How the State of Florida Retirement System Works

FT Contributor
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Florida has an expansive retirement system for public employees. Known as the Florida Retirement System (FRS), it offers two distinct retirement plan options for workers employed by the state.

The FRS has a pension plan for long-term employees who intend to work for the state for their entire career or for a lengthy amount of time. Workers who do not plan to work for Florida for their whole career can opt for a retirement investment plan, which requires a predetermined monthly contribution.

In addition to the regular FRS, the state also has retirement and benefits plans for employees of the state’s university and community college system, firefighters, and law enforcement personnel.

When you take all these groups and the plan options into consideration, Florida has one of the largest state retirement systems in the country.

However, with such a large system, state and public employees need to understand the different options and plans available to them.

Types of Retirement Systems

Because the Florida Retirement System is so large, employees in eligible positions need to understand the details of the specific programs that are available to them. Factors such as your employer, career plans, length of employment, and retirement needs can affect the type of retirement plan for which you qualify.

Employees who use the FRS and other state retirement plans also need to be aware of the different options and factors such as the length of time it takes to become vested, monthly contribution requirements, and when benefits become available to retirees. These different variables can affect how you plan for retirement.

Here is a closer look at the different plans within the Florida Retirement System.

Florida Retirement System Investment Plan

The Florida Retirement System Investment Plan is a defined contribution plan, which means that both employer and employee make set contributions to the retirement account. The amount that you and your employer contribute depends on your salary and your FRS membership class.

State employees have been able to sign up for the FRS investment plan since 2002. However, Florida has offered similar defined contribution plans for the past 25 years. This current plan is best for employees who do not plan to work for Florida for longer than eight years.

The standard FRS pension plan accumulates benefits slowly at first, so short-term employees or older employees who are near retirement can earn benefits faster with the Investment Plan. However, the Investment Plan does not offer set benefits. The value of the retirement account under this plan depends on how well your investments perform.

All members of the FRS system are eligible for the FRS Investment Plan with a few exceptions. For example, members of the Deferred Retirement Option Program (DROP) cannot choose to enroll in the FRS Investment Plan.

One of the advantages of this plan is that you can get vested quickly. You only need one year of service before you own the assets in your retirement account.

Florida Retirement System Pension Plan

The FRS Pension Plan is a defined benefit plan. With this plan, you get specific, pre-defined benefits when you retire. The benefits that you get depend on your salary throughout your career, the length of your employment, your membership class, and other factors. The benefits may get adjusted to take the increased cost of living into account.

Since your benefits are pre-defined, you will get the same amount when you retire regardless of the performance of financial markets.

Since you accumulate benefits slowly and get more benefits the longer you work, this plan is best for employees who plan to spend their careers working for the state or who plan to work for at least eight years.

Those who want to control the investments in their retirement account cannot do so with an FRS Pension Plan because the state takes responsibility for investing the funds.

Another reason that this plan is for long-term employees is that it takes 10 years to get vested, which means that you have to work for the state for 10 years before you own the assets in your pension plan.

State University System Optional Retirement Program (SUSORP)

The State University System Optional Retirement Program is a defined contribution plan for faculty, administrative professionals, and university administrators in the Florida state university system.

Both the employer and employee deposit a set amount into the SUSORP account. Universities contribute 5.14% of the employee’s pre-tax salary while the employee puts 3% of their paycheck in the retirement account.

You could choose to place your retirement funds with an investment provider. Options include AXA, TIAA, MetLife, AIG, and VOYA. The value of your plan at retirement depends on the performance of your investments.

Senior Management Service Optional Annuity Program (SMSOAP)

The Senior Management Service Optional Annuity Program is a defined contribution retirement plan for senior-level state-employed managers eligible for membership in the Senior Management Service Class (SMSC).

Employers contribute 6.27% of the manager’s pre-tax salary to the retirement account, while the employees themselves put 3% of their salary in the fund.

Investment providers such as AXA, TIAA, AIG, and VOYA handle the investments, and the total value of your plan depends on the performance of these investments. Plan members can choose to invest in a variety of funds and annuities.

In addition to the state administrative division, senior management personnel in the state legislature, judicial branch, Auditor General’s office, and Ethics Commission can also qualify for this plan.

Deferred Retirement Option Program

The Deferred Retirement Option Program (DROP) provides an alternative way to receive your retirement benefits. FRS members are eligible for DROP. When you join this program, you stop accumulating retirement benefits. Everything you have earned before entering DROP gets put into a trust, where it accrues interest.

One of the main advantages of DROP is that you do not have to make any contributions to your retirement plan while you are a part of the Deferred Retirement Option Program.

When you retire, the entire amount of your retirement account gets paid in one lump sum. You can also opt to receive monthly payments.

Retirement Taxes in Florida

You need to consider taxes when managing your retirement plan in Florida. While Florida does not tax pension distributions, you do need to consider federal income taxes.


You must pay federal income taxes on your retirement savings. Typically, you do not have to pay taxes when you contribute money to your pension plan or other retirement accounts. However, when the money gets distributed after retirement, you have to pay income tax on the cash that you get from your plan.

Retirees can make a lump-sum tax payment each year, they can pay estimated taxes monthly or quarterly, or they can have the IRS withhold taxes as they withdraw the money from their retirement account.


Florida does not have an income tax. Regardless of the type of retirement plan you have, you will not have to pay any state taxes on your retirement benefits. The lack of a state income tax is one of the reasons that Florida is popular among retirees.

Financial Health of the Florida Retirement System

Florida’s pension and retirement investment plans use a diversified investment strategy with the goal of bringing consistent results to investment funds.

During the most recent fiscal year, the FRS Pension Plan fund returned 6.26%, which is slightly above average. Combined, the different funds available to FRS Investment Plan members returned 5.24%, which is an average return.

The Florida Pension Trust Fund has a value of $162 billion. This figure is up from $99 billion 10 years ago, so the system’s investments have been performing well over the past decade.

Tips for Retirement

Whether you are planning for retirement or already retired, there are steps that you can take to manage your retirement funds and benefits.

What can you do to prepare before retirement?

  • Before you retire, you need to ensure that you have the right pension plan for your job. For Florida state employees, there are multiple options. If you plan to change positions during your career, for example, you would want an investment plan that offers consistent earnings from day one rather than a pension plan that requires years of service before you unlock certain benefits.
  • Understanding vesting is vital. When you become vested, you have ownership of the funds and benefits in your retirement plan. You need to work for a certain amount of time to get vested. Understand precisely how long you have to work before you gain ownership of your retirement assets.
  • Decide how much control you want to have. With a 401(k) retirement plan, you have more control over your retirement investments, while a pension fund offers less control but has set benefits you receive upon retirement.

What can you do after you retire?

  • You can make sure that you have access to money for regular expenses. One option is to get an annuity, which is a fund that makes monthly (or regular) payments.
  • You need to plan for income taxes. You do not have to pay state income tax in Florida, but you do need to pay federal income taxes on your retirement earnings. You can figure out the best way to manage these required payments. For example, you could prepay taxes monthly or quarterly.



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