On June 5th, 2023, Florida Governor Ron DeSantis signed SB 7024, thus making changes to the Florida Retirement System. In this video, Don Anders is covering some of the frequently asked questions we have received to help clarify some of these changes and how they impact your retirement.
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FAQ’s for 2023 FRS Pension and DROP Changes – FRS SB 7024
As the year 2023 approaches, there are several changes concerning the Florida Retirement System (FRS) Pension and Deferred Retirement Option Program (DROP) that will come into effect. These modifications, outlined under the FRS SB 7024, have prompted numerous questions from FRS participants. To address those concerns, we have compiled a list of frequently asked questions (FAQs) related to the 2023 FRS Pension and DROP changes.
Q1: What is FRS SB 7024, and what changes does it entail?
A1: FRS SB 7024 refers to a bill passed by the Florida Legislature, which includes modifications to the FRS Pension and DROP programs effective from 2023 onwards. It primarily affects the calculation of benefits, eligibility requirements, and contributions for FRS members.
Q2: How does this bill impact FRS Pension calculations?
A2: Under the new legislation, the formula for calculating FRS Pension benefits will change. Instead of the current average salary calculation based on the five highest years, the new formula will consider the highest eight years of salary.
Q3: Will these changes affect my eligibility for the FRS Pension?
A3: The eligibility requirements for the FRS Pension remain unchanged. If you have met the service credit threshold and are enrolled in the FRS Pension plan, you will remain eligible for the pension benefit.
Q4: How will the DROP program be impacted?
A4: The DROP program will undergo several changes due to the FRS SB 7024. Starting from 2023, participants will receive a fixed interest rate of 1.3% on their DROP account balance. Additionally, the accrual rate for DROP contributions will decrease from 6.5% to 5% per year.
Q5: What are the changes to participant contributions?
A5: FRS members will see an increase in their contributions. The employee contribution rates will rise from the current 3% to 3.5% in the FRS Pension plan and from 3% to 4% in the Optional Retirement Program (ORP) for members who qualify for DROP.
Q6: How will these changes affect FRS participants who are nearing retirement?
A6: These modifications should not affect individuals who have reached the normal retirement age or those who have already started DROP participation by December 31, 2022. However, it is advisable to consult with a financial advisor or FRS representative to fully understand the potential impact based on individual circumstances.
Q7: Can I choose to stay under the current pension calculation formula?
A7: Unfortunately, FRS SB 7024 mandates that all FRS Pension calculations must use the new formula, based on the highest eight years of salary.
Q8: Does this bill impact FRS investment options or COLA (Cost-of-Living Adjustments)?
A8: FRS SB 7024 does not introduce any changes to the FRS investment options or the COLA structure. The modifications mainly revolve around pension calculations, DROP program adjustments, and employee contribution rates.
Q9: Who can provide more information or clarification regarding the 2023 FRS Pension and DROP changes?
A9: For further information or clarification, it is recommended to contact the Florida Division of Retirement or consult with a qualified financial advisor specializing in FRS.
By addressing these frequently asked questions, we hope to provide some clarity on the forthcoming changes to the FRS Pension and DROP programs under FRS SB 7024. It is important for FRS participants to stay informed and seek professional guidance to ensure they make the most appropriate decisions regarding their retirement plans.
Thank you!!!!
I'm a teacher, grandfathered in the FRS. I abstained from going into DROP when I turned 62, because my monthly benefit, earning more service credits, seemed more beneficial to me than the DROP option at 1.3%, and I anticipated getting some raises. We did get the raises and so I think my monthly benefit is going to be significantly higher than had I gone into DROP at 62. Now I am 65 and am anticipating working one more year, which will put me at Full Retirement Age at the end of the school year 2024 (according to Social Security). My question is: will it benefit me to do one year of DROP, due to the increase to 4 %, or will it be pretty much even? My calculations are that I will lose about 113.00 per month, longterm, if I opt for DROP, but will have around 25,000 in the trust account when I retire (I calculated the break even at 18.9 years from now). I know 25,000 of "free money" seems like a lot, but I'm looking at longterm, and I'm good at saving money.
Did they lower the retirement age
1. My years of service upon entering DROP 2 years ago is 22.8. Will the $7.50 HIS be calculated on exact years of service, rounded up,, rounded down?
What are your thoughts on switching to an investment account? I’m 10 years in with an account worth about 100k and I’m 30.