The biggest advantage of the investment plan is that it allows the employee to choose where the retirement funds are invested

The biggest advantage of the investment plan is that it allows the employee to choose where the retirement funds are invested

What Types of Florida State Pensions are offered?

Approaching pension plans in the state of Florida can be an overwhelming and daunting task.  Florida administers a number of local and specialized pension plans for state employees.  However, the main Florida pensions are administered by the Florida Retirement System, which served over 623,000 employees in 2012.  More information about the qualifications for specific municipal pension plans may be obtained directly from your employer or by contacting the Florida Retirement System.

As of 2013, the Florida pension plans were funded at a level of 86%.  This mark is well above the federal recommended level of 80% and has remained unchanged for the past few years.  With many other states struggling to find funding for their pension plans, retirees in Florida can take confidence in the overall solvency of their benefits.

The Florida Retirement System offers two types of plans – a 401k investment plan and a defined benefit pension plan.  Both are available to all state employees.

Differences between the Investment Plan and Defined Benefit Plan

There are some distinct differences between the two offered plans, which much be considered when selecting a pension option.

  • Both plans require employees to contribute 3% of their monthly salary, pre-tax.  Employer contributes are set at 3.3% for the investment plan, whereas the defined benefit plan sets employer contributions annually as determined by the Florida legislature.
  • The biggest advantage of the investment plan is that it allows the employee to choose where the retirement funds are invested.  With the defined benefit plan, the Pension Board controls all investment decisions.
  • Vesting occurs after only 1 year in the investment plan, while the defined benefit plan vests after 8 years of service.

Defined Benefit Plan Retirement Qualifications

Under the defined benefit plan, there are several options for retirement, including an early retirement option.

Employees enrolled in the program before July 1, 2011 may retire at age 62 with at least 6 years of service credit.  Employees may retire at any age if they have at least 30 years of service.

Employees who enrolled in the program after July 1, 2011 may retire at age 65 with at least 8 years of service credit.  These employees may also retire at any age if they have at least 33 years of service.

Early retirement simply requires the vesting requirements to be met.  For employees hired before July 1, 2011, this is 6 years of service and 8 years for all other employees.  Employees may apply for early retirement at any age, after meeting these requirements, but will see their monthly benefit reduced by 5% for every year they retire underneath the required retirement age.

FRS pays spousal support, in the event of an employee’s death, that is equal to one-half of the employee’s calculated monthly retirement benefit

FRS pays spousal support, in the event of an employee’s death, that is equal to one-half of the employee’s calculated monthly retirement benefit

Options for Purchase of Service Credit

The FRS recognizes certain types of situation as being eligible for conversion into purchasable additional service credit.  This includes the following situations.

  • Past service credit that must be restored by reemployment.
  • Out-of-state public government service (must be approved by the Pension Board.)
  • Military service (including out-of-state or out-of-country service.)
  • Approved leaves of absences that don’t exceed a time limit of two years.
  • Approved disability leave (must be approved by the Pension Board.)

Additional Pension Benefits

When selecting a FRS pension plan, employees have the option to choose between full life annuity and a number of reduced benefit pension plans.  These reduced benefit payment plans are mainly to determine the amount of monthly benefit that is paid out to an employee’s surviving beneficiaries in the event of the employee’s death.

FRS pays spousal support, in the event of an employee’s death, that is equal to one-half of the employee’s calculated monthly retirement benefit.  This benefit also moves to the employee’s dependent children in the event of the spouse’s death.

Depending on the retirement options chosen by the employee, survivor benefits may continue to pay out at a reduced rate for the remainder of the surviving beneficiary’s lifetime, or may cease at the employee’s death.  Employees have the choice to select these pension options when applying for their retirement plan.

The FRS designates an employee’s spouse as the default primary beneficiary, followed by any dependent children and dependent parents.  Employees have the option to change beneficiaries at the time of their retirement.

Employees are entitled to a 3% Cost of Living Adjustment every June.  These COLAs will be automatically applied to an employee’s retirement benefit once they retire.  This COLA is fixed and is not dependent on the Consumer Price Index or inflation rate.

Employees are entitled to two types of disability benefit.  Employees who sustain disability while in the line of public duty are entitled to immediate disability benefit, which will be paid monthly for the duration of disability.  These payments are equal, at minimum, to 42% of the employee’s calculated monthly retirement benefit.

Employees who sustain disability unrelated to work must have at least 8 years of credited service to collect disability payments.  At minimum, these payments are equal to 25% of the employee’s calculated monthly retirement benefit and will continue for the duration of the disability.

Changing Pension Plans or Leaving Employment

Employees who decide to change from the defined benefit plan to the investment plan may freeze their pension account holdings, provided they have at least 5 years of credited service.  Future retirement contributions will go to the new pension plan, and the employee will still be eligible to collect retirement benefit from both plans at the normal retirement age.

Employees may freeze their retirement account if they elect to leave employment and reinstate their account when they resume state employment.  Leaves of absence that are not approved by the Pension Board will not count towards service credit.  If an employee has reached the vesting requirements, they may leave employment permanently and still receive their monthly benefit at the normal retiring age.

At any time that an employee terminates employment, they are entitled to receive back 100% of their employee contributions, plus relevant interest.  Employer contributions are not vested, unless the employee has attained vesting status.