Oct 27, 2023 1:45:00 PM Est. Read Time: 5 min By: Tim Leith
The Florida Retirement System (FRS) is one of the largest public retirement systems in the United States, serving hundreds of thousands of public employees. In 2023, there have been significant changes in the Deferred Retirement Option Program (DROP) legislation within the FRS. In this article, we will explore the recent changes in DROP and other FRS programs and how they may impact public employees in Florida.
Before delving into the recent changes, it’s important to have a clear understanding of what DROP is. DROP is a voluntary retirement option available to FRS members who are pension plan participants who are eligible for normal retirement. When an employee enters DROP, they essentially turn on their pension benefit, and the monthly retirement payments are deferred and deposited into an interest-bearing account. During the time an employee is in DROP, they continue to work and earn a regular salary. Upon exiting DROP, employees receive a lump-sum payment of the accumulated DROP account balance, in addition to their regular monthly pension payments.
Recent Changes in DROP Legislation
Increased DROP Account Interest Rates: To make the DROP program more attractive to employees, recent changes have increased the interest rates offered on DROP accounts. The effective annual rate has increased from 1.3% to 4%. This change is aimed at providing participants with more significant financial incentives to remain in the program.
Election Window: The restricted 12-month election window was removed. There are no longer restrictions on when you can begin participating in DROP. You may enter DROP any time after becoming fully vested and becoming eligible for your pension.
DROP Period Extension: Under the new legislation, eligible members in a regularly established position can elect to participate in DROP for a maximum of 96 calendar months (eight years) after their normal retirement date. This was expanded from 5 years to 8 years and includes those currently participating in DROP. K-12 instructional personnel who are employed by a developmental research school, district school board, or the Florida School for the Deaf and the Blind can extend DROP participation an additional 2 years. This extended time frame allows you to continue working while accruing benefits during the DROP period.
Health Insurance Subsidy: Eligible retirees will now receive a monthly HIS benefit equal to $7.50 per month for each year of credible service in the Florida Retirement System. This was increased from $5.00. The minimum HIS benefit was increased to $45, with a maximum of $225 per month.
The recent changes in DROP legislation underscore the importance of staying informed about retirement options and planning for the future. The decisions you make within the next few months are important and will affect you for the rest of your life. If you have questions about how these changes could impact you, schedule a complimentary appointment with one of our FRS specialists here.