Prior to entering DROP, a Florida Retirement System (FRS) employee has up to four pension payment options. Since the choice is irrevocable, it is important to have a clear understanding of the differences and costs for each option. The choices you make can significantly impact your retirement income.
Yes, you can. You can also request an estimate of the benefits you would receive under DROP versus the benefits you would receive if you continued working (and earning service credit for the same period) and then retired without participating in DROP. Go to FRS Online for an estimate.
To avoid losing any time, consider enrolling in DROP three months prior to your normal retirement date. All FRS members, regardless of class membership and occupation, are allowed to enroll in DROP at any time after reaching the normal retirement date, rather than within the 1-year period immediately following their normal retirement date. Employees can participate in DROP for 96 months (120 months for K-12 Instructional employees). You may leave DROP early with no penalties, so you want to consider enrolling for the full-term you are eligible for.
96 months (120 months for K-12 Instructional employees.)
Once you retire from DROP, you will have 60 days to decide how you want your funds distributed. If you don’t select an option, the FRS will assume a lump-sum distribution option was selected, which is taxed as ordinary income. Another option is to have the funds distributed directly to a qualified retirement plan via a rollover. Make sure you understand the contractual limitations, fees and possible tax consequences for subsequent withdrawals. You may also choose to take your investments with a combination of a rollover and a partial cash distribution.
DROP is a voluntary program. As such, you may defer entering until you are ready.
While in DROP, the contributions and interest accumulate tax deferred. After you retire, funds taken directly from DROP will be subjected to a mandatory 20% income tax withholding and be included as ordinary income in the tax year the money was withdrawn.
You may choose to receive a lump-sum payment of your accumulated annual leave either at the time you enter DROP or after your DROP participation ends. If you choose to receive a lump-sum annual leave payment when entering DROP, up to the lower of your agency’s policy or 500 hours can be included in your benefit calculation.
Inflation has a hidden, but very real, negative impact on the purchasing power of your money. Over time, as the cost of goods and services rise, you will want to consider investment opportunities that have the potential to keep ahead of inflation.
Take the time to get to know your financial professional. A trusted financial professional should take the time to get to know you too. They should ask what is important to you and make sure their recommendations are right for you. They should be willing to provide details of the recommended investments in writing including fees and how to access your money.
RO 2917185 (06/2023)