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FRS Planning

DROP: what it does, and what it decides for you.

A defined program with defined rules. Most of what gets published about it is out of date or too vague to act on. Here is what the statute says.

A man and a woman at a table, one of them writing

What DROP is

If you are an FRS Pension Plan member who has reached normal retirement, DROP lets you retire on paper and keep working for the same employer.

On your begin date your monthly pension is calculated and fixed. Instead of being paid to you, it accrues in the FRS Trust Fund with interest. You keep your paycheck. When DROP ends you terminate employment, take the accumulation, and your pension starts.

DROP is a Pension Plan feature. Investment Plan members do not have it, and there is no equivalent.

The window is 96 months

SB 7024, signed June 5, 2023, raised the maximum from 60 to 96 calendar months for all classes. It also removed the old 12-month entry window. You may elect at any time after reaching normal retirement rather than losing eligibility by waiting.

K-12 instructional personnel may extend 24 months further, to 120 total.

That extension sunsets June 30, 2029. If you are a teacher planning around ten years, that date is the one to know, and most material on this leaves it out.

Your interest rate depends on when you started

There is no single DROP rate.

Participation beganEffective annual rate
Before July 1, 20116.5% for the entire participation
On or after July 1, 20111.30% through June 30, 2023
Same members, from July 1, 20234%

Compounded monthly on the prior month's ending balance.

Interest stops the month your participation ends, not the month the money reaches you. A benefit on deposit less than a full month earns nothing.

If you have service before July 1, 2011, the benefit credited to your account also rises each July 1 by 3% times the share of your service earned before that date, prorated in the first year. If all of your service is after that date, the increase is zero.

What entry settles permanently

Several things are decided at once, on one form, and they do not reopen.

Your benefit is fixed at the begin date. Service and average final compensation are captured then. Later raises do not raise it. Later years do not add service credit.

Your payout option is elected at entry. Options 1 through 4 (whether anything continues to a surviving spouse) are chosen on Form FRS-11o, filed with your DROP application at entry, not at the end. Enter at 55 and leave at 63, and that election was made when you were 55.

Your DROP beneficiary is the one you name on your DP-11, the DROP application, and it must match your retirement beneficiary. Under Rule 60S-11.004(2), the beneficiary who receives your DROP accumulation is the one designated to receive your retirement benefits (Form FST-12 changes it during DROP), and you may not name a different beneficiary for the DROP account than for your retirement benefits.

The election becomes irrevocable at the end of your first month of participation. Terminating at your end date is part of it, not a later choice.

None of that makes DROP a bad decision. It makes it one worth understanding before the form is signed.

Choosing a date

Two things move in opposite directions. Entering earlier starts the accumulation sooner. Entering later can fix a higher benefit, because more service and often a higher average final compensation get captured, and since 2023 you still get the full 96 months whenever you enter.

It is arithmetic, and it is specific to your record. We will not tell you which date is right. We will put the scenarios side by side so the difference is in dollars.

The deadlines at exit stack

Several independent clocks start around the same date. Missing one does not warn you about the others.

ClockLengthWhat happens
Distribution election (Form DP-PAYT)60 daysLump sum, direct rollover, or both. No election means a taxable lump sum with 20% federal withholding on the rollover-eligible portion.
Reemployment restriction6 calendar monthsNo employment with, or services to, any FRS employer, in any capacity. Violation may void your retirement.
HIS application6 monthsNot automatic. Apply later and you keep the subsidy, with at most six months of back pay.
Retiree health enrollment60 daysIf you are in the State Group Insurance Program, People First must receive both your application and your first month's premium within 60 days. You must be enrolled at retirement to continue. Cancel retiree coverage later and you cannot rejoin. Other FRS employers run their own plans on their own deadlines.

On reemployment: if you hold two positions you terminate from both, including one that is not FRS-covered. No unpaid exception, no contractor exception. Since July 1, 2023, volunteer service under §121.091(15) does not count as employment.

Where DROP sits

The end of DROP lands near Social Security timing and decisions about a 457(b) or 403(b). Which dollars you spend first affects the tax bill and how long the money lasts. That is retirement income planning.

Your DROP distribution and your first pension payments can land in the same tax year.

Questions

Questions we hear most.

How long can I stay in DROP?
96 calendar months, all classes. K-12 instructional personnel may extend to 120 months, an extension that sunsets June 30, 2029.
What interest does my account earn?
Depends on when participation began. Before July 2011: 6.5%. On or after: 1.30% through June 2023, then 4%. Interest stops the month participation ends.
When do I choose my survivor option?
At entry, on Form FRS-11o, the option election filed with your DROP application (the DP-11). Not at the end of DROP.
Can I change my mind?
You can cancel in writing through the end of your first month of participation. After that the election is irrevocable.
What happens to the money?
Lump sum, direct rollover, or a combination, elected within 60 days. No election defaults to a taxable lump sum.
Can I go back to work for an FRS employer?
Not within six calendar months, in any capacity. Doing so may void your retirement.
Does DROP time increase my HIS?
No. Your HIS amount is set by the service you had when DROP began.
Important

This page is educational and is not individualized advice. Benowitz Wealth Management is not affiliated with, endorsed by, or sponsored by the Florida Retirement System, the Florida Division of Retirement, or the State Board of Administration of Florida. Confirm the figures that apply to your own record at MyFRS.com or with the Division of Retirement.

Consult a qualified tax professional regarding your specific situation.

DROP entry is irrevocable after your first month of participation. Worth understanding before the form is signed.

Independent, fee-only retirement planning for Florida’s public employees, built around your FRS benefit and everything you’ve built on the side.

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