. Under the new law, K-12 instructional personnel can participate in DROP for up to 10 years, and all other members may participate for up to 8 years regardless of job class or occupation.
- The annual interest rate credited to a member’s DROP account has been increased from 1.3% to 4%. This is a significant improvement and is consistent with “risk-free” interest rates currently available to investors.
While FRS members will welcome these changes, their employers may not be as thrilled. The percentage of employee pay those employers must contribute has increased quite a bit to fund these changes. As the largest FRS employer, the State of Florida will be most affected, but all FRS employers will see an increase in their retirement plan costs. But hopefully, these changes will persuade workers to delay their retirement, which should ease staffing challenges currently faced by many of those agencies.
The Florida Retirement System is complex, and it can be difficult to understand your options. If you have questions concerning your FRS benefits, give me a call at (863) 688-1725 or email me.
About the Author
MBA, CFP®Financial Advisor